Yahoo Finance Electric car 'fire sale' a major warning to Aussies: 'Volatile'
New technology, depreciation and its effects on the motoring industry have been highlighted as issues every EV owner should know.
Electric cars are praised as the future of the motoring industry due to their zero emissions and high-tech offerings. But car experts have revealed there's a financial downside to jumping on the bandwagon.
BITRE data shows Aussies hold onto their vehicles for an average of 11 years and three months. However, Paul Maric estimates electric vehicle (EV) owners would have a fraction of that timeline.
"Basically, two years is the maximum you want to be spending in an EV," the CarExpert.com.au founder told Yahoo Finance.
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"Two years is that sweet spot. It means that you can manage your depreciation effectively. If you are holding on to it longer, you just need to be prepared for a lot of volatility."
Turning over a new vehicle every few years might suit some Aussies but in a cost-of-living crisis, others might not be able to keep up.
Depreciation is a huge issue for EVs: 'It's basically a fire sale'
Depreciation happens on almost every car, but EVs are particularly hurt by this trend because of the industry's rapidly changing improvements. Savings.com.au describes car depreciation as the "silent killer" of vehicles and this could be even more relevant for owners of electric cars.
The Australian Automotive Dealers Association (AADA) and AutoGrab revealed earlier this year where the cliff lies for EVs. Electric cars two years and younger retained 82.8 per cent of their original value, but vehicles two to four years old only held 57.6 per cent of their value.
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Cars two to four years old on the entire used-vehicle market, for comparison, had an average retained value of 85.9 per cent. It's even worse in the UK, with EVs losing 51 per cent of their purchase value in three years compared to 37 per cent for petrol-powered vehicles.
"People who paid top dollar for their cars [are] trying to get out of them as quickly as they can," Maric revealed. "It's basically a fire sale. They want to sell their car first so they're not left holding this expensive asset they can't get rid of.
"And we're going to see more and more of that with people that have taken out three or four-year leases on these Tesla vehicles that came out around the time the government started announcing all these cost benefits for employees."
Technology keeps upgrading
The biggest factor driving the depreciation of electric cars is their emerging technology. Each year seems to usher in better features for car users and Maric said it's best to capitalise on that as much as possible so you don't get stung with an aging car that's tough to sell.
"Once you get to the point of three or four years old, you're getting to the end of the new car warranty and you're halfway through the battery warranty," he revealed.
"No one really knows what's going to happen in 10 years after an EV is produced. You don't know the cost of having to replace a battery."
EV expert Toby Hagon explained to Yahoo Finance that this issue doesn't make it a bad idea to jump on the bandwagon now, but it might make car owners tempted to constantly upgrade their vehicles.
"There's no doubt that an EV in two, three, four years is going to be better, probably significantly better than the cars we've got on the market today," he said.
"But I don't think that necessarily makes the old cars worse or unappealing, it just means that the market is moving along pretty quickly."
Bad battery myth
While there are some concerns about how long an electric vehicle battery is meant to last, Hagon said there's a lot of misinformation out there.
"A lot of people assume that once the battery warranty has expired, they need to replace the battery, which is absolutely not true," he explained.
"Most petrol and diesel cars these days have a five-year warranty on their engine and you don't need a new engine after five years.
"Similarly with an EV battery after eight years, which is typically the battery warranty, you don't need a new battery. A battery in an EV is designed to last the life of the vehicle."
Another hidden issue putting pressure on one industry
Raffy Sgroi, owner of Car Mechanical Services in the ACT, told Yahoo News Australia the mechanic industry isn't able to keep up with the constantly evolving EV market.
She explained there are "steep fees" associated with training staff on the new vehicles and "there's just not enough knowledgeable people" around to service them at the moment.
There's also a large cost in buying specialty parts for when EVs need a bit of TLC.
"The federal government has invested a lot of money in EV technology, building new modules and training courses," she explained.
"But you don't have anyone one that delivers those courses [to young mechanics] that is knowledgeable enough.
"So you can have a really state-of-the-art facility, but if you don't have people waiting to learn, it's going to be useless as an investment."
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