Jul 21, 2023 - Economy & Business

Want an affordable electric car? Check the used lot

Illustration of an inflatable used car inflatable tube man in the shape of a lightning bolt

Illustration: Sarah Grillo/Axios

With more choices, falling prices and a newly available federal tax credit, there's finally a decent market for affordable, pre-owned electric vehicles (EVs).

Why it matters: People buy more than twice as many used cars as brand new models, so a vibrant secondary market is key to broader EV adoption.

What's happening: Early EV adopters are now trading in their cars for new models, creating a larger pool of pre-owned options.

  • Dealers sold an estimated 41,000 used EVs in the second quarter of this year — a 36% jump from a year ago, and 77% higher than during the second quarter of 2021, per Cox Automotive.
  • The average sticker price on a new EV is a little over $55,000, down nearly $10,000 since the third quarter of 2022. But used EVs are even cheaper: an average $41,630, down from about $55,000 last year.

For the first time, used EVs are eligible for a federal tax credit of up to 30% of the purchase price (capped at $4,000), which could help make them even more affordable.

  • To qualify, cars must be purchased from a licensed dealership for less than $25,000.
  • There are income limits on buyers, too: $75,000 for single tax filers, $150,000 for joint filers and $112,500 for heads of household.

That means you're mostly looking at older EVs with limited range, plus plug-in hybrids, according to EV data research firm Recurrent Auto.

  • Some examples: The 2011-2017 Nissan Leaf, 2015-2019 VW eGolf or 2014-2019 BMW i3, all with a range of under 100 miles.
  • Some longer-range models, like the Chevrolet Bolt EV or Hyundai Kona, could come in below the $25,000 threshold if you negotiate well. (Used Teslas are likely too expensive to qualify.)

The catch: About 45% of used car sales involve private parties, so buying your neighbor's old EV doesn't qualify you for the tax break.

The intrigue: There's a potential workaround involving a new app called Caramel that aims to facilitate used-car transactions for private sellers and independent dealers.

  • Caramel doesn't list cars. But once a buyer and seller agree on a deal, it acts as a digital checkout, providing a secure platform for payment, title transfer and registration. Caramel also offers insurance, warranties and financing.
  • Because Caramel is registered as a licensed dealer in a handful of states (but can operate in all 50), it can act as the "dealer" in a private sale. That could make purchases completed there eligible for the $4,000 used-car tax credit.

This IRS hack wasn't part of the original business plan when Craig Nehamen and Ed Brojerdi founded the company 18 months ago. But it's a serendipitous bonus that users seem to have discovered.

  • While EVs account for less than 1% of all used car sales, according to Cox, they represent about 20% of Caramel transactions.

The big question: Will an electric car's battery last through multiple owners?

  • Like your phone, EV batteries degrade over time — generally 2%-3% a year, according to Scott Case, CEO of Recurrent, which tracks battery performance data supplied by a nationwide fleet of EV drivers.
  • The rate of degradation depends on how the car is charged and driven, and the kind of weather it experiences.
  • There aren't enough older EVs yet for a full analysis. But so far, it appears EV batteries are holding up better than experts predicted, and will last well past the usual eight-year warranty period.

The bottom line: The best place to find an affordable EV may well be on the used car lot.

Disclaimer: Cox Automotive's parent company, Cox Enterprises, also owns Axios.

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