Do Electric Cars (EVs) Depreciate Faster?
With the hefty price tag on electric vehicles, buying one for yourself is something that takes careful consideration, to say the least.
Like your traditional gasoline and diesel cars, EVs are a long-term investment and you'll definitely want to get your money's worth.
That said, EVs are still not as affordable as traditional cars. Tesla is by far the most popular EV, and the most affordable Tesla model is the Model 3, which starts at $43,490 before taxes.
That's around $10,000 more expensive than average gas-powered cars (a compact sedan from Mercedes-Benz goes for around $34,000).
What electric cars promise, though, is long-term savings by not buying gasoline.
In a previous blog about How Much Electricity Does it Take to Charge a Tesla, we discussed how the costs of charging an electric vehicle compare to gassing up ICE vehicles.
Like any smart investor, you'd want to know how worthy electric vehicles are of your hard-earned money.
And if you're switching from a diesel car, you'll also want to know if the EV you're eyeing has a good resale value comparable to traditional vehicle types.
What is depreciation?
Depreciation is the process of losing value over time.
Just like Internal Combustion Engine cars, EVs depreciate.
What's that old saying? Your new car starts losing value the moment you drive it off the lot.
EV depreciation is the difference between what you paid for your car and the amount you're being offered for your used electric car.
Unlike other assets like land, jewelry, and antiques that increase in value over time, most cars depreciate the longer they're owned.
How fast do electric cars depreciate?
Some studies suggest that electric vehicles depreciate faster than gas-powered cars.
But with the used EV market being relatively new, it's hard to determine whether EVs really do depreciate faster or sell less than traditional cars.
Bottomline is, both car types lose value over time.
Electric vehicles generally experience depreciation from the moment of purchase, with the most significant impact occurring within the first three years of ownership.
There have been reports that EVs lose up to 52% of their value just after three years as compared to ICE vehicles' 39.1%.
Meanwhile, SUVs lose 39.7% of their original value and trucks can see a 34.3% drop within three years.
The industry average suggests that EVs hold 40% of their original value after three years or 36,000 miles.
This means EV owners can expect a 60% drop in their car's value in that time.
What factors contribute to electric car depreciation?
Mileage. The more miles your car has spent, the lesser its value will be.
Age. As cars age, they tend to lose value because newer and more powerful cars are launched every year.
Maintenance. Cars that have been serviced well will have more value compared to those that don't have any record in the service booklet. This is especially true of EV batteries. For example, if a driver charges at DC fast chargers too often, it may wear on EV's battery (that's why a powerful Level 2 charger like the Lecton V-BOX is a good choice - you get a powerful charge without sacrificing your battery health).
Brand reputation. Cars from reputable manufacturers can hold their value because of a proven track record. Those that come from unreliable car makers will likely depreciate faster.
Government incentives. Studies show that government incentives lower the value of electric cars upon purchase.
Demand. This technology is fairly new, so it makes sense that there isn't really a high demand for electric cars compared to gas-powered cars.
Other factors to take into consideration include keeping the interior clean, keeping the body relatively scratch-free, and making sure there are scuffs on your rims from curbing your wheels!
How does the depreciation of EVs compare with petrol, diesel, and hybrid cars?
For the longest time, diesel cars have been thought to hold their value longer than petrol cars.
This is primarily because diesel engines tend to last longer and are more reliable and fuel efficient.
On average, both petrol and diesel cars lose 60% of their original value after three years or 36,000 miles.
But with issues regarding emissions and with people becoming more eco-conscious, it may not be long until we see these cars lose more value.
In comparison, electric cars lose up to 50% of their original value after three years.
Do any electric cars hold their value better?
Not all electric cars are made equal, and that is especially true when it comes to their ability to hold value.
As previously mentioned, brand reputation plays a big part in retaining an electric car's value.
Take Tesla, for example.
Teslas hold value well because of the brand's good track record.
In any business, brand image is everything. Tesla models have high demand because of their desirability.
The entry-level Model 3 has such high demand that Tesla has the luxury of charging a premium.
How long will an electric car battery last?
Electric vehicles use lithium-ion batteries that are estimated to last between 15 to 20 years or 100,000 to 200,000 miles.
These batteries degrade over time, but it shouldn't be an issue as they often outlive the car itself. However, using a quality and proper EV charger can help you
This means that an EV will most likely outlast an internal combustion engine vehicle.
Battery degradation is a normal occurrence and isn't something to worry about.
Manufacturers are even mandated by law to apply an 8-year warranty on EV batteries, which is equivalent to 125,000 miles.
So, if your battery stops working within that time period, the manufacturer should cover the costs of a replacement.
Do electric cars lose value faster?
There isn't enough evidence to prove that EVs depreciate faster than other types of cars. But some numbers suggest that EVs lose 50% of their value after three years as compared to traditional vehicle types that lose 60% in the same period.
What is the biggest drawback of an electric car?
One drawback of an electric car is its range. As of now, gas-powered cars can travel greater distances than EVs.
Is an electric car a good investment?
Yes. If you look long-term and take into account the amount of money you'll save from buying gas, switching to an electric car is an excellent investment.
Do electric cars have higher resale value?
This will depend on a few factors, including the brand, mileage, physical condition, and age of the EV. Buyers tend to gravitate toward well-known car manufacturers with good reputations.
Do electric cars depreciate slower than gas cars?
Some data suggest that electric cars depreciate slower (50% after 3 years) than gas cars (60%).
Do electric cars last longer than regular cars?
Electric cars are powered by lithium-ion batteries lasting anywhere between 15 and 20 years. This means that an EV will most likely last longer than a regular car.