Shopping for Used Electric Cars
By Aaron Turpen
The used electric car market is a great place to get a deal. It's a buyer's market thanks to depreciation being far higher than with other car segments; and that's a good thing. In fact, it's natural. Nearly all cars lose value over time and new cars, no matter what powers them, lose value fast in their first two years or so. The only exceptions are vehicles made to be highly collectible from the get-go, and those are probably not the type of car you're shopping for. Since electric cars are still new to the automotive market, traditionally stodgy used car buyers are reluctant to take one in.
A recent study for USA Today by Kelley Blue Book found that battery-electric cars lose value faster than nearly all other cars, with a five-year-old Nissan LEAF, for example, likely selling for only about 15 percent of its original sales price. This is being called the "early adopter cost" for electric vehicles. The LEAF isn't the only one, though it is the oldest EV offered on the mass market currently and the highest-selling.
According to KBB, other all-electric vehicles like the Chevrolet Spark EV and Ford Focus Electric are also likely to see depreciation in a big way. The top models on their list of high-depreciation cars were all EVs, including the LEAF, the Fiat 500e, and the Smart Fortwo.
More good news for the buyer? The study and the general consensus among automotive industry insiders is that the depreciation of electric cars has nothing to do with any inherent problems with the cars or their design, but is instead more about consumers on the secondary market being less used to or interested in electrics as an option. This reluctance to adopt what is viewed as new technology is to the interested EV buyer's benefit, of course, and means that it's actually far cheaper to buy a used electric car than a new one, in more ways than one.
Who Should Consider a Used Electric Car
Nearly every electric car being sold today fits roughly within the same market in terms of who's going to be interested in buying and what they need out of a car. With the exception of the Tesla Model S, which does not yet have an active used market, most electric cars have the same functionality and thus the same buyer's profile. An EV buyer is someone who lives in an urban or suburban area, drives an average of 20-30 miles daily, and who is both budget conscious and likely buying a second vehicle or a vehicle specifically for commuting only. The buyer will have a garage or another good place to install a charging station (an expense that we will talk about later on). Electric cars, in the main, have about an 80 mile total range before recharging is needed, but recharging requires a minimum of thirty minutes and usually takes several hours to complete. They are also generally small cars (subcompacts and compacts) and are not likely to be the person's only vehicle, as they are not capable of long trips or drives where access to recharging is unsure. On the up side, an EV has far less maintenance to worry about and is far cheaper to fuel, with each 80-mile fill-up coming at a cost of $4 or less in most markets.
Why a Used Electric Car Is a Good Investment
Early adopters – those who buy things when they're new and untested – often pay a premium to get the latest-and-greatest first. This happens in many markets, not just automotive, and is most prevalent in technology and gadgets such as smart phones, computers, and so forth. With cars, early adopters are either those who buy a model in its first production year or enthusiasts who buy a new technology as soon as it becomes available. With the return of electric cars to the market after decades of being displaced by gasoline engines, the new EV buyer is considered an "early adopter." It's only now, with electric cars having been nationally available for a couple of years or more, that prices for new electrics are beginning to slide.
A new Nissan LEAF sells off the lot for about $21,300 ($28,800 minus $7,500 in federal tax rebates). Some states add in more incentives as well, with a new LEAF selling for as little as $18,800 in some areas. For our math, we'll keep the $21,300 price tag, though. According to Cars.com, in its first year, that new LEAF will depreciate by about half, dropping up to $13,800 in value (most lose about $10,000). That's a big loss for only the first year of ownership.
On the flip side, this means that the used LEAF buyer is getting their car for far less than its dealership lot price and skipping all of the complicated math that comes with figuring in fees, taxes, incentives, and so forth to boot. Where a new LEAF would cost about $21,300, a used one can be had for under $13,000. This puts a one-year-old LEAF firmly into the "low-cost commuter car" category for many buyers. Every year after the first, says Cars.com, means another $1,500-$1,700 off the price.
Things to Understand About Electrics Before You Buy
Before you rush out and buy a used electric car, there are some caveats. They are, as mentioned above, low-range and thus of limited use. For most drivers, this is more about their perception of how far they drive than it is about reality as the average American driver doesn't drive more than half the average range of most EVs on the road today.
Another thing to note is the cost of a charging station. While an EV can be plugged into a standard wall outlet, this trickle charge will not replenish the batteries to a full charge overnight on most cars. The recharge time from near-0 battery for most electric cars at 120V (standard wall outlet) is well over twelve hours. Most EV buyers will want to install a charging station. This requires a 220V outlet and/or wiring, which most homes have available, though it may need to be routed which will cost more. It also requires a professional electrician and the charging unit itself. These are sometimes available for purchase used, but not commonly. New units run from a few hundred dollars to several thousand, with the average being in the $800 to $1,200 range. Installation will depend on the local market for electrician's rates, but will likely cost half to double that, depending on the amount of work required to route the wiring.
The good news? It's likely that your first year of gasoline savings will more than make up for the cost of that charging station.
It's also likely that your used electric car may have some battery capacity loss. Most manufacturers warranty their batteries for at least 8 years from new and expect to see about 20 percent in capacity loss in that time. This would reduce an 80-mile range by about 16 miles. It's important that you check the range of the car before you buy it, which can be done by simply charging it to full and looking at the status of the charge and expected range result the car's computer gives – which will be close to accurate as most vehicles have battery monitoring systems on-board to keep tabs on the battery's performance and charge capacity.
You will also want to become familiar with the publicly-available charging stations in the area you will do most of your driving in. The up-side here is that many places of business put charging stations up front in prominent locations that also happen to be prime parking spots. The general rule is usually that if your car is plugged in and charging, it's OK to park there. Most have a two hour limit, but often the charging is free.
How the Used Electric Car Market Adds Up
Pulling all of this information together, we can see that a used electric car can be a huge value for the car buyer who matches the profile of someone who can put an EV to good use. While they are not for everyone, electric cars are great for many people – some of which may not even realize that they "fit the profile." You may have to re-think the idea if you don't have a safe place to install a fast charger for yours, but if you happen to be in a location where public charging is readily available, that may not be as important. Financially, an EV makes a lot of sense for many people, especially when purchased used.
So weigh your options, but for nearly everyone, a used electric car is much more financially viable than might be expected.
Sources: http://www.usatoday.com/story/money/cars/2013/12/26/plug-in-cars-electric-cars-depreciation-resale-residual-value/4194373/ http://www.cars.com/nissan/leaf/2013/costofownership