This week, Cox Automotive analysts shared news that may surprise some dealers: Retail sales of used EVs rose sharply in January, an uptick that could owe to the ability of used EV buyers to apply a $4,000 federal tax credit at the point of sale.
Average weekly sales of used EVs in January grew 34 percent against the average weekly sales in December 2023.
January’s sales represented a 69 percent increase compared to used EV sales in January 2023.
Thanks to the January sales increase, the days supply of used EVs dipped below 47 days; it averaged nearly 64 days in the fourth quarter of 2023.
The current days supply of used EVs is now lower than the average days supply of internal combustion engine (ICE) vehicles.
The recent surge in used EV sales contrasts with the wariness I heard from dealers at NADA about stocking and selling used EVs. Like consumers, dealers are concerned about value volatility and battery health, among other issues.
Analysts offered a few reasons for the recent rise of used EV sales:
First, January marked the first time used EV buyers could apply a $4,000 federal tax credit at the point of purchase of a used EV. Previously, used EV buyers could claim the credit as they filed their taxes.
Second, the value of used EVs, which suffered last year as OEMs reduced MSRPs on new EVs, might be more within reach of interested buyers, particularly if the buyers and their vehicle of choice qualifies for the $4,000 tax credit.
Third, the average tax refund this year is expected to be $3,000, about $300 higher than last year. Some used EV buyers may be using, or at least considering, their refunds as they buy the vehicles.
Overall, the recent rise of used EV sales represents good news for dealers. As more sales of used EVs occur, dealers can wade deeper into this market with more confidence, since more retail sales brings deeper and more reliable market data to make better used EV decisions.
But I’d also offer a note of caution to dealers who might view January’s spike in used EV sales and the $4,000 tax credit as reasons to start stocking used EVs. Here’s why: The federal program limits the tax credit to EVs (and hybrids) priced at $25,000 and below. On top of that, the tax credit is tied to household income. For example, you wouldn’t be eligible to receive the credit if you’re married, file jointly and make more than $150,000 a year. Such requirements make it difficult if not impossible for dealers to acquire a used EV that qualifies for the program without knowing they’ve got an income-eligible customer ready to buy it.
Still, the January sales numbers suggest the used EV market is on the move and will merit closer attention in the coming months.