Electric vehicles not only promise to be better for the environment compared to gas cars, but they should also cost you less to fuel and service. You may also be eligible for a tax credit if you buy an EV that qualifies for the program.
When the time comes to sell the vehicle, it’s best to know how much you can expect to sell it for below the original price. What about how that compares to a gasoline vehicle?
Well, there is only one way to find out. Let’s dig deeper!
Electric Vehicles vs. Gasoline Vehicles: What Affects Depreciation?
If you’re buying an electric car or a gas-powered car, the following factors will affect the depreciation value.
Regardless of whether you’re selling a used gas car or an EV, the mileage is one of the biggest indicators of its depreciation rate. The higher the mileage, the lower the resale value.
What’s different about EVs is that their remaining battery lifespan also comes into play. Most EVs on the market have abattery lifespan of between 300,000 and 500,000 milesand a minimum warranty of 100,000 miles. Most gas-powered cars have an engine that is expected to last at least 200,000 miles, although some can last a lot longer than that.
But even though electric cars may have a slightly longer lifespan than gas-powered cars,EV batteries are more expensive to replacethan internal combustion engines. According toConsumer Affairs, it will cost you around $4,000 to replace a four-cylinder engine, but most electric vehicles will cost around $15,000 to replace the battery pack—that’s if we don’t calculate the labor costs. And it’s not just the batteries that need replacing—electric motors may also need to be replaced or refurbished after a few hundred thousand miles of use.
To put it into perspective, it doesn’t matter whether you’re driving an electric car or a gas-powered car; its residual value will drop by almost 50% after 100,000 miles.
Brand Reliability Reputation
Traditionally, gasoline car models, which are known for reliability, have the highest resale value. Case in point? According toKelly Blue Book, Toyota is the best car brand with the highest resale value overall since 2014 in North America.
Other car brands that are cheaper to repair and maintain also tend to depreciate at a slower rate than car brands that are considered expensive to own. That’s why it’s common to find Japanese car brands like Toyota and Honda having a higher resale value than European car brands like Mercedes-Benz, BMW, and Audi.
However, electric vehicles don’t have an engine, andthey’re cheaper to maintain than gas-powered cars. Additionally, most EV car brands don’t have a significant variance in maintenance costs despite the price differences. This levels the playing field since you may buy a luxury EV brand that won’t depreciate faster thanthe most affordable EVs.
Beyond that, EV brands with higher market demand, like Tesla, have a higher resale value. Of course, one of the reasons you can get more for a used Tesla EV is its access to the Supercharger network, which is more reliable than other charging networks. But with other automakers like Ford and GM partnering with Tesla to fully access the Supercharger network, there will be otherfactors to consider that could affect your EV’s resale valueother than its charging network reliability.
Car Model and Type
In the US, SUVs are the best-selling type of vehicle, closely followed by sedans and pickup trucks. This means that if you drive a gas-powered or electric SUV, it’s likely to have higher market demand, which will increase the resale value.
However, pick-up trucks tend to depreciate slower than SUVs and sedans. Out of the ten vehicles with the highest resale value awarded byKelly Blue Book, six of them are pickup trucks. Interestingly, EVs are missing from KBB’s list except for the Tesla Model X, which is an electric SUV.
But considering there are relatively fewEV pickups that you can buy, it’s not a surprise that they’ve not yet matched up to their gas-powered counterparts. Additionally, EV pickup models like the Rivian R1T, Ford F-150, and Hummer EV haven’t been on the market for longer than five years, so it’s hard to accurately determine their resale value. Regardless,electric pickup trucks can beat ICE pickupsin acceleration, torque, and storage capacity.
Electric sedans will hold up almost the same resale value compared to similar-priced gas-powered sedans. The same case applies to electric crossovers and hatchbacks.
But what if you drive an electric sports car? Well, the Porsche Taycan, which isone of the fastest electric cars in the world, maintains around 70% of its original price value after three years.
Electric Vehicles vs. ICE Vehicles: Which Has a Higher Resale Value?
Even though EVs have become more popular over the past few years, they still don’t have a higher resale value on average than ICE vehicles. Part of the reason is that automakers are reducing the prices of their new EV models to become more competitive and get them to qualify for theEV federal tax credit.
Case in point?Tesla slashed the prices of its modelsby up to $13,000 in January 2023, and it’s been reducing prices throughout the year. Similarly, Ford reduced the price of its Mustang Mach-E by up to $5,900 and the F-150 Lightning by almost $10,000. On top of that, more EV models are expected to qualify for the full $7,500 federal tax credit by 2025.
In other words, if you bought an electric vehicle before the manufacturer reduced its price, it will be devalued by a percentage equivalent to the reduced price. However, not all EVs have been affected by the price cuts.
Of course, we’re still in the early days of EV adoption, and it could be a while before most second-hand electric cars have a higher resale value than used ICE vehicles. For that to happen, automakers need to develop EV batteries that can last at least one million miles before they require replacement. We also expect electric cars to have a higher resale value once more` long-range EVs are introduced to the market.
Nevertheless, some ofthe longest-range EVs you can buyare expected to depreciate by around 40% after five years. This is better than average even if you compare them with most gas-powered vehicles, showing just how important battery size and range are for EV buyers.
ICE Vehicles Will Eventually Be Phased Out by EVs
Many governments are planning to ban the sale of ICE vehicles and only allow EVs to be sold after 2040. It’s an ambitious plan to combat climate change, but we can’t predict how it will pan out until the deadline.
What we can deduce is that governments and automakers are accelerating the adoption of electric vehicles. As a result, there is no better time to buy an electric car than right now. And if you plan to sell or trade your EV after a few years, you’re likely to get a good offer if it’s in mint condition.
