Which vehicle type depreciates fastest – EVs or ICE vehicles?
Many people considering making the switch to an electric vehicle (EV), are likely to ask whether it will depreciate faster, slower (or not at all) when compared to an internal combustion engine (ICE) vehicle.
This is because ultimately cars are assets – which means you might want to sell it at some point down the line so it is good to know whether it will hold its value.
Do electric cars depreciate in value?
Unfortunately, the short answer is yes, EVs depreciate. But there’s a bit more to it than that. So let’s begin with the all-important question…
What is depreciation?
Depreciation is the difference between what you paid for an asset (which in this case is a car) vs the amount you sell or trade it in for.
While some assets like gold, your home, fine wine, or even classic cars tend to increase in value over time, because of their rarity or other factors, most cars gradually lose their value the longer you own it.
EVs vs ICEs – which comes out on top?
According to data from CarWow, electric cars retain 48.9% of their value after three years or 36,000 miles.
For traditional petrol and diesel equivalents, this figure drops to around 40%.
So if you bought an EV for £30,000 in 2021 then it will be worth £14,670 in 2024.
But if you bought a petrol or diesel car for £30,000 in 2021 then it would be worth £12,000 in 2024.
It can be said then that EVs hold their value better than their ICE counterparts.
However, it is important to note that this is an average of all cars and so any given car will likely deviate from this to some extent.
When EVs first came out, they depreciated quite quickly as there wasn’t enough of a demand for them. But as the batteries have improved over time, demand has risen.
EVs are also holding their value for longer because Government policies like the ban on petrol and diesel cars by 2030, added incentives such as the plug-in grant, exemptions from congestion charges and low-emission zones, all make EVs more desirable.
What factors contribute to depreciation?
Two big contributing factors of depreciation are a cars age and its mileage.
Typically, the older a car gets, the less it’s worth. Mileage is a good indicator as to a car’s mechanical wellbeing because more miles generally means more parts will need replacing.
LeaseLoco took a deep dive into mileage to understand just how much it affects car prices in the UK’s market.
The findings reveal that the average price ICE vehicles depreciate by, is 67p per mile, giving a total loss of £4,670 a year.
EVs on the other hand depreciate at 55p per mile which means a loss of £3,833.50 per year.
Overall, EV’s depreciate 18% slower than ICEs, saving EV owners £836 a year.
The study acts as further evidence that ICE vehicles depreciate faster than EVs.
So if you are concerned about your car losing its value, one option is to limit the number of longer journeys.
Anything else I should know?
Taking care of your car by regularly servicing it, keeping the interior clean and ensuring its bodywork remains free of any scratches, will help retain the car’s value.
Buying a premium-branded EV will also help as these tend to hold their value for longer. For example, Tesla and Mercedes retain around 60%-65% of their value for the first three years or 36,000 miles.
But regardless of any preventative measure you take, an EV or ICE car will almost certainly depreciate in value. So is there another way?
Alternatives to Buying an EV
An alternative to car ownership that may be friendlier on your wallet is to take out an EV under a subscription.
All those concerns about depreciation can then just float off into the ether. Basically you can afford to forget everything you’ve just read.
At elmo, just select the EV you want from our range, tell us how long you want it for and we will drop it off at your doorstep.
Then, when your subscription is up, you can decide whether you want to renew it or not, or choose another car and benefit from all the new advances in technology and battery performance.