Is Electric Cars Losing Value Fast and Why

According to the latest Automotive Insights Report (AIR) from the Australian Automotive Dealer Association (AADA) in early 2025, an electric car retains an average of 84.5% of its original value after one year of ownership.

While this represents a sharper depreciation curve (15.5%) compared to the artificially high 94.8% retention seen during the supply-constrained peaks of 2024, it requires crucial context: EVs are still holding their value better than internal combustion SUVs (67.5% retained) and Utes (72.0% retained) over the same 12-month period.

However, the longer-term depreciation curve steepens. By the end of a three-year cycle, EV retained value nearly halves, holding around 55.5% of the original sticker price.

Explore how different powertrain choices impact your total cost of ownership over a standard three-to-five-year holding period:

Structural Forces Driving the EV Market

Several interconnected factors are accelerating the turnover and depreciation of EVs today:

  • Intensified Price Wars: Heavy discounting on new models directly cannibalizes the second-hand market. When a manufacturer slashes the retail price of a new EV, the used market immediately adjusts downward to maintain a pricing gap.
  • The Technology Adoption Curve: We are in an early-to-mid adoption phase. Battery capacity, charging architectures, and software capabilities are evolving at a pace closer to consumer electronics than traditional automotive cycles. A three-year-old EV can feel a generation behind, suppressing its resale appeal.
  • Shifting Subsidies and Leasing: The expansion of Fringe Benefits Tax (FBT) exemptions and novated leasing programs has artificially increased the volume of relatively new EVs returning to the secondary market. Greater supply naturally softens used pricing.

Lessons From the Hybrid Trajectory

Hybrids currently rule the resale market — retaining an astonishing 98.3% of their value after year one. But this was not always the case.

A decade ago, early hybrid technology faced the exact same headwinds EVs face today: high initial purchase prices, consumer anxiety over battery replacement costs, and steep early depreciation (peaking at nearly 57% over five years). As infrastructure improved, manufacturers refined the technology, and consumer familiarity grew, resale values stabilized. EVs are tracking along this exact same trajectory as the broader market matures.

Action Plan for the Modern Buyer

Depreciation is a guaranteed cost of new car ownership, but the electrified era requires a more strategic approach:

1.      For New Buyers: Do not rely on premium badging to protect against losses. Factor in the total cost of ownership (TCO)—offsetting the steeper initial depreciation with the substantial day-to-day savings on fuel and servicing.

2.      For Used Buyers: The steep year-one drop represents a significant opportunity. Purchasing a one- to two-year-old EV allows the first owner to absorb the heaviest financial hit while you secure advanced technology at a severe discount.

3.      For Fleet and Finance: If the unpredictability of EV residuals is a concern, leveraging a novated lease or guaranteed future value (GFV) finance product shifts the depreciation risk entirely onto the financier.