The increased presence of electric vehicles on our roads raises an obvious question: how will this expansion affect the used car industry? Better yet, should your next car be an EV or are you better off sticking with a used gasoline-fueled vehicle?

Although driving an electric vehicle is believed to be better for the environment, the reality is that for most people battery-powered vehicles are out of their normal vehicle purchase price range.

As of 2022, the average price of an electric vehicle has gone up 22 percent year over year. Meanwhile, prices of conventional gas-powered vehicles have increased by only 14 percent. With gas prices expected to drop in October, the average American driver is more likely to choose a conventional gasoline-powered (and much more affordable) used car as their next vehicle.

Even if roads are dominated by electric vehicles 20 or 30 years in the future, those electric vehicles will almost assuredly still be bought and sold on the used car market.

Why Are Electric Vehicles So Expensive?

The average price of a brand-new electric vehicle is $66,000—an unattainable valuation for the average American driver.

If you’re wondering why electric cars are so expensive, here are a few reasons:

• Expensive batteries: Electric vehicles run on lithium-ion batteries. Manufacturing these batteries is much more expensive than manufacturing the engines of fuel-powered vehicles.  Metals like lithium, cobalt and nickel, which are used to make the batteries, are often expensive to mine, process and convert into usable components.

• Microchip shortage: The pandemic-related global chip shortage is still wreaking havoc on the auto industry. As EVs cannot run without these chips, the shortage is delaying the production of new models, resulting in increased demand for electric vehicles.

• Luxury items: Many EV makes, such as Tesla and Lucid Air, are considered symbols of wealth. As a result, these and many other electric vehicles are price and quantity controlled to maintain the exclusivity of these expensive luxury items.

• Limited tax credit: Buyers looking to purchase an EV are promised a tax credit, but the credit applies to only the first 200,000 vehicles sold by the manufacturer (several manufacturers, like Tesla, have already exceeded that limit).

Eventually, as the chip shortage ends and the supply of lithium expands, EV prices could plummet, although it’s difficult to forecast when this may happen. There’s also the possibility that new manufacturing methods or technologies will make the EV industry less reliant on certain scarce materials, like lithium, in the future.

Are Prices of Used Cars Declining?

Yes. Since reaching their peak in December 2021, used car prices are steadily declining. To illustrate this trend, the average price of a used vehicle toward the end of last year was a whopping 29,969. In July 2022, that number had dropped to $23,500—still high, but a significantly less intimidating price for many drivers shopping for their next car.

If you have a used car you’re considering selling, now may be the right time to do so. In fact, as used car prices are likely to continue falling, the last few months of 2022 may be your last call for selling or trading in your vehicle while the relatively high used car prices are still in your favor.

Reasons to Purchase a Used Vehicle

If you’re looking for your next vehicle, purchasing a used gasoline or electric car over a brand-new traditional or electric vehicle has many long-term advantages:

• Less depreciation: All vehicles depreciate, but used cars retain more value than brand-new vehicles. New vehicles depreciate by as much as 20 percent as soon as they’re driven off the dealership lot. When you purchase a used vehicle, chances are it’s already undergone most of its depreciation.

• Lower insurance premiums: The cost of auto insurance depends on several factors, including your vehicle’s value. As used cars tend to be cheaper than brand-new ones, the cost of insurance is likely to be less as well.

• Warranty: Many used cars come with the remainder of their original warranty. You can also use any left over money in your budget to extend your used car’s warranty or purchase a new warranty.

• Saving money: A used vehicle will cost you a lot less than a new one. This means your monthly car payments will likely be much lower and you’ll be able to pay off your vehicle faster, saving you potentially thousands of dollars.

Sell of Trade in Your Used Car with Direct Car Buying

If you’re in the DMV area and looking to sell or trade in your used vehicle, Direct Car Buying is here to help. Our simple and straightforward car buying process allows you to get a competitive and firm offer within three business hours.

Are you looking for a used vehicle? Browse our rich pre-owned inventory to find your perfect ride.

For more information, call 877-927-6093.