Electric Vehicles & Depreciation in the NY Times

There was a time that mass media held the promise of keeping us informed and educated. Now it seems all they're good for is spreading fear, ignorance, and doubt.

 

From the Glass report:

The problem with a model is they have to make assumptions that reality may prove wrong. For example, our purchase of a used Prius that now has 130,000 miles. According to CNW Marketing, the Prius has an expected lifetime mileage of 109,000 miles.

I bought my first Prius used, a 2003 model in 2005 that had $17,300. It reached a price-performance point that I could afford. Now I have put on 80,000 miles but I'm driving it 'until the wheels fall off.' Right now, it's costs for 80,000 miles are running:

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6
0	cost/mile	description
1	$0.22	depreciation per mile	$17	300
2	$0.05	insurance per mile	$700/yr	6 years
3	$0.05	fuel costs per mile	$2.75/gal @52 MPG
4	$0.02	maintenance per mile	oil	tires	plugs	e.t.c.
5	$0.34	total cost per mile

As we continue to drive this car, the total cost per mile continues a downward trend.

In 2001, we bought a 2001 Echo for $14,250 and sold it last year for $3,000 with 30,000 miles of service and its costs:

	Column 1	Column 2	Column 3	Column 4	Column 5
0	cost/mile	description
1	$0.37	depreciation per mile	$11	250
2	$0.15	insurance per mile	$500/yr	9 years
3	$0.08	fuel costs per mile	$2.75/gal @34 MPG
4	$0.03	maintenance per mile	oil	filter	e.t.c.
5	$0.63	total cost per mile

Obviously, depreciation is the 'big dog' followed by insurance. Depreciation is why we've often bought used cars. If someone buys an EV and 'drives it hard,' their new commuting vehicle, it reduces the impact of depreciation. But a funny thing happens after the $12,000 battery is replaced.

Replacing the battery boosts maintenance costs but reverses depreciation. For example, EV with failed battery, might cost $2,000 but replace the battery and the residual value instantly grows to just under $14,000 and the owner gets the battery value back.

Bob Wilson

 

Its interesting to see such a large difference. Presumably its at least in part because you were driving the Prius 16000 miles pa but the Corolla only 5000 miles pa.

On the other hand, you are assuming a zero current residual value for the Prius.
If you allow for that, the Prius cost per mile will drop .

The cost/value of money would also be a factor. As there was more money tied up in the Prius, presumably this would help the Corolla side of the comparison.

 

Do dino-fueled cars really loose 75% of their value in just 5 years?

Is the UK used car market more brutal, or have I been selecting models that depreciate slower than normal, or have I missed something by keeping cars 15+ years?

 

A car here does depreciate by such an amount in 5 years. There are exceptions, popular diesel models and the Prius fall into these categories but some cars are a lot worse.

The heavy depreciation is due to many factors but I think one of the main ones is that a car pretty much has a life span of just over 10 years before the rust (salted roads in winter), annual safety test (mot) and repair costs catch up. Remember there are annual taxes to pay for all cars, including old ones. You're unlikely to keep an old Ford running worth only £200 when you have £200 annual tax to pay on it, in addition to the strict Governments annual safety check etc.

Also, people seem to change their cars pretty regularly here - keeping up with the Jones's maybe, whereas in the US you appear to hold on to your cars for much longer.

 

its easy to see the apprehension on the depreciation when the battery pack is 50% or more than the value of the car. what if revolutionary new charge storage technology is developed in the next 5 years which is bound to happen. if the Leaf cannot be retrofitted to use that technology at a VERY reasonable price, it would not resell for much.

but i feel that the Leaf will be forward compatible with new charge technology. its not hard to imagine a pack the same size as what the Leaf is using now, going 200+ miles in 3-5 years. now, is that going to make the Leaf worthless?

well, i dont think so. if its got a good glider on it, then it will be worth something. now granted, if something like eestor happens, well then, the Leaf will lose 50% of its value overnight since the batteries would be worth next to nothing

 

oh boy, more FUD.

I think we're going to see EVs keeping their value, especially if there is another run up in petroleum prices.

And I've seen RAV4 EVs bid up to $80k on ebay.

 

Good point. That's the real world example that shows the FUD for the lie it really is.

 

One thing that inluenced me to put a deposit on the Model S is the belief that an EV tends to hold its value. It seems to take ~$50000 to get an EV.

The value of almost every car drops dramatically. When gas prices were high SUVs couldn't be given away used Prius' were selling above MSRP.

 

What a bunch of crap.

Go ahead and read the underlying article and report.

In a nutshell, it seems to say, well, if consumers have to buy the battery, the car will be worth jack in 5 years. But, if they can lease the battery, that'll work much better.

Oh, yeah, like, somehow, leasing makes the issue of battery life disappear?

I don't mind skepticism, but weird, illogical skepticism is just unhelpful. Somehow, if battery life is the issue, leasing will make the car so much more economical than buying? How?

I love this part in particular:

"Glass anticipates a widespread belief that electric car batteries “will need replacing in the near future regardless of the manufacturers’ predictions of battery life.”

Actually, to the contrary, batteries with anything like standard chemistries are, as I understand it, pretty much the easiest things in the world to test for their current status and expected life.

I mean, HAHAHA -- take the car, charge it up, and see how far it goes. Not tough to do. If'n the batteries are all toast, it won't go very far. If'n they ain't, then it will. Can we say "soft failure"? As I understand it, "failure" here means reduced range. Just measure the range, and you have a very good grasp of the expected "life" of the batteries.

Compare that to a compression test and other methods for testing the likely lifetime of an ICE. Let along the unpredictability of the lifetime of an automatic transmission.

This is just malarkey by people who may understand consumer sentiment, but who clearly don't understand batteries at all.

Bottom line: It is far easier to assess the state of an EV's batteries than to asses the likelihood of some complex mechanical system breaking down on a regular gas car.

Now, to the contrary, if they'd just said, EV batteries won't last, so the car will in fact be toast in N years, so that the real, physical depreciation of EVs is vastly higher than ICE vehicles, OK, that's something we could debate. Might even plausibly be true. But near as I can tell, the whole article is based on the premise that the resale value will be low because you can't tell if you're getting a lemon or not. That, I think, is patently false. I think it's far easier to tell if your EV is a lemon than if your ICE vehicle is a lemon.

 

The claim of increased depreciation is based on consumer perception, not actual results. The authors claim that consumers are worried about battery life, which is probably true given the questions we hear about the Prius. If consumers are worried about short-lived batteries, they will be less likely to buy a car where they own the battery, and more likely to buy if the battery is leased. If the battery is leased, short working life becomes someone else's problem.

As you have pointed out, leasing or buying doesn't change the overall cost of the system. Either way the consumer will ultimately pay for battery life. But for new adopters, leasing is a way to mitigate fears about battery life, and because of these fears, it will influence depreciation.

Tom

 

$80K for used Rav4-ev's was back when the EV Rav's were newer ... and gas went for between $4 - $5 ... a gallon. Now gas is under $3 ... and many of the used Rav ev battery packs have over 100,000 miles on 'em. So now, the EV rav-4's are only selling for $36,000 ... which is what they cost 10 years ago (after tax incentives) ... when they were brand new



.

 

looks like you took my post on EV's to be a negative one. i can assure you it is not. i drive an NEV every day and its have every restriction, limitation and inconvenience possible and i still love it.

as far as gliders? a tesla would be a good example. its a shell, frame and body taken and drivetrain, dash, controls etc. added afterwards.

Zenn took a glider from Microcars of France. removed the engine and tranny and replaced it with a charger, motor and batteries.

this saves money since a car developed from the ground up like the Leaf cost tens of millions before EV technology is even addressed.

 

Using the Rav4 EV as an example of EV depreciation is a fallacy. It was built in limited numbers for market of one state, and there are few to no options as competitors to it. A few years ago, if you wanted a highway capable EV, your options was the Rav4 Ranger, maybe a couple others made for the ZEV mandate, or a custom conversion. The market model is more in line with one for collectibles, where demand far exceeds supply. Once new EVs become available, the market for Rav4 EV's will likely crash.