How EVs Depreciate (And Why It Matters for Your Loan)
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EV depreciation follows a different pattern from gas cars, steeper in the first two years, then stabilizes. Understanding that pattern matters for buyers because it directly affects your total cost of ownership, and whether buying new or used makes more financial sense.
The EV Depreciation Pattern
Year 1-2: Steepest depreciation. Historically new EVs lose 20-30% of value on average, driven by new model releases, price cuts, and the transition from new to used.
Year 3-5: Depreciation slows significantly. A well-maintained Tesla Model 3 or Model Y with normal mileage tends to hold 60-75% of its value at three years and 50-60% at five years.
Year 5+: More gradual decline, heavily influenced by mileage, battery health, and whether newer models have made significant feature jumps.
Tesla's 2023 price cuts caused an unusual secondary depreciation event, which rippled through the entire EV market as other manufacturers followed. Buyers who purchased in 2021–2022 saw used values drop when new-car prices fell 15-20%. That shock is largely behind us. 2022–2024 used Tesla values have stabilized.
Tesla vs. Other EVs
| Model | Est. 3-Year Retention |
|---|---|
| Tesla Model Y Long Range | ~65–70% |
| Tesla Model 3 Long Range | ~60–68% |
| Rivian R1S | ~55–65% |
| Hyundai IONIQ 5 | ~55–62% |
| Chevy Bolt | ~40–50% |
Teslas retain value better than most EVs due to brand strength, Supercharger access, and strong over-the-air software updates. The Bolt has depreciated more sharply, creating value buying opportunities on the used market.
Why Depreciation Matters for Your Loan
Being underwater. You're "underwater" when you owe more than the car is currently worth. Most common in the first two years of a new-car loan with little or no down payment. Not a crisis on its own, but it becomes a problem if you need to sell, trade, or the car is totaled.
New vs. Used: How Depreciation Changes the Math
The sharpest depreciation happens in the first two years. Buying a used EV that has already absorbed those two years means you're buying into a flatter part of the depreciation curve.
A 2022 Model Y Long Range that originally sold for $55,000 now trades around $29,000-$32,000. The first buyer absorbed ~$23,000-$26,000 in depreciation. The second buyer starts at a lower basis with gentler remaining depreciation.
For buyers sensitive to monthly payment: the used market in 2026 is well-supplied and growing, buying a 2022-2023 EV avoids the steepest depreciation exposure while financing at rates marginally higher than new financing.
What Affects EV Residual Value Most
Supply and Demand. Many new EVs were leased or sold with tax credits, the market adjusted to discount the new pricing faster in the used market, and continues to do so.
Mileage. Standard depreciation driver.
Battery health. A Tesla with 90%+ battery health at 80,000 miles commands a premium. Measurable with third-party tools.
Accident history. Structural repair history can dramatically reduces value compared to those with a clean history.
One Last Thing
EV depreciation is front-loaded, stabilizing, and increasingly predictable. For buyers who understand the curve, it creates real opportunities, particularly on used EVs that are a few model years old and have absorbed the steepest depreciation already.
Check your EV financing rate with Tenet — two minutes, no credit impact.
Rates as of April 2026, subject to change. APR range 5.25%–18.99%; regional rates as low as 4.40% through select credit union partners. Minimum loan balance $10,000. Tenet Energy Inc., NMLS #2262929.