Automotive: Used EV Market Set to Surge: Lease Returns Drive Next Adoption Wave

Why it is the topic trending: Tax Policy Creates a Surge of Used EVs, Offering More Affordable Options

• A tax loophole in the 2022 Inflation Reduction Act incentivized EV leasing over buying, leading to a high volume of leased EVs in recent years.

• These leases, typically for two or three years, are now reaching their end, resulting in a significant influx of used EVs entering the market.

• This anticipated surge of more affordable used EVs is expected to play a crucial role in the next phase of electric vehicle adoption, attracting price-conscious buyers.

Overview: Affordable Used EVs Flood the Market as Lease Terms End

A surge of used electric vehicles is expected to hit the market in the coming years, primarily due to the expiration of leases that were heavily favored by a tax loophole. This loophole, arising from the 2022 Inflation Reduction Act, made leasing EVs more financially attractive than purchasing them outright. With lease terms typically lasting two to three years, the large number of EVs leased since early 2022 are now being returned, promising a substantial increase in the availability of secondhand EVs at more accessible price points, which is predicted to boost further EV adoption.

Detailed findings: Nearly One Million Leased EVs to Enter Used Market by 2027

• Nearly 1 million EVs were leased between the start of 2022 and the first quarter of 2025, according to Experian data analyzed by Cox Automotive.

• EV lease rates dramatically increased from around 15% in 2022 to 67% by March 2025, with Tesla experiencing a notable spike in leasing. The industry average lease rate is about 25%.

• Roughly 123,000 leased EVs (and plug-in hybrids) are projected to return to the secondhand market in 2025.

• This number is expected to more than double in 2026 to 329,000 EVs, and by 2027, 650,000 leased EVs will be turned in.

• Used EV sales are projected to exceed 100,000 units in the second quarter of 2025, supported by a $4,000 federal tax credit.

• However, this used-EV tax credit, along with new EV tax credits and the leasing loophole, may be discontinued soon due to potential policy changes.

Key success factors of product (trend): Lease Loophole and Affordability Drive Used EV Market Growth

• Tax Incentive (Leasing Loophole): The specific wording of the 2022 Inflation Reduction Act created a tax advantage for businesses (including banks and finance companies) leasing EVs, which was then passed on to consumers in the form of lower monthly lease payments. This directly led to a surge in EV leasing.

• Predictable Supply: Unlike trade-ins of purchased vehicles, lease returns are predictable, allowing the industry to anticipate the influx of used EVs.

• Increased Affordability: Used EVs generally come at a lower price point compared to new models, making them an attractive option for price-conscious buyers who might have been hesitant to purchase a new EV.

• Government Incentives for Used EVs: The presence of a federal tax credit for used EV purchases further enhances their affordability and appeal.

Key Takeaway: Expiring EV Leases Will Flood the Used Car Market, Making Electric Vehicles More Accessible.

Main trend: Used EV Availability Surges: Lease Rolloff Transforms the Electric Vehicle Market

Description of the trend (please name it): The Used EV Tidal Wave: This trend describes the anticipated massive increase in the supply of used electric vehicles entering the market due to the expiration of a large number of leases that were incentivized by a temporary tax policy.

What is consumer motivation: Price-Conscious Buyers Seek Affordable Entry into EV Ownership

• Lower Purchase Price: Used EVs are generally less expensive than new ones, making EV ownership accessible to a broader range of consumers with budget constraints.

• Desire to "Go Green" at a Lower Cost: Consumers interested in reducing their environmental impact may find used EVs a more financially viable option.

• Access to Technology: Used EVs still offer the benefits of electric vehicle technology, such as lower running costs (fuel and maintenance) and a quieter driving experience.

• Potential for Tax Credits: The federal tax credit for used EVs can further reduce the initial cost, making them even more appealing.

• Avoiding Initial Depreciation: New vehicles typically experience the most significant depreciation in their first few years. Purchasing a used EV allows buyers to avoid this initial drop in value.

What is driving trend: End of Lease Terms and Favorable Past Tax Policies

• Lease Contract Expiration: The primary driver is the natural conclusion of the two-to-three-year lease terms for the large number of EVs leased starting in 2022.

• Inflation Reduction Act's "Leasing Loophole": The tax credit structure that favored leasing created the initial surge in EV leases, which is now resulting in the used EV supply.

• Federal Tax Credit for Used EVs: The availability of a $4,000 federal tax credit for used EV purchases helps stimulate demand for these vehicles.

• Growing Awareness and Acceptance of EVs: As more people become familiar with electric vehicles and their benefits, the demand for both new and used models is likely to increase.

What is motivation beyond the trend: Seeking Value and Mitigating Risk in EV Adoption

• Lowering the Risk of Early EV Adoption: Some consumers might have been hesitant to buy a new EV due to concerns about long-term reliability or battery degradation. Opting for a used EV can be seen as a lower-risk way to experience EV ownership.

• Obtaining More Features for the Price: A used EV might allow buyers to access higher-end features or a larger battery capacity than they could afford in a new, similarly priced model.

• Testing the Waters Before Committing to a New EV: For some, purchasing a used EV could be a stepping stone before eventually buying a new electric vehicle, allowing them to gain experience with EV ownership and charging.

Description of consumers article is referring: Price-Conscious Buyers Interested in Electric Vehicles

The article primarily refers to:

• Price-conscious buyers: Individuals who are interested in owning an electric vehicle but are seeking more affordable options than new EVs.

• Consumers who were previously deterred by the higher cost of new EVs: This group might now find used EVs within their budget.

• Potential first-time EV owners: Those who are curious about electric vehicles but want to enter the market at a lower financial risk.

Consumer Profile: Budget-Savvy Individuals Ready to Embrace Electric Mobility

Conclusion: Based on the article, the consumers likely to be interested in the upcoming wave of used EVs are budget-conscious individuals and families who are now presented with a more accessible entry point into electric vehicle ownership. They are likely motivated by the lower price point, a desire to reduce their carbon footprint without a significant financial burden, and the opportunity to experience EV technology firsthand.

• Who are them: Price-sensitive individuals, potentially families or younger buyers, looking for a more affordable vehicle option.

• What kind of products they like: Reliable, functional electric vehicles at a competitive price, likely prioritizing value over the latest high-end features.

• What is their age?: Likely a wide age range, but potentially skewing towards younger individuals or families who are more budget-constrained or those who are newer to EV technology.

• What is their gender?: Not specified in the article; likely a mix of genders interested in practical and affordable transportation.

• What is their income?: Likely lower to middle-income individuals and families who were previously priced out of the new EV market.

• What is their lifestyle: Could vary, but likely includes individuals who need reliable transportation for commuting, errands, or family needs and are open to the benefits of electric vehicles.

• What are their shopping preferences in the category article is referring to: They will likely prioritize price, reliability, and potentially the availability of the federal tax credit for used EVs. They may be more open to older models or vehicles with higher mileage compared to new car buyers.

• Are they low, occasional or frequent category shoppers: They might be infrequent shoppers, making a car purchase only when necessary, and the affordability of used EVs might be the catalyst for their entry into the EV market.

• What are their general shopping preferences-how they shop products, shopping motivations: They are likely to be value-driven, conducting thorough research on prices and reliability. Their shopping motivation is primarily to acquire affordable and practical transportation, with the added benefit of EV technology.

Conclusions: Used EV Surge Offers Key Opportunity for Widespread Electric Vehicle Adoption

The anticipated influx of used electric vehicles due to lease rolloff presents a significant opportunity to accelerate the adoption of EVs among a broader range of consumers, particularly those who are price-sensitive. This trend, driven by past tax policies and the natural lifecycle of leases, promises to make electric mobility more accessible and mainstream. However, the potential phasing out of tax credits for used EVs could impact the momentum, highlighting the importance of consistent and supportive policies in fostering long-term growth in the EV market.

Implications for brands: Automakers and Dealers Must Prepare for Increased Used EV Supply and Demand

• Opportunity to Expand Customer Base: Automakers and dealerships can tap into a new segment of price-conscious buyers through the used EV market.

• Need for Used EV Sales and Service Infrastructure: Brands will need to develop or enhance their capabilities for inspecting, certifying, and servicing used electric vehicles.

• Potential Impact on New EV Sales: The availability of affordable used EVs could potentially affect the demand for certain new EV models, particularly those in lower price ranges.

• Management of Lease Returns: Automakers and their financing arms will need efficient processes for handling the large volume of returning leased EVs and preparing them for resale.

Implication for society: Wider EV Adoption Can Contribute to Environmental and Economic Benefits

• Reduced Emissions: Increased adoption of electric vehicles, even through the used market, contributes to lower greenhouse gas emissions and improved air quality.

• Potential for Cost Savings for Consumers: Lower fuel and maintenance costs associated with EVs can lead to long-term financial benefits for a wider range of consumers.

• Growth of Green Economy: The expansion of the used EV market can support jobs and economic activity in areas related to inspection, refurbishment, and resale of electric vehicles.

Implications for consumers: More Affordable Access to Electric Vehicles with Potential Tax Savings

• Lower Purchase Prices: Consumers will have access to a larger selection of used EVs at more affordable prices compared to new models.

• Potential for Federal Tax Credit: The availability of a $4,000 federal tax credit for used EV purchases can significantly reduce the overall cost of ownership.

• Opportunity to Experience EV Technology: More consumers will have the chance to experience the benefits of electric vehicles, such as lower running costs and a different driving experience.

Implication for Future: Used EVs Expected to Become a Significant Segment of the Overall Vehicle Market

• Maturing Used EV Market: The used EV market will likely become a more established and significant part of the overall automotive market.

• Focus on Battery Health and Transparency: As the used EV market grows, there will be an increasing focus on battery health, warranty options, and transparent reporting of battery condition.

• Potential for New Business Models: We might see the emergence of specialized businesses focused on the resale, refurbishment, and battery management of used electric vehicles.

Consumer Trend (name, detailed description): Value-Driven Sustainability: Consumers are increasingly seeking out sustainable options, such as electric vehicles, but are often motivated by value and affordability, making the used EV market particularly appealing.

Consumer Sub Trend (name, detailed description): Second-Hand Tech Adoption: Consumers are becoming more comfortable with purchasing used technology, including vehicles, as a way to access features and benefits at a lower cost.

Big Social Trend (name, detailed description): Increased Environmental Awareness: Growing awareness of climate change and the desire to reduce personal carbon footprints are driving more consumers towards electric vehicles.

Worldwide Social Trend (name, detailed description): Electrification of Transportation: Globally, there is a growing movement towards electrifying transportation to reduce reliance on fossil fuels and combat climate change.

Social Drive (name, detailed description): The Pursuit of Affordable and Responsible Consumption: Consumers are seeking ways to make responsible choices, such as adopting electric vehicles, without incurring excessive financial burdens.

Learnings for brands to use in 2025: Prepare for Used EV Boom: Key Actions for Automotive Sector

• Invest in Used EV Infrastructure: Develop processes and expertise for inspecting, valuing, and servicing used electric vehicles.

• Strategize for Lease Return Management: Establish efficient systems for handling and remarketing the anticipated high volume of off-lease EVs.

• Educate Consumers on Used EV Benefits: Highlight the affordability and value proposition of used EVs in marketing efforts.

• Consider Certified Pre-Owned (CPO) Programs for EVs: Offering warranties and assurances for used EVs can build consumer confidence.

• Monitor Policy Changes: Stay informed about potential changes to tax credits and regulations that could impact the EV market.

Strategic Recommendations for brands to follow in 2025: Embrace the Used EV Market: Automotive Players Should Develop Robust Strategies for Sales, Service, and Customer Engagement in the Pre-Owned Electric Vehicle Sector.

The main trend is the imminent surge in used EV availability driven by lease rolloff, and brands and companies in 2025 should leverage this by developing comprehensive strategies for the used EV market, including robust sales and service infrastructure, clear communication of value to consumers, and proactive adaptation to evolving policies and consumer preferences to capitalize on this significant opportunity for EV adoption.

Final Note:

• Core Trend: Expansion of Used EV Market. A significant increase in the supply of used electric vehicles is expected due to maturing leases.

• Core Strategy: Focus on Affordability and Value. Brands should emphasize the cost-effectiveness and benefits of used EVs to attract price-conscious consumers.

• Core Industry Trend: Increased Accessibility of Electric Vehicles. The influx of used EVs will make electric mobility more accessible to a broader range of buyers.

• Core Consumer Motivation: Seeking Affordable and Sustainable Transportation. Consumers are motivated by the opportunity to own an electric vehicle at a lower cost while contributing to environmental sustainability.

Final Conclusion: The Used EV Market Poised for Takeoff, Democratizing Electric Vehicle Adoption

The upcoming wave of used electric vehicles represents a pivotal moment for the widespread adoption of EVs. Driven by a unique set of circumstances involving tax policy and lease cycles, the market is on the verge of a significant expansion that promises to make electric mobility more attainable for a much larger segment of the population. For automakers, dealers, and related businesses, the key to success will lie in recognizing the potential of this market, preparing the necessary infrastructure and services, and effectively communicating the value proposition of used EVs to consumers who are eager for an affordable and sustainable transportation solution. This trend has the potential to significantly accelerate the transition to electric vehicles and contribute to a greener future.

Core Trend Detailed: Used EV Market Surges: Lease Expirations Unlock Affordable Electric Mobility

The core trend detailed in the article is the anticipated substantial growth of the used electric vehicle market. This growth is primarily fueled by the expiration of a large number of leases that were initiated following the implementation of a tax policy in the 2022 Inflation Reduction Act that favored leasing over purchasing new EVs. As these two-to-three-year lease terms conclude, a significant volume of used EVs will become available for sale, offering a more budget-friendly entry point for consumers interested in electric mobility. This surge in supply is expected to transform the landscape of the EV market, making it accessible to a wider demographic of buyers.

Key Characteristics of the Core trend: Increased Supply, Affordability, and Policy Dependence

• Significant Increase in Used EV Supply: The number of used EVs entering the market is projected to grow exponentially over the next few years due to lease rolloff.

• Enhanced Affordability of EVs: Used EVs typically have lower prices than new models, making EV ownership more accessible to price-sensitive consumers.

• Influence of Past and Potential Future Tax Policies: The initial surge in leasing was driven by a tax loophole, and the demand for used EVs is currently supported by a federal tax credit, highlighting the impact of government policies on this trend.

• Potential for Faster EV Adoption: The increased availability of affordable used EVs could significantly accelerate the overall adoption rate of electric vehicles.

• Importance of Consumer Confidence in Used EV Technology: Building trust in the reliability and battery health of used EVs will be crucial for the sustained growth of this market segment.

Market and Cultural Signals Supporting the Trend: Data Shows Leasing Boom and Growing Used EV Interest

• High EV Lease Rates: The Experian data showing a dramatic increase in EV lease rates from 2022 to 2025 indicates the large volume of vehicles now entering the used market.

• Projected Increase in Used EV Returns: Forecasts from Recurrent Auto quantifying the number of leased EVs returning in the coming years confirm the impending surge in supply.

• Growing Sales of Used EVs: The projection that used EV sales will surpass 100,000 units in the second quarter of 2025 demonstrates existing consumer demand for pre-owned electric vehicles.

• Federal Tax Credit for Used EVs: The existence of this incentive signals government support for making used EVs more accessible.

• Increasing Consumer Awareness of EV Benefits: As more people become knowledgeable about the advantages of electric vehicles, the demand for both new and used models is likely to rise.

How the Trend Is Changing Consumer Behavior: Price Sensitivity Drives Shift Towards Used EV Consideration

• Greater Openness to Used Vehicles: Consumers who might have only considered buying new cars may now be more willing to explore the used EV market due to affordability.

• Prioritization of Value over Newness: For some buyers, the lower price point and potential tax credit of a used EV may outweigh the desire for the latest model year or features.

• Increased Research on Used EV Values and Reliability: Consumers are likely to spend more time researching the prices, battery health, and reliability of used electric vehicles.

• Potential Shift in Purchase Timelines: The availability of affordable used EVs might prompt some consumers to purchase an EV sooner than they originally planned.

• Consideration of Total Cost of Ownership: Buyers of used EVs are likely to focus on the long-term savings from lower fuel and maintenance costs, making the overall cost of ownership more attractive.

Implications Across the Ecosystem (For Brands and CPGs, For Retailers, For Consumers): Used EVs Present New Opportunities and Considerations

• For Brands and CPGs:

  • Need to adjust production and marketing strategies to account for the growing used EV market and its impact on new car sales.

  • Opportunity to build brand loyalty among a new segment of EV owners through service and support for used vehicles.

  • Potential to explore new business models related to battery refurbishment and recycling.

• For Retailers:

  • Opportunity to expand inventory and sales volume by actively participating in the used EV market.

  • Need to train sales and service staff on the specifics of electric vehicles, including battery diagnostics and charging infrastructure.

  • Potential to establish partnerships with battery repair and recycling facilities.

• For Consumers:

  • Greater access to electric vehicle technology at more affordable prices.

  • Opportunity to save on fuel and maintenance costs over the long term.

  • Need to be diligent in researching the history and condition of used EVs, particularly battery health.

Strategic Forecast: Used EVs Will Be Key to Mass Adoption, Despite Policy Uncertainties

• The used EV market is projected to continue its significant growth trajectory in the coming years, becoming a cornerstone of overall EV adoption.

• Despite potential changes in government incentives, the fundamental affordability of used EVs compared to new models will likely sustain demand.

• Technological advancements in battery technology and increased data transparency regarding battery health will further build consumer confidence in used EVs.

• The automotive industry will increasingly focus on the entire lifecycle of electric vehicles, including the used market and end-of-life battery management.

• The availability of a robust used EV market will play a crucial role in making electric transportation accessible to a wider range of income levels and accelerate the transition to a sustainable transportation system.

Areas of innovation (implied by article) : Battery Health Diagnostics and Reporting, Refurbishment and Recycling Programs, Financing Options for Used EVs, Consumer Education Resources, Optimized Lease Return and Resale Platforms

• Battery Health Diagnostics and Reporting: Developing reliable and transparent methods for assessing and reporting the condition of used EV batteries to build consumer confidence.

• Refurbishment and Recycling Programs: Expanding capabilities for refurbishing and recycling EV batteries to reduce waste and lower the cost of used EVs.

• Financing Options for Used EVs: Creating tailored financing products that address the specific needs and price points of used EV buyers.

• Consumer Education Resources: Providing clear and accessible information to consumers about the benefits and considerations of purchasing a used EV, including charging, maintenance, and battery life.

• Optimized Lease Return and Resale Platforms: Developing efficient platforms and processes for handling the return of leased EVs and their subsequent resale into the used market.

Final Thought (summary): The Maturing Used EV Market Holds the Key to Democratizing Electric Mobility for a Broader Audience

The anticipated surge of used electric vehicles hitting the market in the coming years represents a transformative moment for the EV industry. By offering a more affordable pathway to electric vehicle ownership, this trend has the potential to democratize electric mobility, making it accessible to a wider range of consumers and significantly accelerating the transition to a sustainable transportation future. While policy changes could introduce some uncertainty, the fundamental economic appeal of used EVs and the growing consumer awareness of their benefits suggest that this market segment will play a crucial role in driving the next wave of EV adoption, ultimately contributing to a greener and more environmentally conscious society.

Source: https://www.axios.com/2025/07/02/electric-vehicles-leases-tesla-ira