Should You Buy a Used EV Before the Tax Credit Expires on September 30, 2025?

The U.S. federal tax credit for used electric vehicles (EVs), set to expire on September 30, 2025, has created a pivotal moment for buyers and investors. This $4,000 credit—capped at 30% of the sale price for vehicles under $25,000—has been a game-changer for affordability, but its impending end raises critical questions: Should you act now to secure the discount, or wait and risk higher costs? To answer this, we must dissect the financial implications of timing, depreciation, and post-credit market volatility.

The Urgency of Timing: A $4,000 Windfall or a Missed Opportunity?

The tax credit's expiration has already triggered a surge in demand. In July 2025 alone, over 36,700 used EVs were sold, a record high, as buyers rush to lock in savings. For eligible shoppers, the credit effectively reduces the purchase price by up to $4,000, making used EVs more competitive with internal combustion engine (ICE) vehicles. However, this window is closing.

The IRS's income and vehicle eligibility criteria (e.g., modified AGI limits of $75,000 for singles, $150,000 for married filers) mean not all buyers qualify. For those who do, the decision is clear: act before the deadline. For others, the post-September 30 market may offer fewer discounts, as the credit's absence will likely drive up prices for eligible models and create a “pricing gap” for vehicles just above the $25,000 threshold.

Depreciation: The Hidden Cost of EV Ownership

While the tax credit reduces upfront costs, it does not offset the long-term financial risks of EV depreciation. Historically, EVs lose 30–50% of their value in the first year, far outpacing ICE vehicles, which depreciate 20–30% annually. For example, a Tesla Model 3 depreciates to 64.36% of its value after one year, while a comparable Mercedes-Benz C 300 retains 82.43%.

This rapid depreciation is driven by technological obsolescence, battery degradation, and lease-return saturation. A 2022 Transport Policy study found that EVs with shorter battery warranties and limited range depreciate fastest. However, models like the Ford Mustang Mach-E and F-150 Lightning, which offer robust warranties and software updates, show more stable depreciation. For investors, this underscores the importance of selecting models with strong residual value.

Historical Volatility: Lessons from Past Expirations

The expiration of previous EV tax credits offers a cautionary tale. In 2024, used EV prices dropped 29.5% year-over-year as buyers rushed to qualify for the credit. Post-expiration, the market entered a “death zone” for vehicles priced just above $25,000, which lost value rapidly due to their ineligibility for the full $4,000 discount.

This volatility highlights a key risk: the used EV market is highly sensitive to policy changes. While the 2025 expiration may not trigger as sharp a drop (given the current surge in demand), investors should prepare for short-term fluctuations. The influx of lease-return EVs in 2026 could stabilize prices, but until then, the market remains unpredictable.

Current Market Dynamics: Pricing, Inventory, and Demand

As of June 2025, the average used EV price is $36,700—significantly lower than the $56,910 average for new models. However, inventory is tightening. Dealers are offering promotions to clear 2025 models before 2026 releases, but these deals often target lower-demand vehicles. For buyers seeking premium models (e.g., luxury EVs with long-range batteries), the window to secure a discount is narrowing.

The Anderson Economic Group notes that cost, convenience, and reliability remain barriers to EV adoption. While the tax credit has mitigated some of these concerns, buyers must also consider charging infrastructure, battery health, and long-term maintenance costs. For instance, EVs in colder regions may face higher depreciation due to battery performance issues.

Investor Behavior and Post-2025 Outlook

Post-expiration, investor behavior is expected to shift. Buyers who previously prioritized tax credits may now focus on models with strong residual value, such as EVs with 200+ mile ranges or extended battery warranties. State-level incentives (e.g., California's proposed rebates) could cushion the blow of federal credit expiration, but their impact will vary by region.

Analysts predict that 70–75% of EV purchases will continue even without the credit, driven by lower operating costs and technological improvements. However, the used EV market may face a temporary correction as demand stabilizes. Investors should monitor lease-return trends and battery longevity data—factors that could reshape depreciation curves in the coming years.

Final Verdict: Buy Now or Wait?

For eligible buyers, the answer is clear: act before September 30, 2025. The $4,000 credit is a one-time discount that cannot be replicated, and delaying purchase risks missing out on this financial advantage. For non-qualified buyers, the post-September 30 market may offer better deals on less desirable models, but these may not align with long-term needs.

Investors, meanwhile, should adopt a cautious approach. While the used EV market holds promise, its volatility requires careful selection of models with strong residual value. Diversifying into EVs with proven reliability (e.g., Ford's F-150 Lightning) and monitoring state-level incentives can mitigate risks.

In the end, the decision hinges on timing, patience, and a clear understanding of the market's evolving dynamics. As the EV revolution matures, those who act wisely today will reap the rewards tomorrow.