Buying a used electric car: Is it a good idea in 2024?
Key takeaways
Purchasing a used electric car can be a cost-effective option, especially with the availability of EV incentives and the decreasing prices of EVs.
Used EV buyers can potentially secure a credit of up to $4,000, but the process and eligibility requirements can be complex.
It is important for buyers to thoroughly research and inspect a used EV, just like they would with a gas-powered used car, to ensure its quality and avoid potential issues.
With more available EV incentives and vehicles rolling out, more drivers are eyeing an electric car as their next purchase. According to a recent GBK study, about 50 percent of U.S. households are considering an electric or hybrid option for their next vehicle.
However, a battery-powered vehicle doesn’t always come cheap. The average EV transaction price in February was $52,314, according to Cox Automotive. Luckily, buying a brand-new EV isn’t the only route to ownership. Purchasing a used EV can be a sound option for drivers who want to drive green but while saving money through incentives and recent price drops.
Buying a used EV can save you money
Operating an EV can be less expensive than owning a gas car. And this year, you may be able to secure an EV for a lower price tag than a gas-powered alternative. In January, Hertz announced that it would be selling over 20,000 used EVs from its fleet. Most of these are Tesla Model 3s and many are priced below $25,000.
Coming across a for-sale sticker that low has been rare over the past few years. These prices are even below recent used average prices. The average for all used vehicles was $25,151 in February, according to Kelley Blue Book.
But even without the large rental companies’ upcoming sales, used EV prices have been on a downward trend — driven, in part, by declining Tesla prices.
New Model Ys had an estimated average transaction price (ATP) of $49,363 in February, down 16.2 percent compared to last year. The Model Y is averaging 12 percent lower than last year’s ATP at $43,614, according to Cox Automotive.
These price drops have hit the used EV market hard. Used EV prices are down a whopping 31.8 percent year-over-year as of February, according to a recent study by iSeeCars. By comparison, overall average used car prices are down 3 percent compared to a year ago.
Used EV costs now average just under $31,000. Some models (such as the Chevrolet Bolt) frequently sell for well under $20,000.
Learn more: Should you get an 84-month Tesla loan?
Used EV drivers can get a credit of up to $4,000
According to Ivan Drury, Edmunds’ director of insights, current tax incentives mean now is the best time to consider a used EV.
Previously, those buying a used EV did not qualify for incentives.
But in 2023 regulations shifted. Those buying a used EV, fuel-cell electric vehicle or plug-in hybrid can qualify for a tax credit worth up to $4,000.
However, the process is not straightforward. It depends on where you purchase the vehicle, the cost and your income. According to Peter Glenn, co-founder of EV finance platform EVLife, the first step in exploring a used EV is understanding income requirements.
How to secure a used EV tax credit
If you want to land a tax credit, you’ll have homework to do. The IRS lays out these guidelines:
The vehicle model year must be at least two years prior to the year it was purchased.
The vehicle’s gross vehicle weight rating must be under 14,000 pounds.
The vehicle’s price must be below $25,000.
Your gross annual income must be below $150,000 for joint filers, $112,500 for head-of-household filers and $75,000 for single filers.
If you and the car meet requirements, Bankrate recommends seeking dealers registered to offer point-of-sale tax credits. This way, you can use the credit as your vehicle down payment and get your incentive right away.
On the other hand, shopping with an unregistered dealer means you won’t get the incentive until you file your taxes.
According to the American International Automobile Dealers Association, more than 7,000 dealers have been registered with the IRS as of late 2023.
Even if your income exceeds the above limits, you may qualify for other incentives. Try EVLife’s savings calculator to see which. Glenn says that for some, purchasing a new option instead could result in more savings — depending on your gross annual income.
Remember that federal incentives are not the only route to saving money. Many states offer incentives and can help offset the cost of charging and other additional EV expenses.
Risks of buying a used EV
The GBK study found that drivers still have concerns even while legacy brands continue to roll out more offerings at lower prices.
“EV and hybrid considerers remain concerned about ongoing costs and hassles such as battery replacement, availability of charging infrastructure, vehicle range, and the time it takes to charge,” says GBK President Jeremy Korst.
Depreciation
Some drivers buy used cars because they typically depreciate more slowly. As the saying goes, a new car loses value the moment you drive off the lot.
But, as mentioned, used EV prices are plummeting far faster than used gas car prices. The 2024 iSeeCars study found that of used car models that lost the most value over the last year, seven of 10 were EVs. Three were Teslas.
Historically, EVs have depreciated faster than internal combustion vehicles due to their tech quickly becoming outdated. iSeeCars found the trend was reversing in 2022. Factors included:
Supply chain issues reducing the number of available new EVs.
More charging infrastructure.
The introduction of the used EV tax credit.
The current dramatic value drop is driven by Tesla price cuts, which may or may not continue in 2024. So, it may be a temporary blip. But it’s worth watching if you’re considering a used EV.
Value loss won’t be a problem if you like to drive your cars until the wheels fall off. But if you prefer to trade in your car every few years, you might not get as much money to put toward your next down payment as you’d like.
Dated technology
The older the car is, the less advanced the technology will be. EV drivers often value the latest tech — and EV tech is evolving fast. With that in mind, research what the EV you are looking at has to offer.
If you want an electric car for its advanced tech, you may not find that in an older model. And the longer you own the vehicle, the more dated the technology will become.
For example, a brand-new Nissan Leaf, one of the first mainstream electric options, has a 149-mile range. The 2019 model has a lower price point but a more modest range of 136 miles.
If you want to drive electric because of environmental benefits, an older vehicle isn’t an issue. But if tech is top of mind, consider how the car’s age might impact your experience.
Should I buy an electric car? How to decide in 2024
Buying an EV, new or used, requires some reflection on what you are looking for in your vehicle. An EV boasts less maintenance and an enjoyable driving experience but means faster depreciation and less fueling and repair infrastructure.
Cost to charge
One of the biggest savings with an EV is avoiding trips to the gas station. But charging your vehicle still comes at a financial and time cost. For some, charging at home isn’t an option. U.S. public chargers now number over 130,000, but they still aren’t ubiquitous. And they cost more than charging at home.
If the cost trade-off fits your budget and you can access chargers in your area, it’s smart to consider how your potential used vehicle’s battery will perform. EV batteries don’t last forever. Over time, their charge capacity decreases, shrinking their range. That means more frequent charging.
For this reason, Drury says a used EV with a recently replaced battery is a good find.
How to check a used EV’s battery health
Because they’re expensive to replace, you’ll want some assurance a used EV’s battery is in good shape before you buy.
Glenn recommends that potential buyers check out Recurrent. Enter the car you want to buy’s VIN. The platform presents you with a report showing the vehicle’s range data and comparing it to thousands of other EVs.
Compare the results to the estimated range for a new car of the same model. You’ll get an idea of the car battery’s health. This can also tell you if the available range and battery life fit your driving needs.
Find out whether the EV you’re considering is still under a battery warranty for extra assurance.
Bankrate tip
According to Car and Driver, all recent EVs on the market have a battery warranty that covers them for, at minimum, eight years or 100,000 miles. Research how long your desired model’s battery warranty lasts.
Final steps before buying
Buying a used vehicle always comes with risks. Buying a used EV deserves the same attention you’d provide any pre-owned option.
“Whether or not it is a gas option or, it’s a hybrid or plug-in, older always comes with more issues, even if the vehicle has been regularly maintained,” Drury shares.
Things like wear and tear are unavoidable as any vehicle ages, even with a meticulous driver behind the wheel. Make sure to check any used vehicle’s vehicle history report before you buy.
As with any used purchase, take the car out for a test drive. Consider an independent inspection to ensure it is in tip-top shape.
If you like what you see, compare auto loans for your purchase. Look into standard auto loans and those tailored for EV buyers, like the EV loans Tenet offers.
