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A few years ago, Democrats controlling Congress and President Joe Biden gave the US electric car industry a huge boost via the Inflation Reduction Act of 2022, which included extensions and upgrades to the federal EV tax credit. Whether planned or accidental, one unique feature of the updated legislation was that there was a loophole for leasing that made it possible for nearly all electric vehicle models to qualify.
As a result, EV leasing surged. The great thing about leasing is that it puts those cars on the used vehicle market very quickly, after two or three years. And given that we are now three years after the EV subsidies from the Inflation Reduction Act went into effect, we are just starting to get a surge of lightly used EVs coming off lease.
“More than 300,000 electric vehicles are expected to come off lease in 2026 alone, and they are about to flood the used car market,” Simran Rastogi of Autoblog writes. “Dave Thomas, senior manager of industry insights at CDK Global, the software company that powers a huge share of dealership operations in the United States, talks about his reading of the dealership data on Electrek. When someone with access to hard data like that starts talking about value and affordability, we tend to pay attention.”
Indeed. I mean, it’s common sense logic and we’ve been writing about this phenomenon over the past few years, or longer if we are talking more broadly and keep the European market in mind. Any policies that lead to a surge in EV leasing is going to lead to a surge in the used EV market.
How competitive will pricing be on these used EVs? We will see. In the past, EVs have depreciated a lot, but that’s also due to the fact that you could immediately get a $7,500 discount on a new EV via the federal government. That’s no longer an option, but at the same time, due to a large surge in supply, prices should come down and be highly competitive. We will see.
“The surge in lease returns is also appealing for dealers. Electric vehicles have fewer moving parts, which means there is usually less mechanical wear when they come back from a three-year lease. That translates to lower reconditioning costs before the car can go on sale, not to mention EVs are spending less time on lots than gas-powered cars,” Simran Rastogi adds. Yes, maybe auto dealers will finally come to love EVs with this notable benefit.
I know one thing — I’ll be looking closely at the used EV deals! I’d love to find a highly competitive offer on a Kia EV6, but I am also simply eager to see this market blowing up and many more used car shoppers able to go electric and enjoy the fun and convenience of the electric era.
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