My wife and I are on the waiting list for a Volkswagen ID.4 and I’m wondering how well it will keep its value. We usually trade in our car every four years. I’d like that option in case future EVs come out with more range. It’s a little more money than we’d pay for a comparable SUV, so we’re hoping not to lose too much. – Kris, Ottawa
While most new electric vehicles come with sticker shock now, some electric cars are forecast to hold more value down the road than their gas-powered counterparts, an industry forecast shows.
In its second annual residual-value awards, Canadian Black Book (CBB), a Markham, Ont.-based company that tracks and forecasts used vehicle prices, gave first, second and third place to vehicles in 16 categories.
For the top electric sedans and hatchbacks, the average residual value after four years is 58.5 per cent of the original manufacturer’s suggested retail price (MSRP). The average across similar gas-powered categories is 56.1 per cent.
EVs are only 2.4 per cent higher, but last year, they were slightly lower, said Daniel Ross, the senior manager for industry insights with CBB. And all four EV-category-winning vehicles are predicted to hold more value compared with the vehicles that won those categories last year.
“EVs are one of those segments of the market that are looking like they’re gonna be higher than internal combustion engines in the long term,” he said. “We expect EVs to hold their value quite well.”
Residual value is a prediction of what a car sold today will be worth four years from now – in this case, 2027. For example, if a 2023 SUV with an MSRP of $45,000 had a residual value of 60 per cent, it’s predicted to be worth $27,000 in four years.
Residual value is different from retained value, which is what four-year-old cars are worth now.
The company only announced the residual value percentages for the winner in each category.
The 2023 Kia Soul EV, the winning EV car in the less than $55,000 category, has a forecasted residual value of 61 per cent. For the 2023 Subaru Impreza, the winning gas-powered sedan, it’s 60.5 per cent.
When it comes to the popular SUV categories, gas-powered and electric models are forecast to hold their value better than cars because of consumer demand, Ross said. But, unlike sedans and hatchbacks, gas-powered SUVs are forecast to hold more value than EV SUVs. The winning gas-powered SUVs averaged residuals of 74.3 per cent, compared with EV SUV winners at 66.5 per cent, Ross said.
“A lot of EV SUVs that are coming into the market are luxury-minded – and luxury vehicles tend to depreciate faster,” Ross said. “The EV SUVs that are coming out are already contending with really high values in the SUV market. And the EV SUVs are exceptionally expensive and not necessarily readily available, so that [lowers] residual value.”
The highest residual value for any vehicle was the Chevrolet Corvette (84.2 per cent) followed by the Ford Maverick (83.1 per cent) in the small pickup category. The highest EV value was the Volkswagen ID.4 (69.9 per cent) in the EV SUV below $60,000 category.
Residual value is a guess, based on wholesale prices, trends in consumer demand, consumer perceptions of brands and whether companies are offering incentives.
“If it’s incentivized heavily … that car is a lot cheaper and that hurts residual value,” Ross said.
Residual value isn’t a guarantee and factors that are hard to predict can affect prices. For example, we’ve seen new vehicle shortages over the past two years that weren’t anticipated four years ago, before the pandemic.
Because of that, the actual retained values in 2022 for some 2018 vehicles were higher than their MSRP when brand new.
Eventually, EV retained values will come down as production ramps up, but it’s not clear when that will be, Ross said.
“Right now, we have geopolitical issues [including inflation, pandemic-related supply-chain issues, and the Russian war against Ukraine] that are slowing production of lithium [and other metals] needed for batteries,” Ross said. “So we’re seeing investment now in Canada, and in the United States, too, to generate more material to assemble batteries. Eventually, the market will be in a better place supply-wise.”
2023 Canadian Black Book Residual Value Award winners (with percentage of residual value)
Best overall brand, car: Toyota
Best overall brand, SUV and truck: Toyota
Best overall brand, luxury: Lexus
Best overall brand, zero-emissions: Volkswagen
Most improved overall brand: Nissan
Car: Subaru Impreza (60.5 per cent)
Luxury car: Cadillac CT5 (57.2 per cent)
Prestige car: Lexus LS500 (50.7 per cent)
Small pickup: Ford Maverick (83.1 per cent)
Full-sized pickup: Toyota Tundra (68.2 per cent)
Plug-in hybrid electric vehicle (PHEV): Jeep Wrangler 4XE (76.1 per cent)
Luxury PHEV: Land Rover Range Rover (62 per cent)
Sports car: Mazda MX5 (67 per cent)
Luxury sports car: Chevrolet Corvette (84.2 per cent)
Compact SUV: GMC Terrain (69.6 per cent)
Mid- or full-sized SUV: Toyota 4Runner (79 per cent)
Luxury SUV: Mercedes-Benz GLS (74.2 per cent)
EV car below $55,000: Kia Soul EV (61 per cent)
EV car above $55,000: Polestar 2 (56 per cent)
EV SUV below $60,000: VW ID.4 (69.9 per cent)
EV SUV above $60,000: Mercedes EQS SUV (63.1 per cent)
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