Used electric car prices are still falling, fast!
The landscape of the used car market in the UK is undergoing a transformation. Earlier this year, the growth rate of the electric used car market was a focus of discussion. Used EV supply increased by 174% year-on-year, ultimately outpacing demand (up by 6% year-on-year).
The Society of Motor Manufacturers and Traders (SMMT) published a report in early August 2023 stating that the UK used car market grew by 4.1% in Q2 2023. It doesn’t stop there! Sales of used battery electric vehicles (BEVs) increased by 81.8% in Q2 2023, accounting for a 1.7% increase in market share - a new record. This is further proven by AutoTrader’s ‘The Road to 2030’ report, where 8.3% of leads sent to retailers on 0 to 5-year-old used cars were electric in September 2023, this is an increase from 3% in 2022.
The number of days it now takes to sell a used electric car has fallen. In February, supply was at its highest with used cars being sold every 45 days on average. In August, used electric cars are now being sold every 28 days, which is the same as diesel and one day faster than petrol.
This graph shows that demand for used electric cars is increasing (through the increase in the number of ad views), yet stock levels peaked in February 2023 with 18,000 used electric cars in stock.
Ultimately, the UK used car market has experienced significant growth in 2023 because of the rise in demand which has led to an increase in sales. This post aims to understand the correlation between car prices falling and sales rising, what this means for the wider electric car market and how salary sacrifice fits into this.
Why are electric car prices falling?
There is not one answer to this, instead there are many moving parts.
The influx in supply
Finance and leasing terms of brand-new electric cars purchased three or more years ago have now ended, which has resulted in an influx in supply over recent months. Although consumer demand for used electric cars is high, it is unable to keep up with the increase in availability. Electric Cars that were leased 3 or more years ago are actually of good quality. For example, a Tesla registered in 2019 can have a range of 300 miles per charge.
Concern over older batteries
Battery technology is constantly improving, leaving consumers to wonder whether an electric car with an older battery will cost less at first but result in more money later down the line. This is making consumers weigh up the cost of buying new electric cars, which can get further on a single charge compared to used ones. Furthermore, the majority of the public doesn’t understand what to look for when buying a used electric car. Many EVs are equipped with diagnostic tools that provide information about the battery’s condition.
Electric Cars have further to fall
The substantial premium on electric cars, sometimes reaching as high as £10,000 compared to their petrol or diesel counterparts, can often make the percentage drop in value seem even more significant. However, it's important to note that the residual value of electric cars remains somewhat uncertain.
How much is a used electric car now?
In many ways, the used EV market is now making electric cars more accessible to a wider range of consumers - especially to those where this didn’t seem to be an option before. Mike Hawes, SMMT Executive, recognised this in his statement: “It’s great to see a recharged new car sector supporting demand for used cars”, he continues, “This will allow more people to drive zero at a price point suited to them.” The appetite for pre-owned EVs depends on “sustaining a buoyant new car market and on the provision of accessible, reliable charging infrastructure.”
The table below shows how much the value of electric cars dropped between January and June 2023.
| Car | Avg value 01/01/23 | Avg Value 30/06/23 | 6-month price fall |
|---|---|---|---|
| Nissan Leaf | £18,725 | £12,538 | -£6,188 |
| Hyundai Kona Electric | £22,238 | £14,794 | -£7,444 |
| Peugeot e-208 | £18,615 | £12,340 | -£6,275 |
| Vauxhall Corsa-e | £17,300 | £11,463 | -£5,839 |
| Kia Soul EV | £18,100 | £11,450 | -£6,650 |
| Seat Mii Electric | £14,500 | £8,700 | -£5,800 |
All cars included in this table are three years old and have completed 30,000 miles. This data has been taken from Thisismoney.co.uk.
How are used electric cars performing in the market now?
The European used car market is underperforming expectations as a growing number of consumers opt for more affordable fossil-fuel cars over earlier iterations of electric vehicle (EV) technology. In Germany, Battery Electric Vehicles (BEVs) represented 18% of all new registrations in 2022. However, a decline in new EV sales is anticipated after the German Government abruptly terminated incentives for EVs in December, a decision stemming from negotiations related to the Climate and Transformation Fund, which saw a removal of 60 billion from its budget.
In the United States, Electric Vehicle (EV) values have experienced a 33% decline. Hertz, a major car rental company, is currently selling 20,000 EVs, raising concerns, especially since the company originally planned to purchase 65,000 Polestars over the next five years. Hertz now aims to replace these EVs with petrol and diesel cars due to the perceived lower maintenance costs.
Are used electric cars worth it?
You need to consider whether an electric car will suit you and your lifestyle. You need to think about:
The average distance you drive per day
If you are travelling a considerable distance each day this will affect the EV you decide to purchase, as you will need one with a long range.
Options to charge your EV
The ability to charge your car is extremely important and must be taken into consideration. Do you have off-street or on-street parking? Would you like to install a home charger? If not, does your work or places you frequently visit have charging stations?
Battery health
The battery is the most important component of an electric car and this needs to be in good condition. This can affect charging speed, range and performance. This is especially important when purchasing a used EV.
Running costs
You should consider how much your EV will cost to run and how that may compare to diesel or fuel alternatives. According to Oponeo, the average driver travelling 16 miles per day would spend £20 per month on electricity using the average electric car and a home charger.
Why salary sacrifice a new electric car when you can buy a used one?
Depreciation
Leasing an electric car seems like the smartest option at the moment because the residual values for most new electric cars are unknown. According to Motorway, electric cars are thought to lose “60% of their original value after its first three years at a mileage of 10,000 miles a year.” It is worth noting that this value is better than petrol and diesel depreciation.
When leasing an electric car through salary sacrifice, the cost of depreciation is factored into the monthly payments - so you don’t risk the car reducing in value over time. However, with some newer models, depreciation is unknown.
Excess mileage
If you own the car and drive more miles than expected, the value of your car will typically go down. In a car lease, you typically have to pay the lease company for any extra mileage driven beyond what was initially agreed upon in the lease terms. This is the same for petrol and diesel cars too. Most lease companies charge an excess mileage fee.
Flexibility and changing technology
Electric cars are changing quickly. Leasing allows for flexibility and gives you the opportunity to take advantage of the latest technology available when you’re at the end of your lease. You can switch cars easily, which is something you’re unable to do when you own an electric car.
Early termination risk
If you wish to return your electric car before the end of the lease, the worst-case scenario will be that you have to pay an early termination fee. At The Electric Car Scheme, our Complete Risk Protection package ensures employers are fully protected from day one, eliminating concerns about early termination fees and other unforeseen costs associated with electric car salary sacrifice schemes. You can learn more about our Complete Risk Protection.
However, if you own the car, you will have to sell it and run the risk of getting back less than what you paid for the car originally.
At The Electric Car Scheme, we offer a Complete Risk Protection package, the best prices available on electric cars and all at no cost to the employer. By offering this as a company benefit, you could save employees 30-60% on any electric car by paying from salary before tax. To find out more about how salary sacrifice works companies visit our website.
Every company in the UK can help their employees on their journey to net zero by offering The Electric Car Scheme as an employee benefit. Salary sacrifice allows employees to save up to 60% when leasing any electric car of their choice; they simply agree to have a portion of their pre-tax salary deducted each month to cover the cost. As an employee you choose the car you want, add on any extras and drive away saving thousands! This enables employees to save on the upfront cost of electric cars since leasing involves no initial expenses. Consequently, more individuals can afford to drive electric vehicles, as the price is no longer a barrier impeding accessibility.
Save up to 60% on any electric car with salary sacrifice - because you pay before tax! The Electric Car Scheme will help you make the most of government incentives.
Last reviewed: 19/01/24
