The used EV market could become more favorable for buyers this year, even though federal EV tax credits have ended, as a large number of subsidized leased electric vehicles are expected to flow into the used-car supply.
Car and Driver reported that many electric vehicles leased in recent years with the help of a $7,500 federal credit are likely to be returned to dealerships, increasing used-EV inventory and giving shoppers more choices at lower prices. The outlet said that from January 2023 through September 2025, more than 1.1 million electric vehicles were leased at reduced prices after the $7,500 credit was applied.
Because applications for the subsidy became widespread around April 2023, and the most common lease term is three years (36 months), Car and Driver said the volume of lease returns could rise sharply starting in April as those contracts reach maturity.
Jeremy Robb, chief economist at Cox Automotive, said that before the pandemic, leasing accounted for about 30% of the new-car market, but the share fell to 16% by late 2022 and has been rising again. He said most of that rebound has been driven by electric vehicles and plug-in hybrids (PHEVs). Cox Automotive also said this wave of used-EV supply could be especially strong because of “negative equity” in many of the vehicles.
The report explained that lease contracts are often set with a high residual value to encourage returns at the end of the term. In addition, because the $7,500 incentive was reflected in the lease transaction, many drivers may find the residual value at turn-in is higher than the vehicle’s market price, making it more likely they will return the car instead of buying it.
As supply increases, prices can face downward pressure, giving consumers more options at lower costs. Cox Automotive projected that the share of electric vehicles among lease returns will jump from about 5% last year to 12.5% this year, and could rise to about 19% by 2027.
Models expected to appear in large numbers include Tesla Model Y and Tesla Model 3, which were long eligible for subsidies, along with the Hyundai Ioniq 5, Volkswagen ID.4, and Ford Mustang Mach-E, the report said. Among plug-in hybrids, the Jeep Wrangler 4xe was also cited.
The report added that companies may respond by encouraging customers to extend leases or, in some cases, allowing purchases at prices below the residual value to ease inventory pressure.
Experts also advised that shoppers considering a returned used electric vehicle should check battery state of health and real-world range at a full charge, as well as battery warranty coverage, recall history, whether charging equipment is included, and the vehicle’s accident history.
BY HOONSIK WOO [woo.hoonsik@koreadaily.com]
