[Dormant] Electric Vehicles

If you've been wanting an electric car but everything seems too expensive, there's some good news on the horizon. A whole lot of EV leases are due to expire in 2026, which should lead to something of a glut, according to data analyzed by JD Power.

We have the revised IRS clean vehicle tax credit to thank. This was revamped under the Inflation Reduction Act, and while tough new battery sourcing rules and a requirement for final assembly in North America have meant many fewer EVs are eligible for the tax credit when bought new, a loophole that considers a leased vehicle to be a commercial sale means any leased EV is eligible for the $7,500 incentive, which can now be subtracted from the price of the EV at the time of sale or leasing.

In 2023, 46 percent of all franchise (i.e. not Tesla, Rivian, Vinfast, or Lucid) EV sales were leases, a trend that JD Power says it has seen through the first three quarters of 2024 as well. Once Tesla is included, about 30 percent of new EV sales this year have been leases. By contrast, fewer gasoline-powered cars are being leased each year since the start of the pandemic.

That means there will probably be a shortage of used ICE vehicles in 2025 and 2026. Used EVs might also be a little scarcer next year, JD Power says. It expects a 2 percent drop in the number of used EVs next year, but a 230 percent increase in 2026 as 215,000 cars end their leases.

JD Power also has some good news about new EV prices—they're getting cheaper. The average price for a new electric compact SUV, once tax credits and manufacturer incentives are included, is $35,900, $12,700 less than the price in 2022 for the same class of vehicle.