The used car market plays a crucial role in providing affordable vehicles for people, especially those who can’t afford ever-rising new car prices. While buying a new car can be a dream for many, it is often unaffordable due to the high price tag and the insane dealer markups we often see these days. The used car market provides a more affordable option for people who need a car but cannot afford a new one, and it provides these options at nearly every price point.
On top of that, the used car market also benefits those who are looking for a specific model that may no longer be in production. It also provides an affordable way to own a luxury car or a high-end model that may have been out of reach when it was new, so used cars aren’t just for the poor, but can extend the reach of people with average incomes to buy things that are otherwise out of reach.
Furthermore, the used car market helps to reduce the depreciation rate of cars. Compared to a new car, a used car’s value depreciates slower, which allows buyers to get better value for their money and have an easier time trading the car in later if that’s what they intend to do.
Finally, the used car market provides a greener alternative to buying a new car. Instead of spending resources on manufacturing a new car, buying a used car extends its lifespan and reduces the need for new cars to be produced.
But the promise of the used car market has been out of reach for many EV buyers in the last few years. The traditional “I can’t afford this new model today, but I’ll be able to afford one once they’ve been on the market for 2–3 years” buying strategy has been completely upended. In many cases, used cars even exceeded new car prices in 2020 and 2021, largely because the supply of new cars was heavily constrained and new buyers were pushed into the used market to be able to buy anything at all.
A recent article at Arstechnica shows us that this trend is starting to reverse, and that the used EV market could end up becoming a viable option for more income brackets. According to data compiled by industry analyst Cox Automotive, sales of pre-owned electric vehicles (EVs) through authorized automobile dealers saw a steep rise of 32 percent to 42,753 cars during the first quarter of 2023. Cox Automotive further adds that the numbers exclude the sales made through private parties, indicating that sales of used EVs in the initial quarter of 2023 have been twice that of the same period in 2021.
Cox Automotive anticipates that the sales of new electric vehicles (EVs) in the US will exceed a million cars this year. Additionally, the firm’s data revealed that EV adoption surged to 7 percent of all new vehicle sales throughout Q1 2023. While there are new electric models being launched by several other automakers, Tesla’s badge is still dominant around the market. Despite its market share contracting, Tesla still remains responsible for over 50 percent of all new EV sales in the country.
With the dominant position Tesla has in the market, its repeated price cuts in 2023 have had a larger impact on the whole EV industry, including the used car market.
On top of this, there are the new EV tax credits that we’ve written about repeatedly here. Among the new things is the ability to get a tax credit, and later a point-of-sale rebate, on used cars, which eventually will provide serious savings for people at all income brackets.
The result of both of these things is a simultaneous drop in price with picking up demand.
Combining This With Upward Mobility
While some teenagers and college students with wealthy parents who are willing to spring for a new car end up skipping the bottom rungs of the car market, I’m sure many readers remember that their first car wasn’t new. For some of us, the car we first drove was pretty far from new.
My first vehicle was a used $4,000 sedan with low miles that I shared with my sister. My second vehicle that I alone drove was a used Fiero with over 100,000 miles that needed a lot of work that I could only afford to DIY.
As EVs drop in price, especially “beater” EVs like an old Nissan LEAF (my first EV was one of these), we’re putting electric vehicles in reach of young people. Not everybody gets a great career going and achieves the income to buy luxury cars, but putting EVs on the lower rungs of the economic ladder benefits EV manufacturers later. Instead of seeing EVs as an impossible dream for the rich, people can get an early taste of EV driving and climb the electric ladder instead of the ICE ladder.
The Overall Benefit To The Industry
Going beyond automotive manufacturing, it’s important to see the benefits to infrastructure and user support that come from selling in more income brackets.
As EVs become cars for everyone, political support and willingness of private businesses to invest in charging infrastructure will expand. This broadening of infrastructure ends up creating a situation where the rising tide lifts all boats. While used EVs may not benefit wealthier new luxury EV buyers directly, it benefits them indirectly.
The other benefit will come in the form of independent repair capacity in the market. As older EVs hit the ends of their warranties and the ends of their battery life, dealers and manufacturers will become a smaller part of the overall repair picture.
Once again, this benefits everybody, especially when you look at the story of the supposed $16,000 Tesla repair an independent shop performed for $700. Having EV repair options other than the manufacturer, and not only a few boutique shops per continent, benefits everybody by keeping the price of a repair lower.
All in all, having a healthy used EV market greatly helps everybody, and the industry itself. This is a great development that needs to continue.
Featured image: Used EVs for sale, image by Jennifer Sensiba.
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