Since early last year, the cars rolling off Tesla’s California assembly lines have been selling at ever lower prices, with welcome knock-on effects in a car lot directly across the street from the company’s factory in the San Francisco Bay Area.
CarMax Inc.’s superstore in Fremont, California, has seen a rush of shoppers more willing than ever to try an electric car. While Tesla’s price cuts aren’t the only reason for the footfall — the selection of used plug-in models is growing — Elon Musk’s early dominance of the new electric car market has led to a strong influence on the dynamics of the used car market.
“We’ve seen a really strong interest,” said Henry Melendez in a telephone interview. CarMax’s general manager said customers have told him they want to take advantage of the incentives and falling prices. “They’ve always wanted to have an electric car, but it just wasn’t quite as affordable.”
The trend playing out on Tesla’s doorstep in Fremont is one that can be seen across much of the U.S. Retail sales of used electric vehicles rose 70 percent in the first half of the year, according to market researcher Cox Automotive. The average price of a used electric vehicle has fallen below $30,000, iSeeCars.com reported in June, noting that this has made them more affordable than a typical gasoline-powered vehicle.
Affordability remains a major obstacle to the adoption of electric vehicles among a broader audience of new-car buyers in the U.S. But the momentum dealers are seeing in used cars is a positive sign that demand will pick up once they are able to offer more affordable models.
“Tesla is driving the market by lowering prices,” said Scott Shannon, sales manager at Axis Motorcars in Jersey City, New Jersey. The dealership has about 400 new and used cars in stock, but only six electric cars, he said. “Used electric cars are selling faster than gas cars, almost within a week.”
Not all dealers are so lucky. Demand is being driven in part by ample supply—the inventory of used electric vehicles is now about four times what it was in 2021, when Recurrent, a platform for buying and selling electric cars, began collecting the data.
Overall, according to auto researcher Edmunds, dealers need longer to sell used electric cars than cars with combustion engines. This is different for models between $20,000 and $30,000: According to the market researcher’s data, used electric cars are usually sold out within 30 to 36 days, compared to 39 days for gasoline cars.
It helps that Uncle Sam is pitching in. While clean vehicle tax credits worth up to $7,500 for buyers of new electric vehicles have received most of the attention since the Inflation Reduction Act passed in 2022, the law also created $4,000 credits for purchases of used plug-in models that cost $25,000 or less. While manufacturers must meet strict criteria for their new electric vehicles to qualify for incentives, used electric cars are eligible as long as they are under that price threshold and at least about two years old.
Tesla’s reluctance to update its lineup is another reason why its used electric cars look relatively attractive, says Jessica Caldwell, head of analytics at Edmunds. The U.S. manufacturer has not significantly updated its four-year-old Model Y SUV, and the Model 3 redesign has not drastically changed the look of the sedan introduced seven years ago.
Drivers can grab a used Model 3 for $22,000 and “it doesn’t look much different than a new one,” Caldwell said. Most used electric cars “are a good deal.”
