The dirty little secret on the pathway to the dream of electric cars for all is that they do poorly in the used car market. One of the biggest factors cited by electric car advocates is that they cost less to operate. Electricity is cheaper than gasoline. EVs tend to require less maintenance and fewer repairs than their gasoline powered cousins. Or so the story goes.
But — and this is a big but — the total cost of ownership of any car must include depreciation. For most people, the loss in value from when they buy a new car until they sell it can be more than the cost of fuel, repairs, and maintenance — combined! Anyone who tells you how cheap a car is to own without figuring in depreciation is either a fool or a liar.
Consumer Reports may be the biggest killjoy of all when it comes to taking the luster off many cars that seem appealing when they are new. In its most recent reliability ratings, it puts the boots to such prestigious icons as the BMW 5 series sedan, That’s a car a lot of us think of as an aspirational vehicle, a car for upwardly mobile who want to announce they are on the road to success.
Not so fast, Consumer Reports says. It rates the reliability of the 5 Series “much worse than average” across model years 2006-2008, 2010-2012, and 2015, That means that people who buy one are getting killed by depreciation at trade-in time.
According to Green Car Reports, the latest CR data is equally unkind to electric cars. It lists the 2014 BMW i3 as a used car to avoid because of an unfavorable reliability record. The same goes for the 2013 Nissan LEAF, although the 2014 and 2015 models are rated average or above average. The Tesla Model S is still on the list of cars CR advises against. Even though later models are claimed to have better reliability, earlier cars are still plagued with too many problems, Consumer Reports advises.
Before you start throwing rocks at me, keep in mind this story is all about economics. It is not about how quiet electric cars are, how they sprint away from stop lights, how they will allow the world to finally break its fossil fuel habit, or how they enable autonomous driving technology. All of those things are still true.
No, what this story is about is simply that electric cars must become desirable as used cars if the momentum toward an all electric future is to be maintained. Sadly, people vote with their wallets every day. We all calculate and figure our way through life. Should we pay more for Cheerios than the store brand? Who has the best price, Walmart or Target? Where is the cheapest gas in the area? It’s human nature.
The market for used cars will have tremendous influence on the decision to buy a new one. If your spiffy new i3 will be worth less than a Toyota Corolla later on, which is the better deal? Lease rates are influenced greatly by used car values. Manufacturers may be willing to absorb losses for a little while in order to prime the electric car pump, but eventually they will need to make a profit.
Not everyone reads Consumer Reports or pays attention to their ratings. But for those who do and who are proponents of the electric car revolution, the latest electric car reliability ratings are a splash of cold water on our dreams. If used car shoppers refuse to consider an electric car because of fears about the cost of repairs, that could kill the favorable buzz for electric cars that manufacturers and regulators and EV fans are trying so hard to create.
Photo Credit: Green Car Reports