War’s Impact on Oil Prices Changes Interest in Used EV Market

Jessica Caldwell has been weighing in on Russia’s invasion of Ukraine for the past few weeks.

That attack in February 2022 caused an oil price shock that sent gasoline prices soaring and prompted many consumers to consider electric vehicles.

In some ways, it is a global event that is most comparable to the current US and Israeli war against Iran for its impact on fuel prices and the initial increase in interest in EVs, according to Caldwell, head of Insights for Edmunds.

“We have a model,” Caldwell said, pointing to similar uncertainties arising from the country’s conflicts in the early stages of two events with no clear end time.

How global conflict is changing fuel prices – and buying cars

The expectation before the United States and Israel hit Iran late last month was that the influx of electric rental cars would lead to good deals on used EVs this year. Edmunds projects that the share of battery electric vehicles is expected to grow from 2% of rental returns in 2025 to 8% in 2026.

Caldwell said that good deals are possible, and the cars that will be rented will be better than four years ago when the electricity was difficult.

“We’re looking at cars that were bought in 2023. Those EVs are very good. We’re not really talking about 10-year-old compliance EVs,” he said, referring to vehicles designed to meet the demands of the law.

By 2022, those leased cars represented the first crop of EVs that promised less range and technology.

But many buyers see value there and choose to buy their rental properties when they can, she said. Now, with low used EV prices and residual values ​​set at different expectations, statistics mean that lease owners are more likely to return those vehicles when the deal is up.

That means more used EVs will be entering the market.

Consumer consideration of EVs and hybrids jumped from 20.7% to 22.4% in an Edmunds.com automotive survey from the week of March 2, days after the start of the US-Iran war. As of March 13, the national average for a gallon of regular gas was $3.63, while California hit $5.42, according to AAA. Last month, that national average price was $2.94.

Interest in EVs and hybrids at Edmunds.com also increased almost immediately following the 2022 Russian invasion, according to Edmunds, “rising from 17.5% of all auto research activity in February to 25.1% in March as gasoline prices rose nationwide.”

A surge in EV sales followed, growing year-over-year.

EVs are still a niche market in the US

Despite any similarities, however, much has changed in those intervening four years to cloud the picture, and EVs remain a niche market in the United States, according to Caldwell.

Federal EV tax credits are gone, interest rates have risen and automakers have deviated from their EV policies of the past. On Thursday, March 14, Honda announced that it will cancel the development of three EVs scheduled for production in North America.

And the continued expansion of higher gas prices would be necessary to slow down a major shift in consumer choice from gas power to full-electric power, although, as Caldwell notes, gas prices “have a psychological effect beyond human control.”

The picture becomes more complicated as higher fuel prices can lower interest rates and prices for less fuel efficient cars while increasing interest rates and prices for more efficient cars.

Not every seller is convinced

Not everyone sees EVs the same way, however.

Eric Frehsee, president of The Tamaroff Group, which has locations in Southfield and Roseville and sells Nissan, Acura, Honda and Kia vehicles, wasn’t thinking about the EV deals that have worked when asked about the impact of more EVs for lease.

He noted that EVs have had “good circulation” at first by early adopters, and believes there is more to be done in the EV space. But he said that consumer demand is pushed by the government.

He said: “You see a lot of people being abandoned in the market as it relates” to electric vehicles.

EVs, new and used, represent only about 2% of his business.

“We don’t see a lot of pre-owned EVs in our market. If you find one, yes, it’s a good value because … some of these vehicles are 60% off what they were new.”

But he cautioned that there are many unknowns, such as what happens when you buy a used EV and what happens to the battery if it’s out of warranty.

“It’s kind of buyer beware,” he said.

Frehsee noted that while he doesn’t stock many used EVs, “if someone comes to my place looking for a (Honda) CR-V, I have 30 pre-owned CR-Vs. I have every color, everything, with all different mileages and prices,” he said of the compact SUV with gas and hybrid options.

Eric D. Lawrence is a senior auto reporter for the Detroit Free Press. Post your tips and suggestions about cool car stuff [email protected]. Become a subscriber. Submit a letter to the editor at freep.com/letters.

This article first appeared in the Detroit Free Press: War’s impact on oil prices is changing interest in the used EV market.

Reporting by Eric D. Lawrence, Detroit Free Press / Detroit Free Press

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