Caveat emptor.
It has been a long time since I last bought a used car.
I have forgotten just how sleazy the low end of the used car market can be.
But I’m getting educated in a hurry.
Today’s lesson in low-end used cars? A few weeks back, I was interested enough in an older Nissan Leaf that I scheduled an appointment with the dealer, to have a look at it. Then I did my homework, and cancelled the appointment.
And, foolish me, I figured I at least owed the guy an explanation of why I wasn’t interested. Because that’s what reasonable people do.
The ad for the car claimed excellent battery health, and a 110-mile range, per the independent estimate from Recurrent.com. By contrast, once I learned to read the “gas gauge” of a Nissan Leaf, photos of the dashboard revealed barely 60 miles of range left, as well as a battery that was in mediocre health. Via email, I told the dealer that’s why I was no longer interested. The car really didn’t have adequate range left.
I continue to track the ad for that car, just to try to get a handle on the used car market.
In response to my explanation of that cancelled appointment, what do you think the used car dealer did to the ad for that car?
- Nothing.
- Removed the falsely inflated range estimate from Recurrent.com
- Removed the photos of the car that revealed the actual range.
If you guessed “c”, then you’re a lot less naive about the used car market than I am. Or was.
As an economist, I really shouldn’t use the word “sleazy”, when the behavior is rational. The dealer represents seller, plain and simple. The dealer’s job is to get the best price for the seller, within some reasonable timeframe. Anything that increases the odds of selling the car, without getting thrown in jail, is fair game. So, if fuzzying-up the information on range might help sell the car, then fuzzying should occur. It’s up to the buyer to understand that and act accordingly.
In fairness, the dealer keeps dropping the price of that 2016 Nissan Leaf. In any case, I’ve already made up my mind that I don’t want anything earlier than a 2018 Leaf, due to the rapid degradation of the battery in earlier model years of Leafs.
The lesson here is that it’s still a used car, even if its electric. With everything that buying a used car entails. Just because it’s eco-friendly doesn’t mean the dealer is friendly. The upshot is that in trying to be a straight shooter, in a room full of crooks, all I did was help the crooks to be better crooks.
My local used EV market still appears too hot for my liking.
In addition to that 2016 Leaf, I have been tracking three 2018-or-later Leafs. These have a different battery chemistry from older Leafs. They retain their battery health and range much better than the pre-2018s and are priced accordingly.
Of the three cars I begin tracking less than two weeks ago, two have already sold.
Assuming that’s not just some kind of fluke, either I have an exceptional eye for a good deal, or the market for a reliable used EV is pretty hot. At least around here.
But the internet assures me that used EV prices are plummeting.
Official U.S. Consumer Price Index data are all-but-useless for judging long-term trends in the price of new and used cars. I went through that in Post #1836.
Source: Bureau of Labor Statistics, via the Federal Reserve of St. Louis FRED system
The quality adjustment embedded in the CPI car price data mean that the price trends as published by the Bureau of Labor Statistics have nothing to do with how much money you’ll need to shell out to buy a basic car. Such as Toyota Corolla, shown in yellow below.
But if car prices move fast enough, the actual change in prices will swamp the BLS quality adjustments. And so, for sharp short-term price movements, the BLS data aren’t too bad. From the BLS, we can see that used car prices peaked at the end of 2021, and have been mostly falling since.
Source: Underlying data from the St. Louis Federal Reserve (FRED)
The BLS does not appear to publish any data separating electric vehicles from other types of vehicles. So I have to turn to privately-produced price statistics if I want to get a handle on what’s happening to EV prices, as distinct from other types of vehicles.
And that’s where things turn a bit odd. Because, as far as I can tell, a lot of private-sector price estimates show that the price of used EVs is plummeting.
Here are two such estimates, from what I believe to be independent data sources:
- Used EV prices down 30% in the year ending June 2023. (Source: iSeeCars, quoted by CNBC).
- Used EV prices down 28% in the year ending June 2023 (Source: Recurrent).
The devil is in the details.
The iSeeCars study is a study of used cars one to five years old. And the measured price reduction in that segment was driven by Tesla’s decision to cut the price of its new cars. More-or-less, what they measured is that the price of used Teslas fell about 30%. In addition, it appears that they do not adjust for changes in the mix of vehicles sold, but simply take the change in the average asking price for a used EV.
The Recurrent study is also a study of used cars one to five years old. It appears to be based on the simple average of the asking prices of seven common used EVs and PHEVs. And, as with the iSeeCars study, a big chunk of the reduction is attributed to Tesla’s decision to cut the price of their new cars substantially.
That said, the Recurrent study shows a corresponding increase in (e.g.) the fraction of the used EV market offered for sale at less than $25K. I’m pretty sure that excludes most Teslas. The inference would be that these price declines affected the broader market, not just Tesla.
I’m still in no particular hurry to buy.
When all is said and done, my guess is that I should be in no hurry to buy a used EV. Prices for relatively new models (one-to-five years old) appear to be falling, in large part due to new-car price cuts by market leader Tesla. I don’t perceive that among low-end models, in my geographic area. But its possible I simply tracked an unusual small sample of cars.
Although the price trends may be murky, one aspect is clear. I’m still something of a babe in the woods when it comes to buying a used EV. I need to get a lot smarter before I put my money down on a used car. Even if it is an eco-friendly electric car.
