As electric vehicles (EVs) become more prevalent, the used car market is emerging as a critical factor in ensuring the long-term success of electrification. Manufacturers, Fleet Managers, and leasing companies all play a crucial role in maintaining predictable residual values for EVs. Without strategic efforts to stabilise this market, depreciation risks could undermine confidence in EV adoption.
Residual Value Challenges for Used EVs
The rapid technological advancements in EVs have created an unpredictable resale environment. As newer models enter the market with improved battery range and features, older EVs depreciate faster than their internal combustion engine (ICE) counterparts. Peter McDonald, Director at Ohme, who brings insight from the UK and European markets—where the transition to EVs is more advanced—noted: “The challenge we’ve seen in the UK is that every year, new EVs are coming out that are better and cheaper than the last generation. This puts downward pressure on used EV values.”
Fleet and leasing companies, which traditionally purchase EVs in bulk, face significant exposure to residual value risks. McDonald explained: “Manufacturers are desperate to sell more EVs each year because they face penalties if they don’t meet quotas. This means higher discounts on new EVs, making used EVs less attractive in comparison.”
How Manufacturers Can Support Residual Values
Manufacturers have a vested interest in ensuring strong used EV values, as a weak resale market can deter fleets and consumers from purchasing new models. One way to address this is by implementing structured buy-back programs and certified pre-owned (CPO) schemes.
“We’ve seen in the UK and Europe that manufacturers offering certified used EV programs with warranties and battery health guarantees have more stable residual values. These programs give buyers confidence in purchasing a second-hand EV,” McDonald said.
Another strategy is software and hardware updates for older EV models. Unlike ICE vehicles, EVs can benefit from over-the-air (OTA) updates to improve efficiency and add features, prolonging their desirability in the used market.
“With EVs, manufacturers can push software updates that enhance battery performance and driving efficiency. This means a four-year-old EV can still compete with newer models in terms of technology,” McDonald added.
The Role of Fleet Managers and Leasing Companies
Fleet operators are among the largest purchasers of EVs, meaning their decisions directly impact the used EV market. McDonald highlighted that strategic fleet planning can mitigate depreciation risks: “Leasing companies need to be proactive in managing their EV portfolios. That means staggering vehicle purchases and remarketing them in a way that doesn’t flood the market with too many used EVs at once.”
Some companies have also explored extended lease terms to align with battery warranties, ensuring vehicles retain value for longer. “In the UK, we’ve seen some fleets shift to five-year leases instead of three to avoid rapid depreciation,” McDonald noted.
Creating a Sustainable Used EV Market
A thriving used EV market is essential for long-term electrification success. To achieve this, collaboration between manufacturers, fleets, and leasing firms is crucial. Providing transparency around battery health, offering structured resale programs, and aligning incentives across the value chain will help maintain strong residual values.
“If we don’t get the used EV market right, it could slow down overall EV adoption. People need confidence that their EVs will hold value, just like traditional vehicles,” McDonald concluded.
By addressing these challenges strategically, the industry can ensure that the transition to electric mobility is both financially and environmentally sustainable.
