Auto industry nissan-leaf-lot

Published on June 26th, 2014 | by Steve Hanley

17

Why Are Used Nissan Leaf Prices Falling So Rapidly?

 

nissan-leaf-lotKicking Tires recently reported that the Nissan Leaf is depreciating faster on a percentage basis than any other car in America…and that might just be a good thing. Why?

  • Last month, the Nissan Leaf outsold every other electric car manufacturer. That means lots of people are buying an electric car, which is good news for America.
  • Presumably, lots of existing Leaf owners decided to get out of their current car and get into a new model with all the latest technical features, longer range and shorter charging times, also good news for America.
  • Since the BMW i3 has just gone on sale, some of the used Leafs hitting the market must come from people trading up to the i3. That’s more proof that the electric car market is expanding. More good news.
  • Added incentives on unsold new cars at the end of the current model year make buying new more attractive than buying used, which is even more good news for America.

If the market for EVs are expanding, then why are prices tumbling? There are a couple of factors at work here.

  • Federal and state incentives can knock $7500 – $10,000 off the price of a new electric. There are no such incentives for used cars.
  • Dealers and manufacturers are offering heavily subsidized lease payments to move cars off their lots, while used cars don’t enjoy such heavy promotion
  • Electric car technology is changing at a furious pace. Today’s batteries go further, last longer and take less time to recharge than just a few years ago when the Leaf debuted. People always want the latest and greatest stuff and are willing to pay for it. But they are less inclined to come up with good money for technology that is out of date or obsolete.

With all this good news, is there any bad news? I think there is.

According to the report, the average used Nissan Leaf lost 4.2% of its value in May. That’s $819 that flew out of the owner’s wallet while he or she wasn’t looking. Most people just look at their monthly payment and figure that’s what their car is costing them, but in fact the true cost of any car has to include sales tax, insurance, maintenance, repairs, fuel and of course depreciation. In addition, any down payment has to be apportioned for the number of months the car is owned. Put all that together and you could argue that a typical owner is spending about $1300 each month to drive a Leaf.

There is good news for people looking to buy a used Leaf, though not so good news for many current owners.  But with the cost of the cars tumbling, buyers who want an electric car can get one at a steep discount to the original sticker price.

All that depreciation means more electric cars in total will be on the roads, and that truly is good news for America.


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About the Author

I have been a car nut since the days when articles by John R. Bond and Henry N. Manney, III graced the pages of Road & Track. I know every nut, bolt and bullet connector on an MGB from 20 years of ownership. I now drive a 94 Miata for fun and the occasional HPDE track day. If it moves on wheels, I am interested in it. Please follow me on Google + and Twitter.



  • AaronD12

    Trading UP to an i3? I think you have it backwards. ;)

  • Oollyoumn

    I think the part about dated or obsolete technology being undesirable hits the nail on the head. I don’t know that there is any evidence that people are leaving Leafs for new Leafs or BMWs. That all sounds like speculation to me. Leafs have been leased for $200/mo. That is a good value, and I will jump on one if that value is still present for my next vehicle.

    The way technology is, I would not buy an EV, only lease. Once the price drops to a more stable, and presumably low, point, then purchasing look more attractive. Best to share the depreciation risk with someone else for now.

    This article does not really show if the tax breaks are part of the depreciation. As long as there is that incentive for a new Leaf, used ones will be a difficult sell.

    • Steve Hanley

      Thanks for your comments. One thing that appears indisputable about hyrid, fuel cell and electric cars is that if it were not for federal tax credits and aggressive leases, few if any of them would ever leave dealer lots.

      One of the key components of any lease is the residual value at the end. Too high and the lease company is stuck holding an asset worth more than market value. Too low and the lease rate has to go up accordingly.

      The only wisdom I have seen proven accurate in real life is the old “figures lie and liars figure.” I found a lot of the numbers and conclusions in the source article to be, well, unbelievable.There is a lot of disinformation swirling around cars and new technology. My old Irish grandmother used to say “If’ something’s to good to be true, it probably isn’t.”

      • t_

        I think the market shows very well, that the electric vehicles in this class are overpriced. At least for the consumer. The automakers offer a high price, the consumer uses the car and in a couple of years the car gets changed and noone is willing to pay so much for a used car with short range. It is time to drop the premium off the price, as more people are starting to get interested in electric cars. Otherwise they will still be so NOT mainstream.

      • Oollyoumn

        I disagree with your comment with regard to hybrids. I do not know of any existing tax incentives for straight hybrids, yet the Prius is the no. 1 selling car in CA, and sells very well in many other parts of the US, and world. Many may argue, but Toyota claims to make money on the Prius line. Eventually battery EVs will be cheaper than traditional cars. Most people do not care very much what propels there cars, they just want go somewhere. Once battery EVs do that cheaper and more reliably, there will be plenty of demand. If you don’t think that will happen, just chart the capacity/cost of batteries over the last 30 years, and see where that leads you. Then also chart the cost of traditional engines over the last 30 years, and see where that leads you. It’s not a question of if, but when.

  • Fabien

    The problem is the battery! Used leaf’s all have capacity loss! Even at 20,000 miles these cars cant go anywhere. I am so disappointed in my leaf, a 2013 with one bar lost at 24,000 miles in the southeast. To anyone who reads this! DON’T BUY A LEAF! THEY SUFFER ALOT OF BATTERY DEGRADATION.

    • egogg

      Isn’t there some kind of battery warranty? I recall a snafu when the capacity was dropping below 70% in Phoenix or Tuscon, and Nissan eventually replaced the packs or refunded the owners some amount.

      • Steve Hanley

        There was a story hereabouts recently regarding the Tesla S maintaining 99% of its battery capacity after 20,000 miles. Perhaps Consumer Reports should start including this statistic in its data.

        There is no question in my mind that there are a LOT of sketchy claims flying around the marketplace regarding electric car performance. It’s hard for the consumer to know exactly what to believe and what to ignore.

        • egogg

          Telsa Model S has a radically different battery system than the Nissan. Tesla uses thousands of small cells, and the system is actively cooled. Nissan uses large format cells sealed in a box with no climate conditioning. Overheating kills cell life. Guess which of them is going to fare better in Arizona.

    • egogg
  • glacierleaf14

    Not really sure how that $1300 a month number was calculated? $1300 times 36 months is $46800?
    I am currently leasing a Leaf for $202 a month. I put down $2000 (amortized over 36 months $56). I pay 5 cents a kwh or about $20 in electricity. My insurance is $59 a month. registration equals $6 a month. If I need to put a new set of tires on the car during the lease it would be under $600 (600 / 36) or $16 a month. If I walk away from the car at the end of the lease, my monthly cost to own and operate is $359.
    I spend more than that on gas in my SUV.
    My lease residual is based on the sticker price of $31k. A 40% residual( $13000) seems like a lot of depreciation. The fact is that after tax incentives, discounts and rebates the actual cost of the vehicle was $20,500. Using that $20500 figure, Used leafs selling in the $12k-$15k range are actually maintaining 60-75% of their value.
    Obviously “kicking tires” does not take into effect the $7500+ in tax incentive when calculating vehicle depreciation.

    • Steve Hanley

      Sorry if I was unclear. I am not mathematician, that’s for sure. I simply added the $819 monthly depreciation cited in the story to the other normal costs of ownership such as monthly payment, taxes, insurance, etc and came up with an approximate total.

      There was a time in my life when I was in the car bidness. When I attempted to point out to my customers who were considering another car with a higher rate of depreciation that their total monthly cost would be higher, their eyes would glaze over. People just do not understand that depreciation is part of the cost of ownership and if you do not take it into consideration, you cannot have an accurate picture of how much the car is costing you.

      The article was a bit wishy washy in its math, I admit. It said the depreciation in May was a touch over 5% and declared that translated into $819. Working backwards, that would make the original cost of the car around $40,000. Perhaps I should have been more aggressive in questioning the figures presented as “facts” in the source article.

      Thanks for your comment.

      • glacierleaf14

        Steve, Thanks for the response.
        You are right depreciation is a big factor when purchasing a new car. It along with the lack of demand for used EV’s is one of the factors that convinced me to lease. My power company offering 5 cent off-peak juice, and Uncle Sam subsidizing my lease payment over $200/month, also sweetened the deal.
        With ICE cars burning $100-200 in gas a month( and $45 oil changes every few months) Their operating costs are higher. A person would be hard pressed to lease and operate a tradition car for any less.

  • markpoll

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  • markpoll

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    • Steve Hanley

      We really appreciate you taking the time to post that. Thanks.

  • Chris_in_Raleigh

    I don’t care about my Leaf’s depreciation. Why should I? After 5 years, I break even versus driving my 14 year old gas car, and at that point, I’ve got a far newer car that costs next to nothing to fuel and is a blast to drive.

    As for battery life, I’ve still got 12 of 12 bars after 1 year and 20k miles. One day it will need replacing, but I view that cost as a wash versus the maintenance of a gas car – and more convenient too. Besides, when I replace the battery 8+ years from now, I’ll likely be getting twice the range, so I’ll gladly pay for it as a major upgrade, not a repair.

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