One of the biggest questions at the forefront of any car buyer’s mind is the future value of their vehicle. Purchasing is not a complex act. Simply put, the majority of automotive customers want the most perceived “value” for their money that they can possibly get. Value can be defined in a variety of ways, but at its core, it is the combination of both features and how much the vehicle depreciates during ownership. Vehicles that depreciate less are viewed as more valuable to buyers because they can resell them for more money. Certain OEMs famously create cars that hold residual value, while other brands are known for their rapidly depreciating assets. According to Kelly Blue Book, the top five 2025 models for residual value are the Toyota Tacoma, Chevrolet Corvette, Toyota Tundra, Toyota 4Runner, and Ford Bronco. Each of these have a 5 year resale value of around 60%, therefore increasing their appeal to consumers significantly. Unfortunately however, EV values are notable for the opposite reasons. Owing to a variety of factors ranging from political issues to desirability, EV residual values continue to struggle significantly. In this edition of the Automobility Roadmap, we will examine the current EV residual trends and why they are moving in certain directions.
Political uncertainty regarding EVs has been at the forefront of headlines at industry conferences since the beginning of the new US administration in January. Under the previous administration, significant EV-centric financial incentives were granted to businesses and private consumers with the intent of accelerating EV adoption. These incentives went both ways, encouraging automakers to speed up production and shift key manufacturing facilities to the US and/or North America. Under these policies, EV purchasing exploded. Between 2021 and 2024, US EV sales increased by 166%. This is a very impressive leap forward for technology still undergoing major improvements in terms of both infrastructure and production capability. Because of the newness of the market segment, OEMs weren’t yet able to firmly establish their electric vehicles as high residual value holding assets. With the political shakeups happening in Washington relating to EV policy, the consumer confidence required for increased residual valuations is not growing. Questions continue to swirl about policies ranging from sizable import tariffs to the complete withdrawal of EV tax incentives. Unfortunately, these maneuvers are limiting the improvements of residual values for EVs across the board, and consumers are hesitating to purchase in both new and used markets. A possible silver lining to something like import tariffs comes in the form of higher value used cars across the board. If new vehicles become more expensive, consumer preferences may turn towards the used market. Time will tell the outcome of such seismic economic shifts.
Another essential consideration for EV residual value is the coming surge of lease vehicles for sale on the used market and possible OEM methods for increasing desirability of used models. According to the CEO of Recurrent, Scott Case, “Six percent of all lease returns in 2025 will be battery-electric or plug-in hybrid. Next year, that jumps to 14%.” Market inundation, if handled incorrectly by dealers and OEMs, could have negative impacts on EV residual values. Flooding the market with inexpensive EVs will lead to the decline in resale value across the board, even impacting luxury manufacturers such as Cadillac, BMW, and Mercedes-Benz. The basic laws of supply and demand would have you believe that this is a prophetic prediction, but that is not the case. In order to shore up EV values, OEMs and their dealer networks should look to strengthen their certified pre-owned (CPO) programs to provide tentative customers the guarantees they need to commit to the purchase of used EVs. Customers are worried about battery health, and there are three vital actions dealers can take to put that fear to bed. First, dealers need to offer battery condition reports to potential buyers. Seeing that the used 2022 Mustang Mach-E up for sale has a battery reported to be in excellent condition will increase consumer confidence. Second, dealers and OEMs should work together to issue new CPO program requirements based around battery health as opposed to chassis/powertrain mileage. The wear and tear on EVs presents differently than standard ICE vehicles, and new CPO policies have to reflect that. Finally, dealers have to formulate new methods to educate their buyers on range expectations and battery performance. The simple acts of honesty, transparency, and education will increase trust in used EVs and cause them to be more desirable for prospective buyers. Implementing these three methodologies can facilitate the long awaited preservation of EV residual values across the industry.
In short, the reasons for low EV residual values are complex and dependent upon many considerations outside of OEM, dealer, and consumer controls. Tariffs, political upheaval, and policy reversals are but a few of the many big picture pieces of the value puzzle. The situation is not entirely out of the hands of the industry though – work to reassure customers that they are purchasing quality, reliable EVs is feasible on the dealer – buyer scale. Relatively simple improvements to the certification of pre-owned EVs can fix the myriad issues customers have with used EVs and convince them that they are worthwhile purchases. A lot of time and energy will be necessary to undo years of suboptimal perceptions, but improving EV residual values are far from a lost cause. They are an essential maneuver as OEMs and dealers move into the back half of the decade.
