There is probably no better time to buy an EV than now.
What if we told you that you could buy a 2 year old Tesla at a price cheaper than that of a 2 year old Honda Civic.
Here is an ad from Carvana for a 2023 Tesla Model 3. The list price is $25,990. This does not include a $4,000 tax credit you could get if you meet certain income requirements. If you qualify for the $4,000 tax credit, the price of the car goes down to $21,990 which is quite the steal.
It’s worth remembering that you are paying just north of $20,000 for a Tesla that is going to be Full Self Driving (FSD) compliant. It also comes with Autopilot, heated seats, 360 degree camera vision and whole lot of other fancy gadgetry.
Now compare that to a 2023 Honda Civic with roughly the same mileage. The price of the Civic is $30,990, almost $9,000 more expensive than the Tesla. It includes none of Tesla’s high tech features and while it probably has great gas mileage compared to other cars it will still cost more to fuel than a Tesla or any other EV.
It is now clear that EVs, particularly used EVs are clearly a bargain when compared to used gas cars.
What’s driving this shift?
While it’s true that the Tesla brand especially has suffered from it’s owners foray into politics, a used Tesla Model 3 or any used EV is at the price level it is mainly because of faster depreciation.
EVs tend to depreciate a lot faster because of faster technological obsolescence i.e. EVs are seeing rapid improvements in both battery technology and software almost every other week, causing older technologies to be “obsolete” in a short amount of time. While even gasoline cars depreciate the moment you drive them off the dealership parking lot, EVs tend to depreciate a a whole lot more.
Batteries are also getting cheaper, as we pointed out in one of our previous articles. And as more and more battery factories get up and running, we will see an increase in battery production and supply, making their prices fall even further. This negatively affects the price of EVs as well.
It’s not just that. Most car manufacturers price their newer EVs at a premium to recoup a lot of the money they spent on building new factories and buying new equipment. The gasoline cars produced by the same manufacturers have already paid off all the expensive capital expenditure spent on factories decades ago. And since gasoline cars are sold at much higher numbers, they benefit from economies of scale which helps push their prices down.
So, its true that EVs are now cheap. But we think EVs will continue to decrease in price as manufacturers achieve scale. Chinese EVs have already set a price floor for EVs, with the BYD Seagull priced at just $10,000. Of course, you will never see similar price levels in the US or Europe, but it tells you which direction EV prices are headed.
For the past decade, EVs were always seen as a luxury option, but that axiom is about to be turned on its head. They are now cheap enough to be accessible to every kind of buyer. And the cheaper fuel and maintenance costs aren’t going to hurt either.
So, next time you’re browsing Carvana, you should seriously consider a used EV if you want to save money. The era of affordable EVs is finally here and we are excited for it!