Depreciation is like taking money out of your wallet, and setting it on fire — every single day. You don’t see it as a loss in the beginning, but after a while, you’ll end up paying out the same amount you saved previously by not using gas. So, what causes EVs to depreciate?
Surprisingly, one of the main factors that leads to depreciation are incentives given to new EV owners to help them buy their vehicle in the first place. Since 2010, the U.S. government has offered tax credits up to $7,500 for anyone wishing to purchase an electric vehicle (via CNBC). While this is good, it causes the price of the vehicle to tank when it’s resold.
The second factor is demand. Although interest in electric cars is rising swiftly, that has not topped sales of regular fuel-powered cars. Buyers still want gas-powered cars, although this is predicted to flip in the coming years (via Axios).
The third factor is battery capacity. EV batteries are notoriously for having a limited lifespan, which affects a car’s value if it is not kept in pristine condition. Around the eight-year mark, most electric car batteries have degraded and need to be replaced with a new one, according to Forbes. Finally, changing technology has to be taken into account as well. Rapidly evolving EV technology makes the price go down and accelerates depreciation for older models, each time a new model is released.
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