The used electric vehicle market has miles to go before reaching critical mass, but sparks of growth in recent months may indicate the segment is gaining traction.

For one, there are three times as many used EVs on dealer lots as there were 18 months ago, according to Recurrent, an EV battery and range analytics company.

In its Used Electric Car Prices & Market Report for the first quarter, Recurrent determined there were 37,515 used EVs in dealer inventories in January. That’s up from 24,058 as recently as August and is triple the 11,531 used EVs on dealer lots in April 2021, when Recurrent began tracking this data.

“The used EV market is now higher volume than any new EV model’s sales besides Tesla Model 3 and Y,” Recurrent CEO Scott Case said in comments emailed to Auto Remarketing. “It’s time to take this seriously.”

However, a larger market isn’t the only trend these growing inventory numbers might suggest.

“It also can indicate that vehicles are sitting longer on dealer lots, as a result of higher interest rates,” Recurrent said in the report.

More manageable used prices

But even if interest rates are rising, prices on the used EVs themselves are dropping.

The Recurrent Price Index that tracks a select group of used EVs peaked in July and has fallen 17% since then. The company considers this slowdown to be more of a “price correction.”

“Rather than mistaking this drop for a market decline, understand that this is a return to Earth from the stratospheric used electric vehicle values seen in 2021 and the first two thirds of 2022,” Recurrent said in the report.

They added that current used EV prices are up 7% from March 2021, which is when Recurrent began monitoring the data.

“The higher price today is not just driven by price increases or inflation, though. It is largely due to the influx of higher priced and newer models on the used EV market,” Recurrent said.

Still, there has been consistent slowdown in the index since August and that continued in January.

In a separate but similar analysis, CarGurus found that Tesla models, in particular, have shown rather steep declines in prices.

In fact, four of the top five spots (including the top three) on CarGurus’ list of used vehicles with the largest price drops since July (percentage-wise) were Teslas.

Ranking No. 1 was the Model 3, whose price in January is down 29.7% compared to July, followed by the Model S (down 29.6%) and Model Y (down 27.1%), according to CarGurus.

The Model X was No. 5 (down 24.5%) behind the Hyundai Ioniq Hybrid (down 26.8%).

Additional data from CarGurus in its Intelligence Report for January shows that average listing prices for used Teslas were just below $70,000 in July. That has declined each month since, falling below $50,000 in January.

Softer prices led to greatest interest in used Teslas, CarGurus said in the report. Then came the automaker’s price cuts on the new-car side on January 13.

“Interest in used Teslas surged after price cuts were announced in January; interest had already been on the  upswing likely due to declining prices,” the company said.

More used EVs eligible for tax credits

Going back to the Recurrent report, the company shared another positive sign for used EV growth: more units are now eligible for the tax credits included in the Inflation Reduction Act.

Recurrent said there has been a 66% spike in the number of used EVs qualify for the incentives, which only apply to cars priced at $25,000 or less.

The company explained its “concern” around pricing eligibility, noting that its October analysis indicated only 12% of used EVs qualify.

But in January, Recurrent calculated that upwards of 20% of vehicles in dealer listings are price below $25,000 and would thus be eligible.

“Since some final sale prices for used vehicles can be impacted by continuing price drops, trade-ins and negotiations, we’re tracking the total percentage of inventory below $30K as well, since it’s feasible that some of these listings have a final sale price just below $25K,” Recurrent said. “When those listings are included, nearly 30% of used EV listings are potentially eligible for the used EV credit.”

Case, the Recurrent CEO, noted in his emailed comments: “Everyone looking at used EVs needs to know about the $4000 tax credit — we estimate between 20% – 30% of vehicles are eligible now. But it’s tricky knowing whether a car qualifies, and not even the IRS will help you. That’s why we set up a free resource on Recurrent to check any vehicle if you know the VIN.” 

That resource site can be found here.