Depreciation is certainly something to consider when buying a new car but, as financial commentator Nadine Higgins wrote recently, "a car is more often a money pit than it will ever be a wise financial decision in its own right”. 

Over three years, according to the AA, most new cars approximately halve in value. If you’re buying for the long-run, this is not as much of an issue. 

EVs currently depreciate more than similar ICE cars and it has certainly been a barrier to uptake, but that’s primarily because of how fast the technology has improved, how far prices of new EVs have fallen, and various policy changes. 

Over the next 5-10 years, prices are likely to be driven much more by scarcity and demand and the recent uptick in used EV pricesas people look to drive on electrons rather than expensive imported fuels is a good example of this (it’s important to note that new EV prices have not increased in response to the fuel crisis and in Australia BYD’s luxury brand Denza is offering a guaranteed buyback programme that largely removes any depreciation concern).

Some narrative beyond just the resale value is also useful. New Tesla Model Ys and Model 3s are around $10k+ less now then they were a few years ago, so of course used prices have dropped more than an ICE that hasn't had a similar price drop. 

Also, many models (like the Ford Mustang Mach-e, Kia EV9 or Polestar 2) have had huge discounts (like $20-50k) at times over the last 18 months, which creates a similar situation. 

There haven't been similar discounts/price drops for ICE vehicles and, in some cases, ICE cars have actually become more expensive to buy (and much more expensive to run after the Iran conflict kicked off). 

Predictions are a risky business and depreciation is an unknown quantity, but many EVs are now close to price parity with ICE cars, especially in the smaller category. The risks of losing value will shift to ICE vehicles at some point because they won’t be wanted (which is why we definitely don’t want to weaken the Clean Car Standard and have more clunkers dumped here). 

As Casey wrote: “At this point it becomes even more obvious that owning a petrol car is a bad economic decision, because they cost more to run and service. This means it will rapidly become much harder to sell any petrol car, meanwhile petrol prices will keep going up as people use petrol stations less, and more car owners will try to sell off their petrol vehicles, creating a vicious cycle or ‘death spiral’.  

As EV adoption grows, petrol stations and petrol supply lines will start to shrink and prices will increase further (something we are also starting to see happening with the gas network). 

A bunch of Kiwis will be left holding the hot potato of a petrol car they don’t want and it will be costing them far more than their neighbours’ electric equivalent of the same car. We will then try to palm off our hot potato petrol cars to other countries, but whoever does this too late in the transition will be left holding all the old cars. And it is very unlikely to be a tourist attraction like Cuba." 

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