Why EVs Depreciate Faster Than Gas Cars

Key Concepts

• Depreciation: The decrease in a vehicle's value over time.
• Total Cost of Ownership (TCO): The sum of all costs associated with owning a vehicle, including purchase price, maintenance, fuel, and resale value.
• Incentives: Financial benefits, such as tax credits and rebates, offered to encourage the purchase of EVs.
• Obsolescence: The state of becoming outdated or no longer useful, particularly due to rapid technological advancements.
• Battery Durability: The expected lifespan and performance of an EV's battery.
• Leasing: A long-term rental agreement for a vehicle, often used as a strategy to mitigate depreciation concerns.

Understanding EV Depreciation and its Impact on Adoption

The Steep Decline in EV Value

The video highlights a significant issue for Electric Vehicles (EVs): their rapid depreciation. While all new cars lose value as soon as they are driven off the lot, EVs experience a particularly steep decline, often losing nearly half their value within the first five years. This makes buying a new EV a poor investment from a resale perspective.

Key Points:

• General Car Depreciation: The average car loses about 46% of its value in the first five years.
• EV Depreciation: EVs depreciate at a higher rate, averaging around 59% over the same period.
• Immediate Value Loss: Approximately 10% of a new car's value is lost immediately upon purchase.

Data and Examples of High Depreciation

A 2025 study by iSeeCars identified EVs as disproportionately represented among the worst-depreciating vehicles.

Specific Examples:

• Jaguar I-Pace (discontinued): Plummeted 72% in value over five years.
• Tesla Models S, X, and Y: Fell at least 60% in value.
• Porsche Taycan: Lost approximately 60% of its value over five years.
• Nissan Leaf: Despite being a more affordable EV, it was also among the biggest losers in depreciation.

Contrast with Low Depreciation Vehicles:

• Porsche 911: Holds its value exceptionally well, even with a high starting price.
• Porsche Boxster: Also retains its value relatively well.
• Observation: Three fuel-burning Porsche models depreciate little, while the electric Taycan's value crashes.

Factors Contributing to High EV Depreciation

Several factors contribute to the accelerated depreciation of EVs:

1. High Initial Purchase Price and Market Positioning:

   • EVs have historically been positioned as niche products or luxury goods.
   • A disproportionately large share of EVs are premium or luxury vehicles, or priced as such.
   • On average, buyers paid about $9,000 more for an EV than a comparable gas or hybrid vehicle.
   • This high entry price makes them less accessible to mainstream buyers who are crucial for widespread adoption.
   • Argument: Mainstream buyers, typically seeking affordable sedans in the $25,000-$30,000 range, are unlikely to purchase a $50,000 electric SUV.

2. Impact of Incentives:

   • Incentives, such as federal rebates, significantly impact depreciation.
   • The $7,500 federal credit for new EVs and $4,500 for used ones, while intended to boost adoption, actually "terrible for depreciation."
   • Explanation: When a buyer purchases a car with a discount or rebate, the resale value is often calculated based on the discounted price, even if the seller didn't personally receive the discount.
   • Data: EV incentives were more than twice those of the overall market in August (most recent data available at the time of publication).

3. Rapid Technological Advancements and Obsolescence:

   • EVs are high-tech vehicles that evolve quickly.
   • This rapid evolution makes older models appear outdated compared to newer ones.
   • Example: Over a ten-year period, the maximum range of EVs has about doubled, and the median range has roughly tripled.
   • Example: Newer EVs are adopting 800-volt architectures, which can halve charging times, while older models use 400-volt systems.
   • Argument: A 2-3 year old EV can seem more obsolete than a 2-3 year old gasoline or hybrid vehicle due to faster technological improvements.

4. Consumer Perceptions and Concerns:

   • Battery Anxiety: While studies show battery durability is exceeding expectations and replacement costs are dropping, consumers still fear battery repair or replacement costs.
   • Value Orientation of Used Car Buyers: Used car buyers are primarily value-oriented, focusing on cost and functionality. They may perceive EVs as offering less flexibility and liberty compared to gasoline vehicles due to range limitations and charging infrastructure concerns.
   • Range Anxiety and Charging Infrastructure: More than half of consumers in a June 2025 survey worried about EVs being sufficient for long-distance travel, the availability of public charging stations, and running out of charge.
   • Lower Mileage: iSeeCars research indicates EVs are driven less than hybrids or gas vehicles, which, combined with a higher upfront cost, leads used buyers to expect a lower price.

The Role of Leasing and the Used EV Market

The leasing market plays a crucial role in the EV landscape and its impact on depreciation.

Key Trends:

• Surge in EV Leasing: The share of new EVs leased has dramatically increased, from 17% in January 2023 to 71% by September 2025.
• Upcoming Volume of Used EVs: An estimated 100,000-200,000 EVs returned from rental fleets and leases in recent years, with projections of close to a million used EVs entering the market annually by 2028.
• Impact on Used Prices: Increased volume of used EVs is expected to help keep prices lower for consumers.

Changes in Federal Credits:

• Used Federal Credit: This credit was only available for EVs priced below $25,000, potentially incentivizing sellers to lower prices to meet eligibility.
• Expiration of Credits: The expiration of federal credits (both new and used) is predicted to cause a significant drop in EV demand. Ford CEO Jim Farley suggested it could cut demand in half.
• Leasing as a Workaround: Leasing was often used to circumvent eligibility issues for the federal credit (e.g., for vehicles made outside the US). The end of these credits may reduce leasing.

Future Outlook for the Used Market:

• Tighter Used Market: The expiration of tax credits and a potential drop in leasing could lead to a tighter used EV market with less supply.
• Improved Value Retention: With fewer incentives "hammering depreciation value out of the door," new EVs are expected to hold their value better over the next three years.

Mitigating EV Depreciation: Strategies for Consumers

The video offers a key strategy for consumers to manage EV depreciation:

• Long-Term Ownership: Depreciation only matters up to a point. Cars generally reach the bottom of their depreciation curve after about eight years.
• Recommendation: If you plan to keep an EV for approximately eight years or longer, the depreciation hit will be comparable to that of an internal combustion engine car.
• For Short-Term Owners: If you are someone who switches cars every three years, it is advisable not to buy an EV outright; leasing is the recommended option.

Conclusion and Takeaways

The video underscores that while EVs offer lower operating costs and environmental benefits, their rapid depreciation poses a significant challenge to widespread adoption. High initial prices, the impact of incentives, swift technological advancements, and consumer concerns about range and charging contribute to this issue. However, the growing volume of used EVs and the potential for improved value retention in the future, especially for long-term owners, offer pathways for consumers to navigate the EV market more effectively. The shift in the used market, driven by increased supply and changes in incentives, is expected to be a profound factor in the future of EV adoption.