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Discussion Starter · #1 ·
I know this has been touched on a few times in this forum for particular models but I have a general question.

We know how much ICE cars depreciate and there are decades of data to back up predictions. I wonder if depreciation for EVs will follow a different curve.

I hope that in the next few years, there will be a real increase in EV adoption and therefore more cars coming onto the second-hand market. I think there's high demand for medium and larger EVs with a longer range. If we can assume that EVs are simpler and designed for higher mileage, does that mean that a 5 year old EV with 60k miles will retain proportionally more value than the equivalent ICE has done at the same age and mileage?

The reason I ask is I'm fortunate enough to be able to join a salary sacrifice EV scheme at work. I'd be looking to lease the car for 3 years and then buy it*. I reckon the monthly payments are calculated based on a prediction of the depreciation as basically, I'm paying depreciation for 3 years. My concern is that if at the end of the lease period, I ask to buy the car, the market value figure I'll be quoted will be so high (as the car has held its value) that I would have been better off buying outright initially or financing with a guaranteed future value.

So the question is, does the lease company have a good idea on EV depreciation over the next few years or are they likely to use ICE depreciation data in the knowledge that they'll make money on the EV at the end of the lease as it will have retained more value?

* I've checked and although a lease, I do have the option to buy 'at market value' at the end of the lease term.
 

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The problem is that the EV market has been pretty distorted over the past year or so. I sold my Tesla Model 3 LR with much less depreciation than I expected, and at times people were paying as much, or more, for second hand Model 3s as they would have for a new one. Used car prices in general have been much higher than normal during the earlier part of this year, because of the decrease in production of new cars, I think. Hard to be able to read through the bumps from the unusual conditions of the last 18 months to try and see how depreciation may settle down to. My gut feeling is that there will be a growing demand for good used EVs, as they become more popular, so used prices will stay above average for the class of car.

I would guess that the lease companies will just put an auction estimate for the end of term buyout price, as that's pretty much what all of them do, just send them straight to auction. I doubt that the current high prices being paid at auction for used cars will last, though, and things are bound to settle back down before too long.
 

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Discussion Starter · #3 ·
I think you're right. I realise this is all 'crystal ball' stuff but just wondered if my thinking was in line with others.

I'd usually look to buy a well maintained, one owner car that's a year or two old. As the BEV second-hand market has not developed yet, I'll have to work out the best way to get a new car.
 

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The used car market is pretty out of wack at the moment, and there will continue to be a shortage of nearly new cars for the next couple of years. Given the market shift from diesel in particular to PHEV and BEV it is very likely that BEVs will retain more value than their ICE equivalents. I think PCPs could work out rather well in the short to medium term.
 

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Possibly in say three years when the current crop of EV's start to appear on the market we will be that much closer to the end of fossil cars that many with older ICE will be looking for an opportunity to go EV. If someone changes their car at around 3 year intervals, come 2027 they probably won't want to go ICE so I suspect that demand for good secondhand EV's will maintain good values.
 

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If the scheme doesn't tell you what the final 'balloon' payment will be at the point you sign the contract, you just don't know. Best treat it as a pure 3 year lease deal but hope to be pleasantly surprised. If it doesn't make sense as a pure lease to you, walk away.
 

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The reason I ask is I'm fortunate enough to be able to join a salary sacrifice EV scheme at work. I'd be looking to lease the car for 3 years and then buy it*. I reckon the monthly payments are calculated based on a prediction of the depreciation as basically, I'm paying depreciation for 3 years. My concern is that if at the end of the lease period, I ask to buy the car, the market value figure I'll be quoted will be so high (as the car has held its value) that I would have been better off buying outright initially or financing with a guaranteed future value.
The major benefit of EVs leased via salary sacrifice is the significant tax saving, which you lose if you purchase the EV outside the scheme. The benefit depends on your tax band but I'd have thought the saving should still tilt things in favour of the scheme.

The future value and depreciation will be interesting to watch as it plays out. My starting point, to state the obvious, is that the supply of 3 year old cars, in 3 years time is mostly fixed by what is selling this year, and all the cars coming off leases and PCPs will all find new owners, with the prices adjusting to ensure each one finds a buyer. So it's really a question of what used buyers will want in 3 years, what they are prepared to pay and prices of alternatives like new cars. I suspect more used buyers will want EVs but probably not at current used EV depreciation rates, I don't think current depreciation levels will be sustainable once the supply of used EVs rises significantly.

A lot of new EVs are very expensive, premium models provided as company cars, many essentially free to the driver, or via salary sacrifice with huge tax savings making them relatively cheap. But in 3 years time, as a used vehicle, they are a completely different proposition to a private, used car buyer who typically does a lot less miles and doesn't get the tax saving. Worth more than an equivalent ICE, but not the kind of premiums they currently benefit from.
 

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Discussion Starter · #8 ·
The major benefit of EVs leased via salary sacrifice is the significant tax saving, which you lose if you purchase the EV outside the scheme. The benefit depends on your tax band but I'd have thought the saving should still tilt things in favour of the scheme.
I suspect I'm overthinking this. You make a good point - I need to take a look at the tax saving and overall costs.
 

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The reason I ask is I'm fortunate enough to be able to join a salary sacrifice EV scheme at work. I'd be looking to lease the car for 3 years and then buy it*. I reckon the monthly payments are calculated based on a prediction of the depreciation as basically, I'm paying depreciation for 3 years. My concern is that if at the end of the lease period, I ask to buy the car, the market value figure I'll be quoted will be so high (as the car has held its value) that I would have been better off buying outright initially or financing with a guaranteed future value.
Our work scheme is exactly the same, with the option to own at market value after 3 years, renew with a new car or hand it back and leave the scheme.

We're going to lease 2 cars via the scheme for the foreseeable future till the tech calms down (also making a profit from selling the ICE's!) as suspect the tech will progress rapidly over the coming years. Don't want to be owning a car with a slow recharge speed for example in comparison to newer stuff which will impact values. Especially when the techs really improved and things like solid state batteries are in the mainstream, thats the next level of batteries.

Once it looks like things have calmed down and the improvements start to slow thats when we'll look to own.
 

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It is a trade between two key factors:

Scarcity of supply of second hand vehicles for buyers, and new models offering more value for money, if new prices fall or there is better tech to be had.

Lots of other factors but these may well be the top two.

Looking ahead once more budget EVs start to be sold the second hand market a couple of years later will be very strong because of only a few being available and the pool of potential buyers expanding as the cars become more affordable.

Current top end BEVs might see a price crash with all the premium gone if the battery tech switches to solid state.
 

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As much based on hope as on judgement, but I have a feeling we are at the start of the Osborne effect on sales of new ICE cars.

A lot of comment is made that EVs haven't taken off as they're too expensive for the majority of buyers. I agree with that, but I don't think it means people will therefore buy less expensive new ICE cars (which are also out of reach of a lot of people).

If you modelled the "ladder" of European car buyers I suspect you'd find that a reasonable proportion of those who can afford an EV will buy one. Those who can nearly afford an EV will wait a while, then buy one. Those for whom it is a stretch too far for an EV won't want to lose the heavy depreciation on a new ICE (and they'll soon realise that the ICE depreciation is going to get very heavy as the bans become more front of mind), so they might buy a newer used ICE. The next level of buyers down could find EVs well out of reach, but also find newer used ICEs are also expensive as used prices have strengthened. So they sit tight and wait.

The result is far fewer ICE sales, even though EVs don't make up all the shortfall. There are simply fewer new cars sold as a growing proportion of people either buy an EV, or wait to buy an EV or buy a used ICE in the interim.
 

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The result is far fewer ICE sales, even though EVs don't make up all the shortfall. There are simply fewer new cars sold as a growing proportion of people either buy an EV, or wait to buy an EV or buy a used ICE in the interim.
Already seeing that.
 
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Until petrol stations start closing, I cannot see why petrol heads would not want to buy a used ICE. It is only new ICE that will not be available. Could it even push up the price of good condition used ICE?
 

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Until petrol stations start closing, I cannot see why petrol heads would not want to buy a used ICE. It is only new ICE that will not be available. Could it even push up the price of good condition used ICE?
I think the price of desirable cars will hold up ok.

Thinking about the way blackberry, Erickson, and Nokia were decimated in the face of smart phones. Initially they weren't really bothered or . They coexisted happily and said things like there's space in the market for multiple technologies, people will never pay a grand for a phone, etc. Then people started switching rapidly and while some diehards stuck with their existing tech ecosystems the prices didn't really rise for Blackberry etc they just disappeared as a technology and became unsupported in fairly rapid order.

Number of petrol stations has already been declining for many years, down 35% since peak. Not sure that's anything to do with switch to EVs however, maybe there were just too many?
 

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Number of petrol stations has already been declining for many years, down 35% since peak. Not sure that's anything to do with switch to EVs however, maybe there were just too many?
The last 18 months will not have helped, but also ICE cars getting better mpg longer range you simply do not need as many petrol stations to cover journeys like use to have to do.
 

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The last 18 months will not have helped, but also ICE cars getting better mpg longer range you simply do not need as many petrol stations to cover journeys like use to have to do.
Looks to be in large part that supermarkets do it better and have killed off many smaller independent retailers...
""Commenting, Steve Rodell, director and head of Retail at Christie & Co said, “If applications continue at the same rate, and there is no reason to believe that will not be the case, there will be another 160 supermarket sites by the end of 2016. Experian Catalist figures show the average supermarket site sells 11.2mlpa (thousand litres per year) compared with 2.1mpla for independents, meaning that each new supermarket site is sucking the equivalent volume of five independents out of the market. If left unchecked the expected growth in supermarket forecourts would kill off 1000 independents over the next four years.”"
 

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Supermarkets are in towns, what about the petrol stations along various routes, possibly little used, a bit like charger deserts.
 

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The elephant in the room is that, if you buy a well maintained 8 year old ICE it will still perform as it did when it was new. If you buy an 8 year old EV not only will the battery have degraded but the battery will smaller than those currently available - think Leaf 24.
 

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The elephant in the room is that, if you buy a well maintained 8 year old ICE it will still perform as it did when it was new. If you buy an 8 year old EV not only will the battery have degraded but the battery will smaller than those currently available - think Leaf 24.
If well maintained and serviced correctly.

Modern emissions systems are notorious for going wrong at around the 8 year mark.

I'd also argue that the power output for an 8 year old ICE with say 100,000 miles on it will be a lot less. But the EV will achieve a similar level of performance.

There are 8 year old Teslas around still going strong.
 
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