Technology has a funny way of making the viable lifespan of products shorter all the time. That new smartphone you just dropped the motherlode to buy will be the phone that makes people point at you and laugh in just a couple years’ time. Remember how awesome it felt to buy that 48″ HDTV a couple years ago and how cutting-edge you felt when you did? Well, your neighbour just picked up a 70″ 4K UHDTV that connects to every device in the house and now makes your TV seem like the VHS to his DVD. And as for that 2011 Nissan Leaf EV (electric vehicle) in your driveway?
Actually, that’s a good question. What about that 2011 Nissan Leaf? It’s a full battery electric vehicle which is still cutting-edge, but there’s an all-new Nissan Leaf on the market already which offers more driving range. There’s an even newer Nissan Leaf coming next year that will offer a range about three times as long as that 2011 did when new.
The rapid advances we are seeing with second-generation EVs as well as all-new designs just coming to the market can’t help but make you wonder whether advances in battery electric technology are essentially turning older EVs into paperweights with drastically reduced resale values as a result. It’s a reasonable concern given how range anxiety is one of the major impediments holding EVs back from greater mass market acceptance. Why would anyone want to drive a 5-, 6- or 7-year-old EV which has already seen some of its original limited range disappear due to battery degradation, when new models today take away a huge amount of the range anxiety that car buyers experience?
Range: Battery Degradation vs Available Charging Infrastructure
Depending on a consumer’s needs, there are indeed plenty of good reasons for them to consider a used EV after all.
When the 2011 Nissan Leaf first launched it had an estimated driving range of approximately 120 km and Nissan claimed that the battery would still hold 70–80% of its range within 10 years. Ricardo Borba was the first Canadian to receive delivery of a Nissan Leaf and has a blog which he set up to share his experience with the Leaf over the years. While he has not posted on the site in over a year, his last post from August 2017 showed that after 6 years he had driven 125,000 km and his battery capacity was about 76% of what it had been when new. Depending on what time of year he was driving, the Ottawa-area resident said he still could achieve up to 120 km of driving in the summer but thanks to the increased number of Level 3 fast-chargers in the Ottawa area, his limitations from the reduced range were negligible.
So, if a 6-year-old Nissan Leaf could still reliably offer about 100 km of driving range with longer stretches in summer and shorter stretches in winter, is there still enough life in that battery to make it worthy of resale?
If a consumer is looking for a second car to simply drive around town with, or one that is relegated to errands when the main family vehicle is being used, the answer would still most likely be yes. When one considers the significantly reduced cost to operate and charge up an EV across the country compared to a comparable gasoline vehicle, there is a strong economic case to be made for the right individual. EVs require far less ongoing maintenance in general, so an older EV is not likely to be a financial burden when it comes to upkeep.
Value: Depreciation vs State of the Art
It becomes a more challenging decision to make, however, when one considers the economic benefit of replacing a degraded battery after several years of use for a new one. A replacement battery for a first-generation Leaf would cost approximately $6,000 and the ROI (return on investment) on such a decision becomes murkier unless the consumer plans to drive the vehicle into the ground.
With there being a fair amount of evidence to support the idea that used EVs can be counted on as a viable option for the right individual, it would be reasonable to assume that the resale value for those same used EVs is decent, right?
Well, the reality is that in practice it’s not as straightforward.
While a used EV has plenty of upside for buyers, those looking to trade-in or privately sell their used EV are seeing a number of factors pushing their resale value down.
To illustrate the problem, the residual value on a typical 3-year-old gasoline vehicle will hover between 45–65% in most cases. With EVs, however, that figure drops significantly. In 2016, a 3-year-old Nissan Leaf had a residual value of just 22% on Black Book while a 5-year-old Leaf was just 11%.
A number of factors contribute to the steeper decline in residual values for EVs compared to gas vehicles. Lack of demand has been a major contributor, with well-established range anxiety fears playing into the lower demand. The rapid improvements in range that come with the newest EVs play into reduced demand as well, since consumers seem to always want the newest and most technologically advanced of everything, regardless of whether they need the newest version or not.
A Great Deal for Urban Drivers
However, it’s not all doom and gloom since the vast majority of early EV buyers in Canada were likely located in either Quebec, Ontario or British Columbia, where government rebates reduced their initial upfront purchase price, and thus shrinking the actual net loss in value as a result.
The next time a consumer is looking to buy a used vehicle, you might want to let them know they can benefit from an EV as they are a very cost-effective option with additional benefits like minimizing environmental footprint and low ongoing maintenance thrown in for good measure. Consumers looking to sell an older EV however, might consider the net benefits of simply running it for as long as they possibly can, or if not, they could take the hit and get that newer, shinier, and longer-range model off the lot.
By: Eric Novak