EVs vs. gas-powered: which has better resale value?

Because of their relative novelty, electric vehicles are still shrouded, in the minds of many consumers, under a blanket of uncertainty. Car buyers are curious about their range, their environmental impact, their cost to own, and even their longevity. One often overlooked quality of EVs, however, is their resale value. It seems that new car shoppers seldom think about the resale value of the car they’re considering, but they certainly should—especially if they’re considering an electric vehicle.

As it turns out, electric vehicles do not follow nearly the same depreciation curve as their fuel-burning counterparts (with one exception), and this article will explain the extent to which EVs buck the deprecation trend, and why.

EV vs. gas-powered depreciation

A relatively recent study from ISeeCars.com examined the average 3-year depreciation trends of electric vehicles, and the results did not bode well for EV resale prospects. On average, a traditional gas-powered sedan will depreciate 39.1%, an SUV 39.7% and a truck 34.3%. Electric vehicles? 52.0% (statistics via. ISeeCars.com). This means that newly purchased EVs lose over half of their original value on average, over a three-year ownership period, compared to just 37.7% for gas-powered vehicles.

However, as I hinted at above, there is one exception: Teslas do not follow the same depreciation trends as other EVs. Instead, the Tesla Model S, Model X, and Model Y roughly mirror their gas-burning competitors’ depreciation trends. The Model 3 is a true outlier though, depreciating just 10.2% over three years. Tesla’s ability to outperform other EVs when it comes to resale is not only impressive, but an indicator of why other EVs lose so much value in the first place. 

Why doesn’t EV depreciation mirror that of gas-powered cars? 

In order to understand why EV depreciation doesn’t mirror that of gas-powered cars, we’ll loop back to the opening sentence of this article: it’s because of their relative novelty. EVs are still so new that their technology and their capabilities are changing and improving far more rapidly than the technology and capabilities of gas-powered cars. In other words, EVs now are much, much more dissimilar to their 10-year-old equivalents than are gas-powered vehicles. 

To illustrate this concept, let’s take a look at the Nissan Leaf. In 2011, the Nissan Leaf’s maximum range was a mere 73 miles. Now, in 2021, the maximum range of a Nissan Leaf is 226 miles. That’s a roughly 209% increase in range over 10 years. To put that in perspective, if a gas-powered vehicle were to increase its performance metrics at that same rate, the 2021 BMW M3 would need to produce 1,279 horsepower, and the 2021 Toyota Corolla would need to achieve 73mpg on the highway.

When we conceptualize how quickly EVs have developed, using examples like this, it’s pretty astonishing! So, how does this relate to their massive depreciation when purchased new today? Well, it’s because consumers know this, and thus, they know that when they buy an EV, they’re accepting the fact that something way better will be available in just three short years, greatly diminishing the value of the EV they’re buying today. That is, of course, with the exception of Teslas, which buck this trend completely. 

Why are Teslas immune to traditional EV depreciation rates?

Teslas are unlike most other EVs in that they are updated remotely over the course of their life. This means that the rapid developments in tech that happen after you buy your Tesla will not be exclusive to only the new models: those new tech features can be applied to old models via updates.

This renders Teslas effectively immune to the primary driver of depreciation in other EVs. For this reason, Teslas depreciate at roughly the same rate as gas-powered cars. However, to add a caveat to what was already a caveat, the Model 3 depreciates even less than gas-powered cars, and by a wide margin, too. The Model 3 depreciates at a rate of just 10.3% compared to other gas-powered cars, which depreciate at 37.7%. 

That said, there is no industry insider explanation for this, other than the fact that the Model 3 is just a very desirable car right now. The rules of supply and demand tell us that when demand exceeds supply, as it does for the Model 3, prices go up. This extreme desirability paired with what I will now be calling “Tesla depreciation immunity” makes the Model 3 a fantastic buy from a depreciation standpoint. 

Final thoughts

So with all of this in mind, what conclusions can we establish regarding EV resale values? Generally speaking, EV resale values will be lower than those of gas-powered cars, which means you lose more money on depreciation when buying an EV as opposed to a gas-powered vehicle. However, as we’ve learned, Teslas depreciate about on par with gas-powered cars, and Model 3s depreciate even less. All good information to have in your back pocket when deciding whether your next new car should be an old-school gas burner or a new-age electric vehicle. 

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