The Italian automaker’s guarantee is the latest sign that electric vehicles have a growing challenge — and it’s not just cost and range anxiety relative to their gas-powered peers. EV residual values are cratering compared to their gas-powered peers, harming resale value for owners who have otherwise enjoyed lower ownership costs due to EVs' low maintenance and refueling expenses.
Experts say the reasons for EV depreciation vary from the flood of new models in the market to battery degradation after years of charging. A recent study from iSeeCars.com found EV residuals fell 31.8% over a year ago (a value loss of $14,418) compared to 3.6% for gas engine vehicles. Yet, while EV deprecation is sour news for owners, lower EV values — combined with higher government incentives — could open the opportunity to a wider demographic of buyers to try EVs as manufacturers try to meet government sales mandates.
“Vehicle deprecation over the initial years of ownership is the most expensive part of owning a new car,” said Karl Brauer, executive analyst at iSeeCars.com. “As more EV buyers become aware of that fact, the fewer will be interested in ownership.”
Concerned over owner backlash, some luxury automakers are taking action. To protect residual values critical to its brand’s reputation, Ferrari — which has been making hybrid-electric supercars like the SF90 Stradale and 296 GTB/GTS since 2019 with its first, fully-electric vehicle coming at the end of 2025 — has launched an extended, $7,530 battery replacement warranty so owners can replace the batteries on plug-in hybrid models without facing a high repair bill.
The so-called Warranty Extension Hybrid and Power Hybrid programs cover battery replacements in the eighth and 16th year of a vehicle’s life (a five-year warranty is already offered) and is intended to "preserve the performance and excellence" of hybrid cars, according to Ferrari.
"In case of future developments in battery technology, the replacement (battery) will be a new, state-of-the-art component that will ensure the same performance as the original one," Ferrari said.
Brauer says value retention is particularly important to the Ferrari brand, whose owners expect their $350,000-to-$500,000 purchase to appreciate over time. But the iSeeCars analyst says the depreciation factor is a problem at the mainstream end of the market as well.
“There are a lot of factors causing the devaluation of EVs,” he continued. “There are too many new EVs coming into the market and not enough buyers; a lot of EVs are coming off three-year leases into the used market; and Hertz has dumped thousands of EVs into the used market because customers weren’t renting them.”
According to the iSeeCars study, used EV values in June 2023 were 25% (over $8,000) more than the average used gas car price. Fast forward to June 2024, and they were over 8% ($2,657) lower than the average used gas car.
EVs are relatively new to the U.S. market (the best-selling Tesla Model Y, for example, has only been on sale for five years) compared to internal combustion engine peers. But, as they age, battery degradation will threaten to cause further depreciation.
As owners of laptops and smartphones know, battery performance degrades over time. But where laptop users can replace their batteries for $50-$200, car owners are facing a much bigger bill — estimated at between $15,000 and $22,000, depending on the model.
That depreciation was famously illustrated by Finland’s Tuomas Katainen, who owned a 2013 Tesla Model S with a battery that expired. The $22,500 estimate to replace the battery was prohibitive, reported CNN — so Katainen strapped 66 pounds of dynamite to his car in 2021 and blew it up on a YouTube video that went viral.
Katainen’s dramatic display underscores the U.S. government’s regulatory requirement that manufacturers provide at least an 8-year/or 100,000-mile battery warranty. Tesla claims its batteries will retain at least 70% of charge over eight years, but a report from battery-data firm Recurrent studying real-world driving range found that Tesla batteries degraded on average to 64% of their EPA-rated capacity over three years.
Seeking Alpha auto analyst Anton Wahlman notes that the average age of U.S. vehicles is 12.6 years in 2024. Most are powered by gas engines that cost $4,000 to upwards of $10,000 to replace.
“There are a lot of cars that are on the road longer than eight years. What happens as soon as your EV is past the eight-year warranty?” Wahlman said. “A replacement battery could be a $15,000 or greater part. It’s a ticking time bomb, and a fundamental problem for all buyer demographics.”
In a three-year cost-of-ownership analysis studying comparable Ford and Hyundai EV/ICE vehicles in the market today, Car and Driver looked at maintenance, refueling and deprecation costs while driving 15,000 miles a year. The study found that the Hyundai Kona and Ford F-150 EVs out-performed their ICE peers in the cost of fuel and maintenance, but that depreciation was the EVs’ Achilles heel.
“It’s clear that EVs depreciate quicker than their gas counterparts,” the study’s authors conclude, reporting the Kona ICE depreciated by $9,795 compared to $15,305 for the Kona Electric. And the Ford F-150 depreciated by $13,981 while the F-150 Lightning EV lost $15,738.
Given the price and deprecation challenges of EVs, Wahlman says that “there is no end in sight” to $7,500 government subsidies to level the playing field for EV buyers.
If EV residuals continue to drop, iSeeCars analyst Brauer says that a wider demographic of buyers is likely to look at EVs — especially in the used market. A search of Edmunds.com, for example, finds numerous 2021 model year Model Y Long Range models ($50K when new) with 70,000-80,000 miles for the same $25K price as a new 2024 Chevy Trailblazer.
“Prices are dropping because the market is getting saturated for the luxury, first-adopter car buyers that have been attracted to EVs,” said Brauer. “The price delta to capture a mainstream buyer is much lower, which is why prices are dropping. But the driving lifestyle is also very different because the mainstream buyer needs the EV for local and long-distance travel.”
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