Deciding Between a New or Used EV: What You Need to Know
As the electric vehicle (EV) market rapidly evolves, you might be weighing up whether to buy a new or used EV. Here’s a quick guide to help you make a well-informed choice.
4 min read
By Jia Li • January 23, 2024
Should Your First EV Be New or Used?
Your choice may primarily hinge on your financial situation, but it’s important not to dismiss alternatives like Plug-in Hybrid Electric Vehicles (PHEVs) and lease takeovers. Additionally, the landscape of EV rebates and incentives, particularly due to the Inflation Reduction Act (IRA) in the United States, plays a significant role.
In the fast-evolving realm of automotive technology, electric vehicles (EVs) have become the center of attention. As their popularity continues to soar, a new trend is emerging among savvy consumers – the preference for used EVs. This option holds particular appeal for individuals who prioritize budget-friendliness while eagerly embracing the EV revolution.
Why Consider a Used EV?
First things first, new EVs can be pricey. This is where the second-hand market shines. A gently used EV could be half the price of a new model, making it a great option for those who dream of electric but are mindful of their wallets.
The selection of used EVs is expanding, with various tempting deals on models that aren’t too old or faulty. But, like buying any vehicle, you should check its history, accident record, and overall condition.
Battery Life: The Heart of the Matter
EVs are relatively new, so most used models aren’t that old. The key thing to watch is the battery pack. It degrades over time, and its condition can greatly depend on how the car was used. Fast charging and frequent depletion can speed up this degradation, affecting the car’s range.
But recent studies suggest that with modern battery thermal management systems, this degradation is not as significant as once feared. For instance, Tesla batteries and other actively cooled batteries are showing better longevity than initially predicted.
Understanding the Inflation Reduction Act’s Impact
The IRA, introduced in North America, brought significant changes to EV rebates. Vehicles not produced in North America are no longer eligible for the federal EV tax rebate, and new requirements for battery materials and components mean fewer EVs qualify for the full $7,500 tax credit. Income caps also play a role, with higher earners potentially missing out on these incentives.
In 2023, the U.S. government transformed the EV tax credit into a point-of-sale tax rebate program, allowing immediate benefits at the time of purchase. This could sway your decision toward a new EV, particularly if you’re seeking the full warranty and peace of mind of a brand-new vehicle.
For EVs built outside the NAFTA zone, dealers can still receive the full $7,500 as commercial owners and potentially pass these savings to consumers through leases. However, this varies based on the dealer’s discretion and the vehicle’s demand.
Lease Takeovers and Used EV Rebates
The IRA also introduced rebates for used EVs priced at $25,000 or less, offering 30% of the cost up to $4,000. While less than the new vehicle rebate, it’s a significant incentive for used EV buyers.
Battery degradation is a common concern among potential used EV buyers. However, recent studies indicate that for vehicles with modern battery thermal management, degradation is less severe than previously thought. Tesla batteries and other actively cooled batteries are showing better longevity than expected.
Lease Takeovers: An Emerging Option
In the current economic climate, lease takeovers might be a savvy choice. These occur when a leaseholder transfers their contract to a new buyer, often at a more favorable rate secured during lower interest rate periods. This option can be especially attractive if residual values of EVs are lower than their current market value, offering potential savings at the end of the lease term.
However, for Tesla leases, keep in mind that there’s no buyout option at the end of the lease. Tesla’s recent flexibility with transferring Full Self-Driving (FSD) software could signal changes in this area, though.
Choosing the Right Used EV
When delving into the used EV market, it’s crucial to test drive and get the vehicle inspected by a qualified technician. Ensure that the EV you’re considering has a good battery life and hasn’t been subjected to excessive wear and tear. Also, check for any remaining warranty, especially for the battery, as this can be a significant future cost saver.
Summing It Up
The decision between a new and used EV depends on your priorities and budget. While new EVs offer the latest features and full warranties, they come at a higher price. Used EVs, on the other hand, are more affordable and still provide many of the benefits of electric driving. With additional incentives like tax credits and lease takeover options, the used EV market is becoming increasingly attractive.
In conclusion, stepping into the world of electric vehicles doesn’t have to break the bank. By opting for a used EV, you’re not only making a cost-effective choice but also contributing to a more sustainable future. As the market continues to evolve, it’s clear that used EVs offer a compelling option for those looking to make the switch to electric driving.
Posted by Jia Li
Categories: Buyer’s Guide
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