Inflation for used cars is on a downward trajectory, with prices declining by 9.3% year-over-year. However, a notable trend has emerged — used electric vehicles (EVs) are experiencing a steeper price decline compared to their traditional combustion engine counterparts. iSeeCars.com Executive Analyst Karl Brauer joins Wealth! tdo shed light on this divergence.
Brauer attributes the wider price gap to the "much stronger appetite" for EVs among new car buyers, driven by the many incentives. However, he highlights that these buyers are also "more value-focused," perceiving electric vehicles as "somewhat a demerit" due to the elevated costs associated with the vehicles. Consequently, the used car market has responded by offering more compelling pricing for EVs to facilitate their sale.
However, "I think there is a psychological element here too," Brauer tells Yahoo Finance, suggesting that consumers may be "apprehensive" about purchasing EVs, influenced by developments such as Hertz's (HTZ) decision to abandon their electric vehicle fleets entirely.
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This post was written by Angel Smith
Video Transcript
Room room here.
Let's talk about some autos inflation for used cars and trucks moderating down more than 9% from the year prior as revealed by the latest consumer price index.
But the price difference between used EVs compared to used combustion engine gas vehicles is stark according to IC cars.com used EV prices dropped below used gas cars by two $65 down in February.
Uh Now that number has widened to a whopping $2657 in May.
So here to dig into the data, we've got Karl Brauer who is the C cars.com executive analyst.
Carl.
Great to have you here.
What do you think is driving this uh this gap that we're seeing now, we had a lot of new, a new EV sold in the past few years as we know they've really cranked up the production on these vehicles and a lot of incentives have pushed them out there.
And I think the appetite for electric vehicles is much stronger for new car buyers clearly and the used buyers, they're always more value focused.
They're always more price sensitive and they are not willing to pay a premium in fact, it now looks like they consider it somewhat of a, of a, to have an electric power train and they're gonna, you have to charge less for the equivalent EV than gas car before you're gonna get them to buy.
I mean, it's interesting, especially considering the number of credits that were being thrown out there for new and used EV purchases.
How does that factor into the consumer mindset?
Going to the signing table or going to make a purchase?
I think when you see a lot of incentives which you know, the inflation reduction act kind of, I think did a good job of making them make more sense and getting more middle class people in there.
We sold a lot of expensive cars to a lot of wealthy people.
Uh originally with these programs that got a lot more people to consider a new EV and I think again, that helped get them into the, into the hands of people who are buying new.
But with all the new automakers jumping in the non Teslas, all these traditional automakers jumping in were starting to flood the new car market and that's gonna start flooding the used car market and they're just not appealing to used car buyers at the same level.
Well, also the inventory that's flooding into the used car market is from some of the rental services out there as well that had made large purchase orders for electric vehicles and then decided ok, we need to actually slash the kind of uh uh amount or the proportion or percentage rather of those vehicles that we have in our fleet.
And so that just puts even more inventory back into the used market there.
So how is that also kind of been a, a weight on the matter of consumers who are looking at used vehicles and trying to make that decision between a standard combustion engine and an electric vehicle, 100% brad.
And, and not only are you throwing more vehicles into the supply of used evs when you have Hertz and other rental car companies, you know, pulling back dramatically on their numbers.
But I think there's a psychological element here too, right?
If you're a consumer and you're seeing headlines that says Hertz is, is largely ditching to a large extent, a lot of their EV fleet.
What's that make you think what's going on?
Why would Hertz want to get away from evs like this?
And I think that only compounds again, consumer apprehension, especially price sensitive use shoppers for jumping into the EV market from, from what we've seen in the past.
If there is a vehicle that we see, you know, make its way into our type of vehicle that we see, make its way into the used car, uh atmosphere or sphere just in droves like we're seeing in this case.
And like we've been discussing, what type of consumer sentiment impact does that typically have and, and is it long lasting?
Is it something that a company can recover from?
I think we're going to be on kind of a, an extended period of rebalancing supply and demand.
Uh I think we've hit a threshold.
We did a study last year and it showed that at, at 7% market share in a given location, it's harder to get the EV market share to grow the new car ev market share.
And now we've hit 7% nationally and, and we're starting to see these cars stack up at dealer lots.
So we need a catalyst that changes what, what basically you're saying uh the the opinion of these EVs whether it's price, whether it's range, whether it's charge time to get to a wider audience new and used, there's going to have to be a dramatic shift that pushes these past kind of the 7% demographic.
It seems like wealthier multi car families that have a house and can charge at home.
We got to get past that group.
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