Skip to content
Open the Data Dash
Close
Hyperdrive

Tesla Model 3 Breaks Mold by Retaining Value in Used Market

Updated on

Tesla Model 3 Breaks Mold by Retaining Value in Used Market

  • The sedan is being snapped up quickly on car-shopping sites
  • ALG forecasts major jump in residual values for premium EVs
Tesla Inc.’s Model 3.
Tesla Inc.’s Model 3. Source: Tesla Inc.
Tesla Inc.’s Model 3.
Source: Tesla Inc.

It’s early, but there are signs Tesla Inc.’s Model 3 could be as exceptional in the used market as it has been in the new-car world.

The sedan has sold at volumes no other electric vehicle has come close to reaching, turning Tesla into the most valuable auto company in the world. But it takes a while to see how well a car performs on the used market -- owners typically hold onto their wheels for at least a few years.

Explore dynamic updates of the earth’s key data points
Open the Data Dash
Close

Car-shopping websites still have small samples sizes to work with for how used Model 3s are doing, but so far the data are encouraging. The sedans are selling quickly once owners list them for sale, and TrueCar Inc.’s ALG unit sees their presence in the premium-electric vehicle market having a dramatic impact on the segment.

“If you’re looking for a used Audi A4, you have other comparable options like the BMW 3 Series, Mercedes-Benz C-Class and Lexus IS,” said George Augustaitis, director of automotive industry and economic analysis at CarGurus Inc. “If you’re looking for a Model 3, there’s no substitute.”

Fast Wheels

Used Tesla Model 3s sell quickly on iSeeCars.com

Source: iSeeCars.com

Note: Site analyzed 4.4 million new- and used-car sales from March through June.

Early plug-in models such as the Nissan Leaf and BMW i3 depreciated much faster than conventional cars. Demand was low, driving range was limited and battery degradation was a concern.

Low residual value -- the amount cars are worth after a few years of ownership -- was one of many factors holding back wider adoption of EVs. But ALG’s outlook is for vast improvement. The 64-year-old company formerly known as Automotive Lease Guide forecasts that the premium electric-car segment will go from currently having the lowest auction-value retention after three years to the fourth-highest 36 months from now.

relates to Tesla Model 3 Breaks Mold by Retaining Value in Used Market

Tesla’s Model 3.

Source: Tesla Inc.

Used Model 3s took just 29.3 days to sell on average from March through June, according to iSeeCars.com. The Tesla sedan was the fastest-selling used car the vehicle-listing aggregator tracked during that span.

Tesla’s ability to deliver over-the-air software updates are likely helping its cause.

“You’ll frequently hear people say, ‘The car I own is better than the one I purchased,’” said Gene Munster, a managing partner at venture capital firm Loup Ventures.

Tesla started production of the Model 3 in the second half of 2017, but it took the company months to ramp up output. It also didn’t begin offering leases until April 2019.

“There still aren’t a lot of Teslas in the aftermarket,” said George Chamoun, chief executive officer of ACV Auctions. Some independent used-car dealers don’t sell them, but he expects this to change.

ACV sold triple the number of Teslas in July compared with the beginning of this year, and the average number of bids for the cars are 20% more than for the rest of the company’s inventory.

“Demand is outpacing the limited supply,” CarGurus’ Augustaitis said of the Model 3. “Its range and tech and price point are still unique.”

(Updates with timing of Tesla offering Model 3 leases in the 10th paragraph.)