One question that keeps coming up as eclectic vehicles continue to soar in popularity is whether they hold their value better than cars with combustion engines.
It’s no secret that electric vehicles are more expensive to buy straight off the lot, so the long-term savings are now being weighed against whether or not depreciation is going to be a crucial factor.
As with any vehicle, electric vehicles are going to be a long-term investment. This means that maintaining value for as long as possible can be a feature that will make or break your decision to buy.
What is depreciation?
It’s vital to get to grips with what factors contribute to depreciation when thinking about long-term value.
This term refers to the loss of value over time and with use, typically in the automotive industry. It’s the difference between how much you paid for your car and how much you will potentially be able to sell it for, should the need arise.
Since the act of driving causes wear and tear in all the different sections of the car, cars are one of the only assets whose worth won’t rise after the sale.
Due to the fact that electric cars don’t have a combustion engine, they have fewer parts than petrol or diesel vehicles, meaning that it can be important to determine exactly what depreciation entails and whether this will impact the long-term value.
There isn’t a whole lot of information out there regarding exactly how fast electric vehicles will depreciate since they are still relatively new. Research suggests that they will lessen in value quicker than their counterparts; however, as new models are growing in design and functionality, this isn’t necessarily the case. It’s thought that the better the model you buy, the more likely it is to hold its value.
Electric vehicles are expected to depreciate by up to around 50% of their original value when they hit 36,000 miles on the clock (which is around three years of moderate use), compared to the average of 39.1% for those with internal combustion engines.
What factors contribute to electric car depreciation?
Making an informed choice about how well the value of your electric vehicle is going to hold up can be aided by having a better understanding of the important elements that influence car depreciation.
The top ones are:
- Mileage: this is a key indicator when determining a car’s depreciation, as the more it has been driven (i.e. miles covered), the more the car has been used
- Age: it’s no secret that age is the biggest factor of depreciation; not just in terms of wear, but also as they typically fall behind newer, more powerful, tech-filled cars that are typically launched every year
- Maintenance: every time a car is serviced, it will hold its value a little longer, as a recorded history of maintenance shows good care
Other considerations are also important to keep in mind, for example, the reputation and success of the brand you select. Unknown or small brands won’t attract buyers in the future as well as well-established ones. Also, market demand is another factor to keep in mind, as is overall vehicle condition, both inside and out, and whether or not it came with any government incentives.
Although electric cars don’t have combustion engines, the batteries can also be a consideration for depreciation. On the plus side, right now the lithium-ion batteries used in electric cars are estimated to last between 15 and 20 years, and although they may degrade over time themselves, they often last a lot longer than the vehicles they power.
It’s crucial to note that technology is causing change across a wide range of industries, including the automotive industry, particularly with the introduction of electric vehicles. Long-term values may be impacted as a result, since newer, more modern models are likely to drive down the cost of older models that are perceived to be less functional for drivers.
Many people will want to make sure they get the most features for their money because purchasing a car is often an investment, and EV manufacturers are conscious of staying ahead of the trends.
Why choose electric vehicles over combustion engines?
Diesel cars have typically held their value a little longer than petrol alternatives when it comes to depreciation. This is because they can be more reliable, more fuel efficient, and generally more resilient to the signs of wear, tear, and ageing.
Currently, market sentiment is shifting due to a growing emphasis on a more environmentally sensitive approach to car use.
Many causes, including emissions taxes and a more conscientious approach by drivers to reduce carbon footprints and improve air quality, have contributed to the rise of electric cars and the increase in the sale of these cars over petrol cars. As a result, even if they might not necessarily keep their value better now, electric cars are more likely to do so in the future as the industry develops and they get better.
Will buying an electric car be a smart financial decision?
The likelihood is that you will be making a wise investment if you buy from a respected seller.
Although you’ll probably pay more for your new electric car than you would for one of its competitors, the savings and advantages over the long run are encouraging an increasing number of individuals to make the switch and bolstering the market.
Generally speaking, EVs from the major brands sell for more used than those with combustion engines, although this could be because of their novelty and newness. As the market gains more traction, sentiment is likely to change along with it, but not in a bad way.