Electric car depreciation — An in-depth guide

What is depreciation?

Car depreciation is the gradual decrease in the value of a vehicle over time.

Some assets appreciate in value; jewellery may appreciate in value due to its rarity, while a house’s value will often grow due to factors such as market growth and improvements. However, cars’ value almost always depreciates after they are sold for the first time.

If potential resale value is something you take into account when choosing a new car, it’s certainly worth considering the rates of electric car depreciation. It will make things much simpler when the time comes to sell your electric car.

Do electric cars hold their value?

Whilst electric cars depreciate slightly faster on average than ICE models, it’s important to bear in mind that they typically have higher prices. Therefore, more value loss through depreciation can be expected.

Many EVs will hold their value well if you keep on top of their servicing and maintenance schedule.

Premium EVs such as the Mercedes-Benz EQS, BMW iX and Polestar 2 tend to hold their value better than most. You can also expect models with longer electric ranges and more sophisticated technology to retain more of their value over time.

Just as with ICE cars, EVs with a good reputation for quality and reliability are likely to hold more of their value. How well an EV has been looked after its and its battery health will also influence its used value.

The impending 2035 ban on the sale of new ICE vehicles is also likely to hurt used ICE values, whilst boosting used EV values.

Factors influencing electric car depreciation

• Mileage

  The more miles you clock up, the less your vehicle will be worth.

• Age

  Virtually all cars experience age-related depreciation. So, you can expect an older EV to be worth less.

• Battery condition

  Your EV’s battery performance and the range that the battery can provide will affect its market value.

• Brand reputation

  If your car's brand has a poor reputation - or an incident adversely affects the brand’s reputation, your car’s value may also suffer.

• Service history

  Staying on top of your EV’s servicing schedule and recording each garage visit in the service booklet can help you retain more of your car’s value.

• Cosmetic condition

  Keeping your car in good condition and proactively fixing any minor dents and scratches can help to reduce the effects of depreciation.

• Size

  Larger cars are typically costlier to run and come with higher price tags. Therefore, if you opt for a large EV, you stand to lose more money over time.

• Market demand

  As a result of the current EV market struggles, many used EVs are now depreciating at a faster rate.

Comparing depreciation: EVs vs ICE vehicles

• Market data reveals that on average, EVs depreciate at a slightly faster rate than their ICE rivals.
• A typical EV’s value drops off more steeply than an equivalent ICE model in the first year, then levels off.
• However, it is important to bear in mind that EVs typically have higher RRPs than equivalent ICE models. Therefore, you’re likely to lose more money through depreciation if you buy a new EV.
• Market volatility affects both EVs and ICE models. However, reports of poor residual values for EVs may knock consumer confidence, pushing used EV values down even further.
• Some ICE cars are liable to pay daily fees if they travel within emissions-based chargeable zones such as the Ultra Low Emission Zone (ULEZ) in London or the Clean Air Zones (CAZs) in other cities, whereas EVs are usually exempt from these charges.
• Full EVs are also exempt from the Congestion Charge in London.
• These additional charges have hurt the resale values of some higher-polluting ICE models.

How long do electric car batteries last?

Typically speaking, electric car batteries last anywhere between 10-20 years.

However, it’s crucial that you keep your batteries in good condition, as your EV can't run without them. If the batteries become damaged, the value of the whole car will suffer as a result.

Here are some of the factors that can damage electric car batteries and reduce their capacity:

• Overcharging.
• Exposure to extreme temperatures.
• Not allowing batteries to cool before recharging.
• Only using rapid chargers.

How to minimise electric car depreciation

• Choose an EV brand with a good reputation

  Choosing a reliable model will help to minimise the risk of expensive faults. EVs from brands with a good reputation tend to depreciate slower, as higher consumer confidence helps them hold on to more of their value.

• Maintain a full service history

  Make sure you service your EV at the intervals recommended by the manufacturer and keep a record of each service. Maintaining a complete service history will reassure the next buyer that you have taken good care of your EV and help you get a better price for it.

• Keep the car looking good

  Regularly clean the car inside and out. Address any scratches and blemishes promptly. If your car looks good cosmetically, this will help to preserve its value.

• Sell at the right time

  Choosing the best time to sell your car can lessen the effects of depreciation. If you are selling a used car, avoid selling it in March or September when the new numberplates launch. Demand for different types of EVs peaks at different times of year. Sports cars sell for more in the spring and summer thanks to the warmer temperatures, whereas 4x4s fetch the best prices in winter, as they can handle inclement weather better than most cars.

Why are electric cars depreciating so much?

The arrival of a wide selection of EVs from emerging and established manufacturers on the UK’s new car market has made a higher proportion of used EVs available to consumers.

A few years ago, when used EVs were in short supply compared to consumer demand, prices were on the rise. However, more recently, thanks to the influx of EVs joining the used market, supply now outpaces demand, which has caused used EV prices to fall.

Furthermore, EV-specific technologies are quickly advancing. The latest models now boast significantly longer ranges than their predecessors. Battery technology is also improving and as such, some consumers have reservations about the performance and reliability of older EV batteries. As such, many EVs appear dated faster than equivalent ICE models.

The future of electric car depreciation

• After significant shortages during and after the pandemic, the supply of EVs in the UK’s used market is now improving, with many formerly leased EVs now rejoining the market as used cars.
• EV technology and reliability is improving with each new generation. Some manufacturers are offering eight-year battery warranties to help make EVs more attractive to consumers.
• Increased availability of EV charging infrastructure will make electric motoring a viable prospect for growing numbers of drivers.
• Whilst the Government does not currently offer any incentives for EV buyers, they may choose to re-introduce discounts to support the approaching 2035 ban on the sale of new ICE vehicles – and the ongoing drive towards electrification.
• EV demand is expected to increase as the 2035 ICE ban approaches. This may lead to a slower rate of depreciation for the next generation of EVs.