Used electric vehicles are beginning to hold their values better than in the past, which could help bolster sales and the case for dealers to get into the used-EV space, according to Canadian Black Book (CBB).
“Higher values in the [used] wholesale market help to make the case for stronger residual forecasts, which will then in turn make new EV’s more attractive for leasing,” Brian Murphy, vice-president of research and analytics at CBB, said in an email. “I do think dealers should consider the EV market. There certainly are sales to be made there.”
EVs in the past had a “really weak track record” on residual values, a factor that scared away many consumers, whether leasing or buying. But that is beginning to change, said Murphy.
The Nissan Leaf is an example of an EV with slowing depreciation. According to CBB, a 2019 Leaf in good condition would wholesale for $30,450 in August 2020 — its 16th month in the market — or 68 per cent of its list price.
That’s significantly better than a 2016 Leaf that, after 16 months, wholesaled for about $17,650, which is 41 per cent of its list price.
“At one point, of the five vehicles that were the weakest performers of retaining values in their marketplace, three were EVs. What we’ve seen more recently is they’re starting to perform more like their internal-combustion siblings,” Murphy said.
“They’re not quite there yet because there’s still people who have questions about everything under the sun, from longevity of the battery to range. Eventually, it will normalize.”
BUY EV, STAY EV
Even though EVs, new and used, remain a tiny portion of the overall market, Plug’n Drive CEO Cara Clairman said she hopes that consumers will view the growing supply of used electric vehicles as an affordable option. And once they buy a used EV, she said, they could be in the market for a new one down the line.
“Most people who buy an EV stick with EVs. They don’t go back to gas very often,” Clairman said, adding that used EVs are “a great way to build the market and to make it a more equitable market, because you can have people come in at $8,000 to $10,000 at the bottom end.”
But dealer Shahin Alizadeh, CEO of the Downtown Automotive Group in Toronto, is skeptical that the used-EV market will become viable anytime soon. Alizadeh echoed Murphy’s comments that EVs have generally not held their values well because of consumers’ concerns over charging and range.
“I think the EV used market is terrible,” he said. “Hybrid is different. The hybrid used market on the Toyota side is on fire. We can sell any hybrid any day of the week.”
Used-EV valuations depend in part on the health of the vehicle’s battery. Factors affecting a battery’s health include its age, use, high temperatures, extreme climates and frequent use of fast charging stations, according to Geotab, a fleet-management-software company that tracks battery degradation.
Canadian dealers looking to sell used EVs also face competition from U.S. jurisdictions that offer incentives large enough that some Canadians are willing to import them, said Murphy.
“[The incentives] look after the environment, but sometimes they can cause distortions in the marketplace that can create some unique results when it comes to used-vehicle values.”
Such distortions in supply can happen within Canada as well because of EV rebates in certain provinces.
Quebec, for example, receives a steady flow of used EVs because of a program that offers up to $4,000 in rebates.
In an email to Automotive News Canada, Laura Wehunt, vice-president of automotive valuations at Black Book, said Quebec’s used-EV incentive program caused “some oddities” in wholesale values because it incentivized vehicles that were not previously registered in the province. That was an issue when Ontario had the nation’s most generous discount for new EVs, though the province has since ended that program.
“Now that Quebec leads in incentives for both new and used, it is a little different,” Wehunt said. “But what remains is the flow of used EVs into Quebec.”