In another blow to battery-cars, analysts for the National Automobile Dealers Association have noted a steep drop in the value of used plug-in electric vehicles.
Trade-in prices are expected to decline nearly 30% this year—the highest depreciation of any vehicle segment in the American automotive market, according to a new report from the NADA Used Car Guide, which tracks the prices of used vehicle .
“The steep rate of depreciation for used plug-in electric vehicles can be attributed to limited range, manufacturer incentives and federal tax credits intended to offset the higher prices of new plug-in electric vehicles,” said Jonathan Banks, executive automotive analyst for the NADA Used Car Guide.
If the forecasted decline continues, it could be a serious problem for both manufacturers struggling to boost demand for their latest plug-in hybrids and pure battery-electric vehicles, as well as federal and state government officials who have been using financial incentives to help promote the technologies.
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“Generous tax credits can certainly promote more new sales than would have been achieved otherwise, but they also have a negative impact on future resale values for one basic reason — few consumers are willing to purchase a credit-ineligible, used plug-in electric vehicle for more than they would pay for a new one, less the federal tax credit,” Banks added.
Since the federal tax credit alone is worth $7,500, that means the price of a used battery vehicle will tumble quite rapidly without a similar incentive.
The May 2012 edition of the NADA Official Used Car Guide indicated average trade-in values for the 2011 Chevrolet Volt and Nissan Leaf were $31,060 and $24,857, respectively. In May 2013, values for the Volt and Leaf had fallen by a combined average of nearly $10,000, to $21,235 and $14,792, respectively. As a percentage of MSRP, the Volt retained only 49% of its value and the Leaf retained 42%, according to the numbers compiled by NADA.
That’s a sharp decline when compared to residual values for conventional hybrid vehicles normally not eligible for tax incentives.
NADA reported average trade-in values for a 2011 Toyota Prius hybrid fell by $4,735, to $16,490 over the same period, while values for a 2011 Chevrolet Cruze with a four-cylinder gasoline engine dropped by $2,548, to $11,602, placing retained values at 63% and 62% respectively.
(New high-speed charging system could boost demand for battery-cars. Click Here for more.)
Meanwhile, Nissan officials said this week they are preparing a new re-sale program for the Leaf EVs that will be coming back off lease to Nissan dealers. The details of the program haven’t been finalized yet, Nissan spokesman Dan Passe said
NADA analysts said considering the limited range of plug-in electric vehicles — coupled with substantial incentives, tax credits and moderating gasoline prices — NADA estimates the annual rate of depreciation for used plug-in electric vehicles will improve little over the next two years, with annual losses going from 31.5% in 2012 to 29.7% in 2013 and 27.4% in 2014.
In terms of U.S. dollars, a plug-in electric vehicle worth $20,000 in 2012 is predicted to lose $9,792 of its value by the end of 2014, while similarly priced gasoline and hybrid vehicles over the same period are expected to lose $5,573 and $6,455, respectively.
The NADA report also predicted that without government incentives plug-in electric vehicles will become more difficult to finance.
“Unless lenders have implemented unique loan-to-value requirements for plug-in vehicles, their equity stake and risk position in a new PEV or PHEV loan are greater than they would be with traditional incentives. That being said, new technology and high new vehicle prices will naturally limit plug-in EV purchases to prime credit,” the report said.
NADA noted leasing allows for a more attainable point of entry and a lower monthly payment, primarily because the federal tax credit remains with the lease company, which uses it to reduce the amount of principle financed.
However, without some offset by individual manufacturers or government tax credits, faster depreciation and the decline in the resale value of used vehicles, means the cost of leasing increases because banks and finance companies take on more risk.