Cheap used electric vehicles will flood the market in the next two years, experts say

• According to JD Power, almost 280,000 electric car leases will end in the next two years.
• These cars are likely to flood the used car market.
• This is because it is cheaper for most lease holders to simply lease a new electric vehicle instead of buying the old one.

The next two years will be a roller coaster ride in new and used electric vehicle prices in the United States. According to a new study from JD Power, over a quarter of a million electric car leases will expire by the end of 2026, flooding the market with potentially very affordable battery-powered cars.

That’s good news for people who are looking for an electric vehicle but don’t quite have the money to buy a new one. But there’s more good news: For those returning their gently used electric vehicles, it may be cheaper to simply lease a new one rather than buying out their two- or three-year-old car at the end of the contract.

This is because prices for new zero-emission cars are expected to fall even further, coupled with the introduction of more models from several automakers. Look at General Motors – the company already has nine electric cars on offer, but more are on the way, along with cheaper versions of the models currently available. BMW, Hyundai, Kia, Stellantis and others will also diversify their portfolio.

According to JD Power’s October 2024 E-Vision Intelligence Report, new electric vehicle leasing volumes increased a whopping 355% in 2023 and 88% in September 2024. This will result in a massive 230% increase in recurring vehicle leasing volumes in 2026. Before That Happens However, recurring EV leases are forecast to decline by 2% next year.

In total, nearly 280,000 electric vehicle leases will expire in the United States over the next two years. At the same time, however, JD Power says people who want to buy a new electric vehicle after their current lease expires may simply do so instead of paying the residual value and sticking with the car they leased in 2023 or 2024. The average recurring lessee in the compact SUV segment now pays $584 per month for their electric vehicle, according to JD Power, and the average residual value of their vehicle is $29,645.

That means the purchase price for most electric compact SUVs is above the $25,000 threshold that would qualify for the used electric vehicle tax credit. Without the used electric vehicle tax credit, it would cost the average recurring lessee in the electric compact SUV segment $477 per month to buy out the lease, while the average lease payment for a new electric vehicle in the same category would be just $457 per month Month.

The main reason for this is the steady decline in the price of electric vehicles over the last two years, which is expected to continue in the future. The average price an individual pays for a new electric vehicle is currently $35,900 – including incentives – down $12,700 from $48,500 in 2022. Add to that the fact that most people who currently own an electric vehicle – 94% to be exact – said they would probably consider an electric vehicle buy electric cars for their next vehicle purchase, and you get a scenario in which the market will again be flooded with used electric vehicles in 2028 and 2029 from people who have decided to cancel their contract and buy a new car instead.

Given this backdrop, there is no escaping uncertainty about the future of tax credits and incentives. When they’re gone, the market could change again – we just don’t know how yet.