You Could Buy a Used Electric Car for 15% of Its Price When New
NEW YORK ( TheStreet) -- Hey, have I got a deal for you -- an all-electric car. So long as you buy it used, that is.
A study for USA Today by Kelley Blue Book suggests that all-electric cars such as the Nissan Leaf could experience jaw-dropping depreciation over the first five years.
The 5-year-old Leaf could sell for only about 15% of its original sales price, while a similar Nissan Sentra SL compact, a gasoline-engine vehicle, would retain 36% of its original value.
Other all-electric vehicles such as the Chevrolet Spark EV and Ford Focus Electric are also likely to suffer huge depreciation. In fact, the Leaf, Fiat 500e and Smart Fortwo, all electric cars, topped Kelley's list of 2014 models likely to have the highest depreciation.
The problem is centered on the pure electric vehicles -- plug-ins with no back-up gasoline engine. Hybrids, which have gas motors as well as electric ones, tend to hold their value much better. For instance, the Toyota plug-in Prius, which can charge from an outlet but also has a gasoline engine, retains 35% of its value after five years, just two percentage points less than a comparable all-gas vehicle.
The study does not cite any particular problems with plug-ins. Rather, it looks as if the big depreciation simply shows that used-car buyers are taking their time to get comfortable with this new technology. That's a pattern that's been seen in the past.
If a plug-in holds up as well as a regular car does, it should last 10 or 15 years, maybe longer. That means you could buy a 5-year-old plug-in for less than a sixth of its original price and still have half to two-thirds of its useful life ahead of you.
This is just a more extreme example of the well-understood case for buying a used vehicle . Cars and trucks depreciate very quickly in their first few years, but still have lots of life left in them, so the second or third owner gets a lower cost per mile driven.
Of course, plug-ins are very new, and the Kelley Blue Book figures are not backed buy a lengthy track record. It's just too soon to know how well the plug-ins will function as they get older. Clearly, that uncertainty will weigh on the minds of used-car buyers because 5-year-old vehicles don't have the same warranty protections as new ones.
All-electric vehicles appeal to only a small subset of drivers -- people who need a vehicle for errands that never take them far from the recharging station in the garage. Many plug-in buyers have another vehicle for long trips.