Want a cheaper second-hand EV? Hold out till 2025

Start the clock; I’d say we’re 18 months away from the first flood of second-hand EVs hitting the market. Much of the focus in Australia has been on the sale of new EVs — this is where most of the government support has been targeted.

But there’s one policy that may end up shaping the second-hand market: The federal government’s move to exempt fringe-benefits tax on EVs purchased on a novated lease.

At risk of delving too deep into accountant jargon: This change means that if you drive a car on a novated lease, and it was purchased (or first used) after July 2022, you do not have to pay an additional tax on the personal use of that vehicle. This only applies to EVs purchased for under $84,916 — or the threshold for the luxury car tax.

To simplify: If you are driving a company car, it’s more than likely on a novated lease arrangement, where you log your work-based driving hours and the cost of the car comes out of your income.

This incentive hasn’t gone unnoticed. While there’s no figure on the number of EVs out there on a novated lease, a recent survey from Novated Leases Australia indicated that almost half of Australians would consider adopting an EV via a novated lease arrangement with their employer.

So, why does this matter?

The common novated lease term is three years. If EVs follow the same trend as other novated lease vehicles, we’re likely to see many roll onto the second-hand market as drivers use the end of their contract as an opportunity to upgrade their car. And their old vehicle falls onto the second-hand market.

If, in a year’s time, you are in the market for a second-hand EV, you may be in luck. To date, EVs have largely held their value in the second hand market.

Cars typically lose around 50% of their value within the first three years. Some Tesla models have lost only 10% of their value by comparison. We’ve only this year seen some second-hand Teslas — mainly 2019 models — dip below the $40,000 mark.

There is a question however as to whether the additional supply of second-hand EVs will simply meet demand that’s already in the market — keeping prices stable.

The cost of owning and operating a car is going up. A $2 per litre petrol price has become the new norm, with indications this could hover closer towards $3 by the end of 2024. Servicing costs are also rising.

Either way, this shake-up is poised to hit our market within the next year or so. If you are hoping to sell your EV at a premium and upgrade you may want to do it sooner rather than later.

But if you are looking for a more affordable second-hand EV, holding out just a little bit longer may be your best bet.

As I’ve argued in the past, price isn’t the only factor driving EV adoption. With the new car market, many automakers are using the switch to EV to redefine what premium means for their line of vehicles. And with the second-hand market, many Australians are looking at what charging facilities are in their area before considering a switch.

Also, Australians tend to replace their car once every five to seven years, with the latest ABS data showing the average age of cars on our roads is around 10 years old. Many are primed to try an EV as their next car — and given how infrequently they consider their cars, it’s a big decision.

But being aware of this dynamic with novated leases will at least allow you to make the best call for your personal circumstance and hopefully come out ahead of what are rapidly changing market dynamics for EVs.

Des Hang is the CEO and founder of Carbar