A used 2020 Kona EV with under 30,000 miles is very affordable, especially after the IRS used EV tax credit (which does not have a country-of-origin requirement). (Green Wave Electric Vehicles)
Jesse Lore
Demand for electric vehicles (EVs) has been on a rollercoaster for the last 24 months. The EV market has gone from two-year wait times for popular new models in 2022 to the end of 2023 where “EV Inventories Hit Record High in US as Cars Pile Up on Dealer Lots”, as reported by Bloomberg. While EV demand was outpacing supply, manufacturers ramped up production to capitalize on what they perceived was the first wave of mass adoption for these climate-friendly cars. Demand ebbed in late 2023, with early adopters having already gotten their vehicles (about seven percent of new car purchasers last year) and the 44% of the rest of the car-buying public considering an EV but not jumping right in and purchasing one. As a result, the number of EVs sitting unsold for more than 60 days on auto dealers’ lots far surpassed that of unsold internal combustion engine (ICE) cars.
Here is what that has meant for the market:
The length of time cars remain unsold on dealer lots is an important metric in automotive retailing for a couple of reasons. First, most dealers have lines of credit to pay for their vehicles and that line of credit can be expensive with today’s high interest rates. Also, as the market price of vehicles shifts, the longer a dealer has a vehicle, the more likely they will lose money when they sell it, because the easiest way to get a car sold is to reduce the price.
Manufacturers and new car dealers have had to reduce prices and offer other incentives to purchasers in order to increase demand. Tesla cut the price of their most popular model, the Model Y, by $2000 in April and offered 0.99% financing in May. Toyota hoped to boost sagging sales of their EV, the bz4x, by offering an unheard-of $1,999 down/$199 per month lease deal this spring. And Ford cut the price of their F-150 Lightning for 2024 by up to $5,500 according to Car and Driver.
These price cuts have spurred demand, with some manufacturers reporting an increase in sales after the reductions. Ford saw sales climb 86% after the price cuts, according to Electrek. This says that the buyers are out there. They are just looking for better deals.
The reduction in new EV prices has reverberated through the used EV market as well, with Recurrent Automotive reporting a 27% decline in used EV prices over the same period last year. This reduction in prices in the used market is driven not only by the price cuts in the new market, but also by Hertz getting out of the EV rental business and unloading as many as 30,000 Tesla Model 3s from its fleet. Hyundai, Kia, and GM have also been selling their one-owner, off-lease 2020 and 2021 models at auctions around the country, which have added to used EV supply and brought down prices.
Last but certainly not least, the new EV and used EV tax credits that were created by the Inflation Reduction Act allow participating dealers to take $7,500 off new electric vehicles and 30% of the purchase price up to $4,000 off used electric vehicles at point of sale. There are limits to the IRS program, but overall it has benefitted EV purchasers through price reductions that can have an impact of reducing payments by $70-$150 per month.
With all of these market forces at play, electric vehicles have never been more affordable, especially as used vehicles. The 2024 Hyundai Kona EV Limited, for instance, is again in limited availability and starts at $42,420 (with no tax credit because it is not made in the U.S.), and a used 2020 Kona EV Limited with under 30,000 miles is only about $17,000 after the IRS used EV tax credit (which does not have a country-of-origin requirement). That means that instead of a no-money-down payment on a new Kona EV of around $800 per month, someone can get a no-money-down payment on a similar vehicle for only around $325 per month, while saving up to an additional $150 per month on fuel and maintenance compared to the gas model Kona, or about $75 per month compared to the hybrid Kona.
According to U.S. News and World Report, the best used hatchbacks over $15,000 include the 2020 VW GTI, the 2020 Honda Fit, and the 2020 Honda Civic. All of them have higher average purchase prices than the Kona EV, the Kia Niro EV, or the Chevy Bolt EV after the used EV tax credit, and at best their fuel economy is between 30 and40 miles per gallon. Meanwhile, their operating costs (fuel and maintenance) are about twice what they are for an EV, according to AAA’s annual “Your Driving Costs” report. Plus, the climate impact of those gas-car “comparables” is much worse than an EV; even a 40 MPG Honda Fit that drives 15,000 miles per year will put over 7,000 pounds of CO2 into the atmosphere every year.
New and used automobiles have had drastic value swings since the pandemic. EVs, as a newer and smaller slice of the automotive market, have been subject to even wider price swings during the past 24 months. Right now, EVs may be more affordable than our economy has ever seen. If demand stays steady, prices will rise in the months and years to come as manufacturers cut production. If demand continues to evaporate, prices may continue to drop; this might be good news for people considering going EV and looking for a deal, but might also be bad news for the planet and our transition to clean energy.
Jesse Lore is the owner of Green Wave Electric in Hampton, NH.
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