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Used vehicle prices have been sky-high for years. But in recent months, there’s finally a bit of relief. And what’s more, the values of certain used EVs–such as used Teslas–are in freefall. Does this mean the electric vehicle’s honeymoon is over? Are early EV adopters selling for a reason? Or are we seeing supply and demand finally even out?

Used vehicle values are finally coming down

Used cars sit on a lot with their prices displayed.
A lot sells used cars | Justin Sullivan via Getty Images

For years now, a limited supply of new vehicles has kept the prices of used vehicles artificially high. In fact, there were certain used cars worth more than their MSRP just a few months ago. But the iSeeCars website finally reported that used car prices have been falling for six months. Now they appear to be stabilizing, decreasing at a sustainable rate; in April, May, and June, the average used car’s value fell about 3% per month.

But during the same time, the value of electric vehicles, and certain other luxury cars, has been plummeting. This seems like great news if you’ve been waiting to buy a used Tesla. But should we be worried? Are early EV adopters having a change of heart for a good reason?

Used electric vehicle prices are in freefall

The window sticker in a used Tesla Model 3 electric car for sale on a dealer lot.
Tesla Model 3 | Mario Tama via Getty Images

While the average used vehicle’s value fell 3.6% during June 2023, the price of the average used EV plummeted 29.5%. In May, the same number dropped 28.9%. And in April, it fell 24%. It is safe to say that used EV prices are in freefall.

Which electric vehicle prices are falling the quickest? Teslas, followed by the Nissan LEAF. The price of a one-to-five-year-old Tesla Model 3 is 30.5% lower than it was this time last year. The Tesla Model X is down 21.3%. Tesla Model S values have dropped 19%. The Nissan LEAF’s average value has fallen 19.2% since last year.

These aren’t the only used electric vehicles with falling prices. The Hyundai Ioniq’s value is down 16.2% in the past year. The Jaguar E-PACE is also down 16.2%. Finally, BMW’s PHEV 5 Series’ values fell 15.5%.

Is the electric vehicle’s honeymoon over?

A Tesla Model S used electric car parked in a showroom garage.
Tesla Model S | Jasper Juinen/Bloomberg via Getty Images

Electric vehicles are getting a lot of buzz. Most automakers launched their first line of EVs in the past ten years. Environmentalists and government officials have been touting EVs as the next big thing in transportation. And more drivers have gone electric every year. But now, it seems EVs’ shine may be wearing off.

One in every five early EV adopters have gone back to gasoline vehicles. In fact, one EV-driving celebrity went so far as to say automakers duped drivers with EV claims.

What are these complaints? That current battery technology (lithium-ion) makes electric vehicles expensive, heavy, lacking range, and quick to wear out. On top of that, lithium mining is reportedly contributing to environmental degradation and human rights abuse. Certain experts say we should have waited for one of the many other emerging battery chemistries to mature before going all-in on EVs.

Disillusionment with lithium-ion EVs may contribute to the plummeting prices of used electric vehicles. But it is far from the only factor.

Falling used EV prices signal a shift in supply and demand

A lot of used Tesla electric cars with plummeting resale value.
Used Teslas | Chris Ratcliffe/Bloomberg via Gett yImages

Elon Musk is quick to claim to his shareholders that demand for his Tesla vehicles is “infinite.” If this is true, the only factor limiting his company’s growth is the speed with which he can build new cars. But falling used EV prices signal that demand for Teslas is indeed finite.

In Musk’s defense, there was a time when it seemed the demand for EVs was infinite. This is because there was a time when getting your hands on most new EVs was nearly impossible, and popular models such as Teslas had waiting lists thousands of customers long. Generous tax rebates and 2022’s surging oil prices increased demand further. But times are a-changing.

Karl Brauer, iSeeCars Executive Analyst, said, “Electric vehicle prices are now falling at nearly 10 times the rate of the average used vehicle, reflecting a clear shift in EV supply and demand.”

In addition to falling demand, there is a clear shift in the EV supply. One factor is the abundance of new Tesla competitors. Bauer specified, “Tesla occupies three of the top four slots in used car price drops, with Nissan’s LEAF rounding out the top four and confirming the market’s shift away from older, high-volume electric vehicles…With so many newer EVs entering the market over the past two years cars like the Model 3, X, S, and LEAF are looking less competitive and less compelling.”

But Tesla itself is also contributing to the falling values of its used cars. Bauer said, “With Tesla cutting prices on new models, its used EV values have tumbled.”

If you own a Tesla, don’t count on it appreciating. But if you are in the market for a used EV, now is the time to buy.

Used internal combustion vehicle prices are stabilizing at much higher prices than they were pre-pandemic; an EV may be your most budget-friendly option. That is if you aren’t yet disillusioned with lithium-ion electric vehicles.

Next, find out why a used Tesla might be a great investment or learn more about the current values of used cars in the video below: