Electric vehicles are suddenly the best deal in the used-car market as sellers confront plummeting prices

By Venessa Wong

The average monthly payment on used electric vehicles, which are now cheaper than hybrids and gas-engine cars, is approaching affordable levels for middle-income households

An interesting shift has happened in the used-car market over the course of 2024: Used electric vehicles, which had long been priced at a premium, have gradually become cheaper than their gas-engine and hybrid counterparts.

The average used-EV price was $26,839 in August, 11.4% less than the average price of $30,292 for used gas-powered cars and 9.8% less than the $29,759 average price of used gas-electric hybrid cars, according to the car-buying site iSeeCars.

In a boon for EV buyers and a setback for EV sellers, used-electric-vehicle values are down 25% in the past year, with the biggest drops for the used Tesla (TSLA) Model 3 (down 24.8% over the past year), Kia (KR:000270) Niro EV (a 21% decline), Maserati Levante and Nissan (NSANY) Leaf (both down 20.2%), according to iSeeCars data.

"Used-car shoppers want a better deal," Karl Brauer, the executive analyst at iSeeCars, told MarketWatch. "From this data, it's clear that they need a price cut on an electric car to feel like they're getting as much value as an equivalent gas or hybrid car."

See also: Car buyers face a stubborn problem that Fed interest-rate cuts can't solve: record-high prices

Prices of gas-engine cars, hybrids and EVs were about even as recently as February. Back in September 2023, used EVs cost about 12% more than used gas-engine cars and 10% more than used hybrids.

But a glut of new cars - including from a slowdown in EV sales, due in part to concerns about range and charging infrastructure - changed things. "A buildup of new vehicles on lots over the past year has been the catalyst for discounts and incentives on aging inventory. As these new car prices trend downward, values of newer used vehicles have correspondingly declined," according to an Edmunds report published last month. As a result, used EVs are now "a readily available secondhand item."

The bulk of used EVs sold now fall within the $20,000 to $30,000 range, according to Edmunds. As prices fell, used EVs started to sell more quickly. While it took an average of 55.3 days to sell a used EV in September 2023, the length of time to sell is now down to 38.6 days, about the same as for used gas-engine and hybrid cars, iSeeCars data show.

At this lower price point, used EVs are more appealing to drivers focused on affordability. Cox Automotive Chief Economist Jonathan Smoke previously called $400 a month the "magic" car-payment amount for middle-income American households. The current average payment is far higher, at $737 a month. With used-EV prices now close to $25,000, a buyer with an average 13.9% interest rate who puts down 20% would have a roughly $400 to $500 monthly payment on a 60-month loan.

From the archives (April 2024): Smart ways to shop for used EVs, which now cost half as much as they did in 2022

Even with cheaper used options, affordability remains a top issue for car buyers today. New-car prices are still 30% above pre-COVID levels, and used-car prices are 35% more expensive than they were before the pandemic, Pat Ryan, the CEO of CoPilot, an artificial-intelligence-assisted car-shopping app, said in a statement.

EVs "need a substantial discount to sell," Bauer said, especially to buyers of used cars. While buyers of new EVs typically have higher incomes and more than one vehicle, used-car buyers are more value oriented and "need the EV to be substantially cheaper, otherwise they'll just buy a gas car that covers all their needs and not have to worry about public-infrastructure charging or at-home charging," he noted.

Whether lower used-EV prices signal an opportunity for buyers depends on their particular circumstances and needs. EVs generally remain less attractive to drivers who regularly have to travel long distances and those who don't have convenient access to charging at home, said Bauer.

Car shoppers who are concerned about EV depreciation can also consider leasing, which typically reduces monthly payments, experts have previously told MarketWatch. Edmunds' list of lease deals, which vary by location and credit score, currently includes the Nissan Ariya for $99 a month for 24 months, the Nissan Leaf for $109 a month for 36 months, and the Hyundai Ioniq 5 for $199 a month for 24 months.

-Venessa Wong

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09-21-24 0955ET

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