David Cottrell got his $39,999 Tesla Model Y last February. The compact electric sedan was a fantastic car, he says. But a few months later, he decided to enter the make and model on the website of an online used car retailer. Surprise! The Tesla was already worth $10,000 more than he and his wife had paid. They were thinking of buying a house in their hometown of Seattle, and the extra money seemed like a no-brainer. By June they had sold for $51,000, a handsome profit.
Now Cottrell looks back on the transaction with a twinge of heart. He loves his new home and is excited about his reservation of a roomier Rivian electric truck, which is due for delivery this summer. But when he plugged the same Model Y into the online used retailer again this month, he discovered the car was only worth about $2,000 less than he had sold it for, even after taking into account the 20,000 miles he has covered since then. “If we could have kept him, I could have driven for a year here and I could have been about even,” he says.
This is not how the life of a car is supposed to work. They are supposed to lose their value over time. This is why used cars are generally cheaper than new ones. But right now everything is upside down. A toxic mix of pandemic-era supply shortages and inflation has driven up prices for used cars and trucks, which rose 35% in March compared to the same time last year. last, according to the US Bureau of Labor Statistics. It’s not uncommon for some used luxury cars, like Porsches and Corvettes, to cost more than their original price, says Luke Walch, owner of Green Eyed Motors, a dealership outside of Boulder, Colorado, specializing in electric and hybrid vehicles. Now, “it’s flowing in the commoner’s car,” he says.
Things have gotten even weirder in the world of electric vehicles, where used cars seem to be getting newer. Figures tracked by Recurrent, a company that tracks electric vehicle battery health, and data firm Marketcheck suggest that last year the majority of used electric cars for sale were four or five years old. Today, just under a third of used electric vehicles are three years old. Electric vehicles sold in 2020 or 2021 represent 17.5% of inventory. “This is weird,” says Brian Moody, editor of Autotrader, an online automotive marketplace. In fact, the whole situation is almost unprecedented, he says.
If you’re someone hoping to go electric right now, that’s unfortunate too. Despite high prices, electric vehicles and hybrids are moving out of batches faster than they can bring them in, Walch says. Carvana, a company that buys and sells used cars online, says 90% of its electric vehicles are in the pipeline, up from 45% just over a month ago.
The rise of the new used car began with the shortage of microchips, which began to seriously affect automobile production in 2021. Today’s vehicles use at least 100 chips each to control their complex electronic systems, and electric vehicles, which are particularly complicated, can use as many as 1,000. But when the COVID-19 pandemic first hit in 2020, automakers cut their sales forecasts and chip purchases. Chipmakers were selling their wares elsewhere. Then came the federal stimulus checks, which sent thousands of dollars to US bank accounts. Some Americans were looking for big purchases filled with chips, like computers, game consoles and cars. But automakers no longer had the silicon to make cars and were forced to slow down or even stop production. The mess drove up the price of new cars and sent more cost-conscious buyers to the used market, where prices also soared.
The Russian invasion of Ukraine – and subsequent sanctions on Russian exports – have created new bottlenecks in the supply chain. The price of nickel, a component of some electric vehicle battery chemistries, has been swinging wildly over the past month. And in the United States, soaring gasoline prices have led car buyers to seek out electric vehicles. “The prices of [electric vehicles] went up for a while, then there was a big jump with the war and high gas prices,” says Al Bastanmehr, owner of Green Light Auto Wholesale, which sells used electric and hybrid vehicles in Daly City, California. “It’s just crazy. It’s at an all-time high.
The new and used EV crisis — and the temptation for EV owners to return their new Teslas, Ford Mustang Mach-Es, and even lower-end vehicles like Nissan Leafs — may linger for some time. New cars are getting a bit cheaper, with new vehicle transaction prices dropping 0.3% between February and March, according to Kelley Blue Book, an automotive research firm. But new vehicle transaction prices are holding up — and even rising — for EVs (which rose 1.8% over the same period) and hybrids (8.6%). In other words: new green cars are not cheaper right now.
And here’s the big deal for electrics: some new cars that were supposed to hit the market in 2020 and 2021 never made it. That means fewer used cars on the market this year, and next year, and the year after. “At some point new car prices will recover, but it will take a long time,” says Scott Case, co-founder and CEO of battery health company Recurrent. “This whole system – it’s going to take a long time to get through it and get to a new normal.”
This story originally appeared on wired.com.