Electric cars have been through their ups and downs when it comes to used values. In the immediate wake of the Covid pandemic, there was an enormous focus on electric cars, and for a brief time, used values spiked.
However, that was followed by a major crash in used EV values as the traditionally conservative secondhand car market raised its doubts over battery life and charging infrastructure. Buyers stayed away, to a large extent, and so used values for electric cars plummeted.
That has certainly changed, especially over the past year, and the upward trajectory of used EV prices seems unstoppable now, to the point where a used electric car is rapidly approaching parity in terms of price with an equivalent used petrol, diesel, or hybrid car.
Canice Fitzsimons is the auction manager at Merlin Car Auctions, where many EVs will begin their journey from their first owner into the secondhand car market.
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“I would say we’re definitely over the worst of it, from the perspective of used EV values,” said Fitzsimons.
“It’s definitely levelling off, and the electric vehicles are now starting to depreciate in what you might call the right way, in the same fashion as a petrol or diesel car. Now, if I’m valuing a car coming through the door for an auction, I’d have a fair idea of what it’s worth. That was very difficult to do previously. It was a minefield for a long time, from 2022, all the way up until the middle of last year. I would say the confidence of valuing EVs wasn’t there.”
That process is taking time, though, and Fitzsimons reckons that the next 12 months will see further significant movements in electric car values.
“For instance, you can see Volvo has made a massive leap, and it just doesn’t make diesel models anymore. That kind of thing gives confidence for buyers and from the retailer’s perspective. On the retail side of things, for new electric cars, that’s just surging in a massive way; it’s stratospheric,” said Fitzsimons. “In the used market, we’ve just about found our electric feet.”
There is a warning hanging over all this, however, and Fitzsimons said that’s because “an awful lot of people are still wary of how much it’ll cost if something goes wrong”.
That continuing concern over long-term battery reliability may yet prove a brake on climbing electric car residual values.
However, those used EV values are, for the moment, climbing. According to figures from DoneDeal, electric car values have climbed by 2 per cent this year, outperforming hybrid and combustion cars.
Such a change means that the finance that we use to buy such cars will need to change. In the short term, firmer used values for EVs should mean that more competitive finance offers will be available for them, but there’s more to it than just that.
Martin Cardiff, head of sales for Volkswagen Ireland, said: “Through Volkswagen Financial Services, we offer a range of HP [hire purchase] and PCP [personal contract products] to new and used car customers across all powertrains. PCP provides customers with greater certainty and peace of mind around the future value of their vehicle, which is one of the reasons it remains so popular across all powertrains.
“Private lease customers currently cannot avail of the SEAI [Sustainable Energy Authority Ireland] grant, which represents a missed opportunity. Extending the grant to private leasing could help bring more EVs into the used car market, while giving customers the benefit of predictable monthly payments without the commitment of ownership or the need to consider the vehicle’s future value.”
While private leasing is something of a niche product for now, it seems likely that the more common PCP and HP finance deals will evolve in the coming years, as the nature of car ownership changes. With growing used values, there’s more opportunity for EV-specific finance packages to be created, but beyond that it looks very much as if the nature of electric cars means that buyers might start hanging on to them longer.
Battery longevity has been impressive so far, and that longevity, combined with constant improvements in a car’s functionality thanks to over-the-air software updates, means that car buyers might not feel the need to trade in so frequently in years to come.
Indeed, the likes of BMW are already predicting that car buyers might keep their car for several years and, instead of trading it in for a new car, will instead come back to a dealership for semi-regular updates and improvements, including the likes of replacing tired battery cells and even replacing interior trim and touchscreens to keep a car up to date.
Given that, finance packages will need to change from their current three-year cycle to something quite different. Banking experts predict that in the future, electric car finance won’t just be about buying a car but will need to take into account the total cost of ownership, including long-term servicing and repairs, battery health and replacement, and even charging costs. We’ve already seen the beginning of this, with PCP plans including options for servicing costs and even tyre replacements to be included in the payments.
In the longer term, we could be looking at one of the biggest car finance shake-ups since Ford first introduced the PCP in the 1990s.
