The Australian second-hand electric vehicle (EV) market is expected to see a surge in the next 18 months. While most government support has been focused on the sale of new EVs, a policy change regarding fringe-benefits tax on EVs purchased through a novated lease may shape the second-hand market. Under this change, drivers on a novated lease do not have to pay an additional tax on the personal use of the vehicle if it was purchased after July 2022 and costs less than $84,916. This incentive has gained attention, with nearly half of Australians expressing interest in adopting an EV through a novated lease arrangement with their employer.
The common term for a novated lease is three years, meaning many EVs are expected to enter the second-hand market as drivers upgrade their vehicles at the end of their contracts. Historically, EVs have held their value well in the second-hand market compared to traditional cars, which typically lose around 50% of their value within the first three years. Some Tesla models have depreciated by only 10%. This trend may continue as more second-hand EVs become available, potentially stabilizing prices.
The cost of owning and operating conventional cars is increasing, with rising petrol prices and servicing costs. Therefore, the upcoming influx of second-hand EVs presents an opportunity for both sellers and buyers. Those looking to sell their EV and upgrade may want to do so sooner to take advantage of the high demand and premium prices. On the other hand, consumers seeking more affordable second-hand EVs may benefit from waiting a little longer.
While price is a significant factor in EV adoption, other considerations, such as charging infrastructure availability, also play a role. Australians typically replace their cars every five to seven years, and the average age of cars on the road is around 10 years. This indicates that many Australians are ready to try an EV as their next vehicle, but it is a decision that requires careful consideration.
Understanding the dynamics of novated leases can help individuals make informed choices regarding EV ownership. The second-hand EV market is evolving rapidly, and staying informed about market dynamics can ensure individuals make the most advantageous decisions for their personal circumstances.
Des Hang, CEO and founder of Carbar, emphasizes the importance of considering various factors beyond price when considering EV adoption. Automakers are redefining what premium means for their EV models, and individuals should also assess the availability of charging infrastructure in their area. By staying informed and considering all relevant factors, consumers can navigate the changing landscape of EV ownership successfully.
Wait until 2025 for a more affordable used EV
As the demand for electric vehicles (EVs) continues to rise, many individuals are eagerly waiting for the day when purchasing an electric car becomes more affordable. The market for electric vehicles has undoubtedly witnessed significant growth in recent years, but the high upfront cost still remains a major barrier for many potential buyers. However, experts believe that waiting until 2025 could prove to be a wise decision for those seeking a more cost-effective option when buying a used EV.
The growing interest in sustainable mobility, coupled with governmental policies promoting decarbonization, has fueled the expansion of the EV market. With major automakers investing heavily in electric vehicle technology and infrastructure, the variety and availability of EV models have increased significantly. Yet, the high price tag associated with new EVs often deters budget-conscious buyers from making a purchase.
At present, the cost of producing electric vehicles remains relatively higher than that of their gasoline-powered counterparts. Factors such as battery technology, limited economies of scale, and the high costs of raw materials contribute to the elevated purchase prices. Consequently, these costs are passed on to consumers, making it difficult for more people to embrace clean energy alternatives.
However, experts predict that significant advancements in technology, along with increased production volumes, will gradually bring down the cost of EVs in the used car market. Batteries, which currently account for a substantial portion of an EV’s production cost, are expected to become more affordable as their capacity increases, and economies of scale drive down prices.
Moreover, as the market matures and more EVs populate the roads, it is expected that the prices of used electric vehicles will fall. By 2025, a larger number of electric cars will have entered the second-hand market. This influx of used EVs will create more options for buyers, introducing more competition and ultimately driving down prices.
The projected decline in used EV prices by 2025 can be attributed to several factors. Firstly, battery degradation over time leads to diminished range, making older electric vehicles less appealing to buyers. As a result, demand for newer models with enhanced battery technology will increase, pushing down prices for older vehicles. Secondly, the established charging infrastructure networks will continue expanding, reducing the range anxiety often associated with EVs. This will further alleviate deterrents to EV ownership and contribute to their depreciation.
Furthermore, ongoing government incentives and policies aimed at transitioning to cleaner transportation will continue to foster EV sales. These incentives, coupled with the growing public awareness of environmental concerns, will result in a higher number of individuals opting for EVs. Consequently, more used electric cars will enter the market due to trade-ins or resale, further contributing to the supply and affordability of pre-owned EVs.
While it may be tempting to embrace the electric revolution by purchasing an EV at the earliest opportunity, waiting until 2025 for a more affordable used electric vehicle might prove to be a prudent choice. The combination of technological advancements, economies of scale, increased competition, charging infrastructure expansion, and government incentives will undoubtedly lead to a decrease in prices for pre-owned electric cars.
As we move closer to 2025, the transition to cleaner transportation will become more accessible and appealing to a wider range of consumers. By being patient and waiting until then, potential buyers can enjoy the benefits of EV ownership while ensuring a more financially viable and sustainable investment.