When Is a Good Time to Buy an EV?
2024 has been an interesting year in the transition to electric cars. EV sales – unless you are Tesla – continue to grow year-over-year, with many manufacturers notching up record sales numbers in 2024. On the other hand, the pace of year-over-year growth is less than it has been in prior years; so far in 2024, EV sales are up less than 10 percent versus 2023, where compared to prior years, EV sales growth has been at 30 percent or more. Those sales have only come as a result of big discounts from both manufacturers and dealers – leading to questions about whether such growth is sustainable. But, if you’re in the market for an electric car, all this news of a topsy-turvy market is good – new and used EVs are more affordable than ever.
New EV Discounts At Record Levels
The latest data from Kelley Blue Book, which tracks transaction prices across the industry, showed that incentives on electric cars were up a whopping 74 percent in July 2024 compared to incentives on the average new car. In fact, the average financial incentive package, or discount, offered with a new EV last month was over 12 percent of the transaction price – or more than $6,000.
Despite the discounting, Kelley Blue Book reports that the average transaction MSRP for a new EV in the U.S. was $56,520 – a drop of about 1.5 percent versus the same period last year, but still about $8,000 more than the average transaction price for all new cars, which averaged an MSRP of $48,401. That’s still a substantial price difference, but the gap between EV prices and average vehicle prices is closing. A recent report from BloombergNEF actually predicts that prices for battery-powered vehicles will get more affordable in the coming months and years. That’s because the price of lithium, the main material used in the lithium-ion batteries that power most EVs, is rapidly declining. Indeed, the price of Lithium in June 2024 dropped below $13,000 per ton, the lowest in 35 months.
Better news for those considering an EV comes in the form of more choice. Just a couple of years ago, if you were interested in switching to electric, you had very few choices – in very few vehicle categories. While expensive, high-profile vehicles like the Tesla Cybertruck and Rivian’s R1S and R1T get a lot of attention, there are many good electric options in mainstream price classes now. Midsize EV SUVs are proliferating quickly, and there are a number of great EV MSRP options in the $35,000 to $45,000 range – and not only from Tesla.
Speaking of Tesla, the Cybertruck is now the best-selling vehicle in the U.S. with a MSRP of over $100,000 – its success helped Tesla’s average transaction prices increase by 11 percent compared to last year, reaching almost $60,000 MSRP. (The Model 3 has an average transaction MSRP of $53,878, and the Model Y has an average transaction MSRP of $52,055, showing that buyers prefer the longer-range, higher-content versions of these vehicles.)
Used EV Prices Are Falling Fast
Increasing discounts on new cars has also had the effect of driving down the prices of used EVs. With the average transaction prices of new cars falling rapidly, used car prices have moved down as well. In fact, in some ways, pricing for used EVs is in freefall – one website, Edmunds.com, reports that used EV values have fallen over 20 percent compared to this time last year. While it’s true that used cars in general have gotten more affordable as new car prices have dropped and discounts increased, the total used car market saw just a 6.8 percent price drop.
Why is that? In addition to rapidly dropping new car prices, there are also just a lot more used EVs on the market compared to a year ago. More EV owners are trading in their cars on newer models, as manufacturers introduce new, longer-range, better-driving models every day. Compound these trade-ins with the great deals available on new EVs, and you have significant downward pressure on used EV prices.
The other factor, of course, driving down transaction prices, is the new $4,000 federal tax credit – which only applies to vehicles sold under $25,000. Dealers are now pricing inventory to take advantage of the federal credit – and help move some of those electric cars faster.
Now Is Not the Time to Sell an EV
There is one downside to all of this good news about EV pricing – and it’s a big one. If you currently own an electric car and are looking to trade it in, don’t expect to get a good price for it. Cheap new EVs, which have also made cheap used EVs possible, mean that dealers and even private buyers will likely offer you less for the EV you’re driving now than you probably want.
Then again, if you are already driving an electric car, you’re probably already enjoying its lower overall fueling and running costs – and won’t mind holding onto it a little bit longer.
