Used EVs Under $25,000 Outsell Gas Cars As Tax Credit Nears End

In the current US car market, used electric vehicles (EVs) are presenting an unprecedented opportunity. The convergence of falling prices, robust battery performance, and an expiring federal tax credit is creating a favorable environment for consumers considering an electric vehicle purchase.

For years, Tesla CEO Elon Musk has discussed the possibility of a $25,000 electric car. While this has not materialized in the new car market, the used EV sector is seeing a reality check. Dealerships like EV Auto in Colorado and Utah are offering used Model 3s for around $20,000. These vehicles, though pre-owned with significant mileage, are proving to be a viable option due to their durability and performance.

The used EV market is thriving, with a significant number of vehicles priced below $25,000. Over a third of used EVs are under this price point, and more than half are under $30,000. This is particularly appealing in a market where even modest new gas-powered cars often exceed $30,000. Buyers are responding positively, with used EVs outselling used gas cars in five of the last seven months. This trend indicates a growing acceptance of affordable, eco-friendly transportation options.

However, there is a sense of urgency. The federal program offering up to $4,000 in tax credits for used EVs priced at $25,000 or less is set to expire at the end of September. This program, initially slated to run until 2032, was accelerated by the signing of the new One Big Beautiful Bill. For younger buyers, especially Gen Zers looking to go green without a hefty price tag, this window of opportunity may not reopen soon. Experts like Brent Gruber from JD Power and Liz Najman of Recurrent advise prospective buyers to act quickly, as the tax break applies only to models made in 2023 or earlier and priced below $25,000. Supply is limited, and delaying could result in fewer options.

One of the primary concerns for potential used EV buyers is battery performance and replacement costs. Real-world data, however, is encouraging. EVs from as far back as 2011 retain 79% of their original range, while 2020 models average about 97%. This performance exceeds many buyers' and automakers' expectations, alleviating concerns about battery longevity and cost.

For those who miss the September deadline, another opportunity may arise. Over the past three years, leasing an EV came with a $7,500 tax credit loophole, making leasing more affordable. As these leased EVs, often well-maintained, hit the used market next year, roughly 215,000 of them are expected to be available, according to JD Power. This influx could provide another wave of good-quality used electrics.

The future of the used EV market is complex. New EVs may become more expensive, potentially driving up used prices as well. Dealers might also increase prices once they no longer need to stay under the $25,000 threshold for tax credit eligibility. Alex Lawrence, CEO of EV Auto, predicts a bifurcated market: older EVs under $20,000 and newer models at higher price points. Despite the uncertainties, the market holds potential for savvy buyers.