Cheap Used EVs Will Flood The Market In The Next Two Years, Experts Say

Nearly 280,000 EV leases will end in the next two years, according to J.D. Power. These cars will likely flood the used car market. That's because most lessees will find it cheaper to just lease a new EV instead of buying out their old one.

The next two years will be a roller coaster ride for new and used electric vehicle prices in the United States. According to a new study from J.D. Power, over a quarter of a million EV leases will end by the time 2026 comes to a close, flooding the market with potentially very affordable battery-powered cars.

That’s good news for people who are looking to get an EV but don’t quite have the money to buy a new one. But there’s more good news: the people returning their slightly used EVs might find it cheaper to just lease a new one instead of buying off their two- or three-year-old car when the contract ends.

That’s because prices for new zero-emissions cars are projected to go down even more, coupled with the introduction of more models from several automakers. Just look at General Motors–it already has nine electric cars on sale, but more are on the way, together with more affordable versions of the currently available models. BMW, Hyundai, Kia, Stellantis and others will also diversify their portfolio.

According to J.D. Power’s October 2024 E-Vision Intelligence Report, lease volumes for new EVs surged a whopping 355% throughout 2023 and 88% throughout September 2024. This will lead to a massive 230% spike in returning lease volumes in 2026. Before that happens, though, a 2% decrease in returning EV leases is projected for next year. 

In total, nearly 280,000 EV leases will end in the next two years in the United States. At the same time, however, J.D. Power says that people looking to get a new EV after their current lease ends might just do that instead of paying the residual value and sticking with the car they leased in 2023 or 2024. The average returning lessee in the compact SUV segment now pays $584 per month for their EV, and the average residual value of their vehicle is $29,645, as per J.D. Power. 

This means the buyout price for most electric compact SUVs is higher than the $25,000 threshold that would qualify for the used EV tax credit. Without the used EV tax credit in the mix, it would cost the average returning lessee in the electric compact SUV segment $477 per month to buy out the lease, while the average lease payment on a new EV in the same category would be just $457 per month. 

The main reason for this is the steady decline in EV prices during the past two years, which is expected to continue going forward. The average price paid for a new EV by an individual is currently $35,900–including incentives–down $12,700 from $48,500 in 2022. Add the fact that most people who currently own an EV–94% to be precise–said they are likely to consider an EV for their next vehicle purchase, and you get a scenario where in 2028 and 2029 the market will once again be flooded with used EVs from people who chose to end their contract and get a new car instead.

All this being said, there’s no escaping the uncertainty about the future of tax credits and incentives. If they’re gone, we might see the market change once again–we just don’t know how yet.