Used EVs lead the charge

As macroeconomic pressures forced changes in consumer purchasing patterns in the first half of the year, uncertainty continues in the auto industry. Dealers had struggled to project sales numbers, OEMs drew back EV manufacturing and lenders adjusted strategies to navigate evolving consumer demand and shifts in credit. The EV market is showing mixed signs of sustainability. While new-EV sales face hurdles, used-EV sales are flourishing, even as federal incentives for EVs are expiring and some states have halved incentives. [caption id="attachment_58353025" align="alignnone" width="1152"] (Courtesy/Canva)[/caption] For example, the used-EV wholesale market has seen growth. Wholesale used-EV auction platform Plug sold more than $8 million worth of EVs in the second quarter through June 25, Jimmy Douglas , founder and chief executive, told Auto Finance News . Year-to-date sales total over $20 million. Sales at Plug, which was launched in Q1 2024, have grown more than 75% over the past three quarters, he said. EV sales are still being propped up by leasing. In fact, 67% of EVs purchased were leased In March, according to the latest data from Cox Automotive . “EV leasing demand has increased sharply,” Douglas said. “Leasing offers lower monthly payments than buying, which helps offset EVs’ higher sticker prices.” Rising sales, prices and EVs coming off lease Average wholesale values for used EVs trend lower than for other vehicles, which could prompt stronger demand for used EVs. In fact, in the first half of June, used EV values rose 0.7% month over month while prices on non-EVs rose 2% MoM, according to Cox Auto data published June 18. “One of the big deciding factors on whether or not they want to go from an ICE vehicle to an EV, in addition to whether or not it fits our lifestyle, is price,” Matthew Phillips , CEO of Car Pros Automotive Group in Renton, Wash., told AFN . Still, the average transaction price (ATP) and wholesale value of used EVs are up following an uptick in consumer demand in the first half of the year and a drop in production by some OEMs. The ATP for used EVs rose 2.6% year over year in May to $36,053, according to the latest data from Cox Auto. Wholesale used-EV values climbed 2.3% YoY in May and 7.1% YoY at the end of June, according to the Exponential Used Electric Vehicle Index , which was 94.09 as of June 26. The index measures wholesale prices of used EVs in operation and inventory awaiting sale. [caption id="attachment_58353020" align="aligncenter" width="1472"] Source: BigWheels[/caption] By comparison, overall, wholesale values of used vehicles in operation and inventory awaiting sale were up 4.2% YoY in May and 5.1% YoY at the end of June, according to the Exponential Used Vehicles Index, which was 143.33 as of June 26. [caption id="attachment_58353021" align="aligncenter" width="1524"] Source: BigWheels[/caption] Heightened consumer demand and strong sales have contributed to increased used-EV values during the first half of the year. Sales of those vehicles surged 32.1% YoY and climbed 1.1% MoM to 36,609 units in May, according to Cox. Used-EV inventory was 40 days’ supply on average during the month, an 11% decline YoY and down 3.4% MoM. “When we see manufacturer sales surge, it's frequently because they put more incentives on it and brought the price down,” Phillips said, adding that with federal tax incentives expiring and some states reducing incentives, OEMs are likely to push incentives even more. [caption id="attachment_58352720" align="alignnone" width="1917"] (Courtesy/Cox Auto)[/caption] The upward trajectory of used-EV sales is expected to continue, Stephanie Valdez Streaty , director of industry insights at Cox Auto, told AFN . In fact, second-quarter sales are expected to set a record at more than 100,000, she said. An influx of EVs coming off lease will also contribute to used-EV supply and sales down the line, Valdez Streaty said. “Consumers are going to continue to have more options [and at] different price points" for a used EV, she said. Vehicles coming off-lease have contributed to an uptick in the number of Teslas entering the market, Peter Glenn , founder, co-CEO and head of marketing at fintech EV Life , told AFN . The Folsom, Calif.-based company provides EV loans that allow consumers to defer down payments as they secure EV tax credits. EV Life launched used-EV financing in February 2024. “We're seeing a lot of used Model Ys coming in just under $25,000,” in part due to Tesla CEO Elon Musk ’s political activity, he said. To qualify for the federal clean vehicle tax credit, the sale price must be below $25,000, according to the IRS . “I have personally never seen so many Model Ys qualify for used-EV tax credits before,” he said. “That’s a very attractive vehicle to finance.” Used-EV sales top new Coinciding with surging used-EV sales in May, new EV sales declined YoY. New-EV sales dropped 10.7% YoY in May to 103,435 units, but were up 4.2% MoM, according to Cox. Dealer inventory for new EVs fell 11.6% YoY in May to 111 days’ supply, up 8% MoM. The ATP for new-EVs remained higher than used in May at $ 57,734, however, ATP was down 1.1% YoY and 2.3% MoM, a ccording to Cox Auto data. [caption id="attachment_58352719" align="alignnone" width="1870"] (Courtesy/Cox Auto)[/caption] Englewood, Colo.-based Elway Dealership Group has seen a similar decline in EV sales, which are “OK, not great,” Vice President Michael Maledon told AFN . “I think that's going to be a theme for a while.” EV sales swings are normal amid changes to the tax credit and new model releases, Jason Scott , partner at Spring Lane Capital, told AFN , noting that over the long term, EV adoption has grown. Spring Lane Capital is a major investor in EV fleet management fintech Spring Free EV and San Jose, Calif.-based charging station company EVCS . “The EV market has been volatile for the last couple of years, but within a line that goes up and to the right,” Scott said. “It's clear to most people that there is a better total cost of ownership and user experience story, but that data and that perception has not permeated the market yet. We're still at the beginning of that hyper adoption curve, but we see it going in the right direction.” Tax credits A challenge to EV adoption, however, is the elimination of the Inflation Reduction Act and federal EV tax incentives that are set to expire at the end of the year, experts say. President Donald Trump’s One Big Beautiful Bill, signed into law on July 4, accelerates the expiration of the tax credit for purchasing and leasing EVs to Sept. 30I. The tax credit was originally set to expire Dec. 31, 2032. Some say the elimination of the tax credit will widen that gap in new- and used-EV sales. “The real question mark about the EV market is [around] new electric vehicle sales and how they perform with the changes in tax credits, and particularly the commercial EV tax credit,” Andreas Wallendahl , CEO of EV-financing company Tenet , told AFN . The looming elimination of the tax credit served as an incentive for consumers, with EV sales holding up for some OEMs. Many reported an uptick in EV sales in June : American Honda ’s EV sales jumped 37.7% YoY to 33,026 units; Ford Motor ’s Q2 EV sales rose 6.6% YoY to 82,886 units; Hyundai Motor America sold 4,584 IONIQ EV models, down 1.8% YoY; and Toyota Motor North America ’s EV sales rose 6.7% YoY to 90,426 units. The used market, however, “is going to be important to getting equitable access to EVs for all consumers,” Cox’s Valdez Streaty said. Mixed lender sentiment Despite cautious optimism in the EV market, sentiment among financiers is mixed. “I see the sweet spot in financing electric vehicles that are a couple of model years old,” Tenet’s Wallendahl said. “I expect to continue to see a strong consumer trend of purchasing used electric vehicles to maintain affordability.” Possible increased prices due to auto tariffs and a possible shock to gas prices from global tensions will "push more people to find affordable options, and they're going to find really good, affordable options in 2- to 3-year-old electric vehicles,” he said. Spring Lane Capital Associate Katie St. James told AFN that the company is excited about the underlying economics of EVs, especially when you think about commercial fleets. “When you get down to the real economics of EVs on a total cost of ownership basis, they are superior to internal combustion vehicles in a lot of cases,” she said. But not all financiers share Tenet’s and Spring Lane’s enthusiasm. Fintech Upgrade has identified battery life and the overall maintenance cost for the consumer as top concerns , Scott Raymer , head of auto, told AFN . “We haven't made [EVs] a huge appetite for us,” he said. "About 5% or less of our business is EV, and that's pretty much by design. We are careful [with] what we want to originate in the EV space.” Credit unions also have reservations about financing pure EVs. “I do not anticipate that credit unions will pick up a strong market share of leasing or new EVs in 2025, although [EVs] will be a bright spot in the industry,” Bob Child , chief operating officer at Origence , told AFN . Origence provides technology and financing capabilities to credit unions and is the parent company of credit union lending network CUDL . However, Child says that he expects industrywide “new-EV sales are going to continue to be strong between now and the end of the year,” primarily driven by the pending elimination of tax incentives as early as September 30. Policies shift EV demand While many in the industry see a bright future for EVs despite the termination of some incentives, others believe that federal and state policies are curbing demand. New Jersey dealers did not experience the pull ahead in overall sales that was reported through much of the market in Q1, Laura Perrotta , president of the New Jersey Coalition of Automotive Retailers (NJCAR), previously told AFN . EV demand in the NJCAR’s region saw “really good growth over the years, and then just recently it collapsed,” she said. “We think it's, unfortunately, because of some of the policy decisions.” In addition, New Jersey has already cut EV incentives by 50%, prompting a likely further drawback in demand, Perrotta said. Other regions are experiencing similar trends. “I don't think the demand was [ever] there, and there was some artificial demand created by those EV tax credits,” Elway Dealership Group’s Maledon said. Dealers and manufacturers will experience “some short-term pain” if the credits are eliminated, he said. “But in the long run, it's not sustainable to try to create a market where the demand isn't.” — Additional reporting by Aidan Bush Register here for “Digital strategies for exceptional customer experience,” a free Auto Finance News webinar set for Tuesday, July 15, at 11 a.m. ET.

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