In this day and age everyone wants more bang for their buck, and who can blame them? Whether it's baked beans or a new rain jacket, you want to know that you’re getting good value for your hard earned cash.
Cars are no different. As the saying goes “you lose money on a car as soon as it leaves the showroom”, a statement which is up for debate of course. But, depreciation is still a huge concern when purchasing a new car, and electric cars are no exception.
So whether you’re in the market for an EV or you have a brand new EV parked in the drive, you may be finding yourself asking questions about electric car depreciation.
What is electric car depreciation?
Electric car depreciation is no different to petrol, diesel or hybrid car depreciation. Car depreciation - electric or otherwise - is simply the vehicle's loss in value as it ages.
In the instance of brand new factory fresh models, depreciation occurs as soon as you own the car, as technically it is now a second hand model. Unlike other big ticket items like houses, designer watches, or antiques, cars are almost guaranteed to depreciate in value over time.
Depreciation within the car industry is typically measured by residual value, which is the percentage of the new, initial price that has been lost. For owners of brand new models this isn’t a good sign as your new asset has very rapidly decreased in value.
What factors contribute to electric car depreciation?
There are various factors that contribute to the depreciation of an electric car's value. Yet, electric vehicles are subject to almost the exact same depreciation factors as petrol and diesel models.
Electric cars will experience depreciation due to:
- High mileage
- Interior and exterior neglect i.e. body work scratches and dents
- Service history
- Battery condition/age
- EV type (PHEV, self charging hybrid, full electric etc.)
The two main depreciation factors to be mindful of are mileage and age. We cover how quickly an EV depreciates in the next section, but with age, the older a car is, the less it tends to be worth. Unless, of course, it enters into the realm of being a classic car - at which point it may regain some of its lost value.
Initially, the market for electric vehicles was smaller and rather niche, meaning the residual value for EV’s was much lower. However, a collective shift in attitude, higher congestion charges and increased government incentives have increased the demand for EV’s, making residual values stronger than they once were.
How quickly do electric cars depreciate compared to petrol, diesel and hybrid cars?
It’s common knowledge, as confirmed by the AA, that new cars will lose around 60% of their value after three years at an average mileage of 10,000 miles per year.
However, in relation to electric cars specifically, the latest figures show that EVs retain around 49% of their value after 3 years, meaning that electric cars depreciate slower than petrol and diesel cars.
The value of EV’s is continuously on the up due to the increased demand and frequent shift in attitude, meaning that their residual value is likely to remain steady. These strong residual values are great news for leasing customers, whether it’s an electric model or otherwise, monthly repayment fees are likely to remain low.
How long do electric car batteries last?
As we previously mentioned, one of the main factors that causes electric car depreciation is the lifetime of the car battery.
Electric car batteries are vastly simpler compared to a regular car battery, and there are a couple different types of electric car batteries too. However simpler they may be, there are certainly elements of the battery that will wear out over time.
As a fairly new breakthrough within the automotive industry, it is difficult to define the exact lifetime of an electric car battery. In some cases they have even been said to outlive the car they have been designed for!
Putting a figure on it, electric car batteries last anywhere from 400,000 to 500,000 miles! And with the average driver doing just under 6,000 miles per year, a battery should technically last around 83 years!
Does brand matter in relation to electric car depreciation?
If you’re in the market for an EV and you’re here to learn more about electric car depreciation, you may have also questioned “does brand matter in relation to electric car depreciation?”.
And the answer is yes, brand can matter in relation to electric car depreciation. The more in-demand a brand is, the more likely it is to still be desirable second hand and therefore retain its value.
It is clear to see that depreciation is something which affects cars regardless of whether they are petrol, diesel, hybrid or electric. With a focus on electric vehicles only however, it is clear to see from the information outlined in this article that electric vehicles depreciate at a much slower rate than petrol or diesel.
The global chip shortage that the automotive industry currently faces has also altered vehicles' residual value entirely, meaning that vehicles as a whole are retaining their value for much longer. Great news for anyone who is in the market for a new car!
If you’re still struggling to come to a conclusion about purchasing a petrol, diesel, hybrid or electric car then you can read our handy guide to aid your decision making.
However, if your mind is made up after that wad of depreciation information, then compare electric car lease deals with Lease Fetcher! We compare millions of lease deals every day to bring you the best lease prices on the market!