Report: Auto Finance Departments Worried About Losing Billions On Used EVs

Automakers are apparently worried about losing billions of dollars thanks to the steep deprecation curve on all-electric vehicles. The industry expected them to be worth significantly more and are reportedly growing extremely concerned as demand remains low while leased EVs come back to dealerships.

At the core of this issue is everyone’s inability to correctly predict the future. Automakers and government regulators pushed aggressively for all-electric vehicles to supplant combustion models, seeing limited success in the process.

Finance departments likewise leased electric vehicles at higher rates while the EV tax credits were still in effect. Federal funding incentivized more people to purchase the vehicle while also giving automakers some wiggle room on MSRPs — which is honestly pretty scummy.

However, the budgetary chickens have come home to roost. According to Automotive News, those higher two-to-three-year leases normalized in 2022 have been coming back to dealerships and aren’t worth nearly as much as the captive lenders would have liked them to be.

Basically, the industry priced EVs too high and built too many. This resulted in electric models deprecating significantly faster than combustion-driven counterparts. It also means that there are a growing number of EVs on the secondhand market that aren’t worth very much.

Most analysts will peg EVs losing about 60 percent of their value within the first 5 years, compared to combustion models losing about 40 percent over the same timeframe. But it needs to be said that the difference between them is even greater during the first 3 years — which is the typical length of a new vehicle lease.

This has been a mixed bag for people looking to buy electric vehicles. Some have been able to negotiate massive discounts on brand-new models that dealerships couldn’t move. But others may have purchased something near MSRP, only to learn that the car’s secondhand value would be depressingly meager due to the steep deprecation curve.

For lenders, this is bad because they might have been able to lease an EV to someone at a price that would have more closely reflected the initial MSRP. However, those models are now back on the lot and the only option is to hope that someone comes along who wants to purchase a used electric model at a price that’s probably a lot lower than the finance department would have liked.

From Automotive News:

That leaves the captive finance companies with a dilemma: If they price vehicles at original resale estimates, they will be too expensive for the market. But dropping prices cuts profits.

Automotive News’ analyzed 2025 EV registration figures from S&P Global Mobility and Cox Automotive average leasing rates by brand to estimate which automakers face the highest losses in the coming years from off-lease EVs. The costs could be in the billions.

As captive lenders look to mitigate future losses, they are turning to dealer partners and wholesale auctions to help them resell off-lease EVs. Dealers are cautiously interested in buying these vehicles for their used lots and plan to test the waters of the used-EV market. Wholesale auctions also have invested millions to adapt their operations for more EVs going through their lanes.

It’s hard to have any sympathy for these finance departments. Automakers have been letting them steer the ship for years as we’ve watched cars become less user friendly and more expensive to own. With a few notable exceptions, the automotive industry has spent an entire generation doing whatever it could to maximize profitability at the expense of literally everything else. Reliability, usability, affordability, brand reputation, customer satisfaction and just about everything else was sacrificed on the altar of “shareholder value” and maximizing profit margins.

With the above in mind, it’s hard to envision a scenario where the public feels bad for automotive manufacturers. But that will not prevent them from coming to the government to beg for help. Despite nearly every automaker in the world spending the last ten years acting giddy about the prospect of pivoting their entire lineup to all-electric vehicles, they’ll come to the government and gripe about how regulations forced them to build EVs in the first place. They’ll ignore all the years of taxpayer-backed funding that helped fund their electrified aspirations and beg for a bailout.

Frankly, the government probably should be considered culpable for just how mismanaged the automotive industry has gotten. EV subsidization, misguided regulations, emergency financial bailouts, wasteful programs like “Cash for Clunkers” and other missteps have clearly contributed to the current state of the industry. However, the automakers themselves pushed for a lot of the above — operating under the assumption that it would make a bunch of money. Unfortunately for them, that doesn’t appear to be the case anymore.

[Images: allnewalbert/Shutterstock.com; Sergii Kozii/Shutterstock.com; Around the World Photos/Shutterstock.com]

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