You’re Extended Forecast: Flash Flooding Of Used EVs

If you have an electric car that is not leased, and you are thinking of getting rid of it, drop what you are doing and do it now. There is a wave of electric vehicles set to return to the market in 2026 as leases signed during the industry’s early-decade boom begin to expire, creating both financial pressure for automakers and a potential opportunity for dealers, according to an analysis published by GoodCarBadCar.

The report says more than 300,000 electric vehicles are expected to come off lease in 2026, a sharp increase from the roughly 123,000 projected to return in 2025. The surge reflects the heavy leasing activity that took place in 2022 and 2023, when federal tax credits, manufacturer incentives and strong consumer enthusiasm pushed many buyers into three and four-year lease agreements. Those contracts are now reaching maturity in a very different market environment.

At the time many of those leases were written, the outlook for EV demand and resale values appeared strong. Leasing calculations were typically based on the assumption that vehicles would retain about half their original value after three years. A $50,000 electric vehicle, for example, was expected to be worth roughly $25,000 at the end of the lease term.

That assumption is now proving optimistic. According to analysis cited in the report from NETSOL, many EVs are actually retaining closer to 35% to 40% of their original value. That creates a 10- to 15-percentage-point gap between what finance arms expected and what the vehicles are worth in the current market.

The difference translates into real financial losses. Captive finance companies — the lending divisions owned by automakers — are absorbing the shortfall when returned vehicles are worth less than projected. In many cases, the report notes, more vehicles are being sent to auction rather than remarketed through retail channels, pushing losses back onto the parent company’s balance sheet.

Several factors have contributed to the shift. The expiration of the $7,500 federal EV tax credit, slower-than-expected growth in demand for electric vehicles, and a used-vehicle market with increasing inventory have all combined to reduce resale values. As the number of returning vehicles rises, that pressure is expected to continue.

Data cited in the report shows the scale of the change. While broader used-vehicle values remain relatively firm — with the Manheim Used Vehicle Value Index reaching 210.5 in January, its highest level since September 2023 — that strength has been driven largely by gasoline-powered vehicles. EV-specific wholesale values have faced downward pressure, and the arrival of hundreds of thousands of additional units is likely to intensify that trend. I talk about this on the Car Pro Show after monitoring the Manheim Auction every Wednesday.

Despite the financial challenges for manufacturers and lenders, the report suggests the influx of off-lease vehicles could present a significant opportunity for dealers. For stores already operating in an environment of lower showroom traffic, the returning vehicles represent a large supply of relatively affordable electric inventory.

A used EV priced at 35% to 40% of its original MSRP offers a different value proposition than a new model at full price. That lower entry point could appeal to consumers who previously considered EVs out of reach, particularly if dealers are prepared to address questions about battery life, range, and ownership costs.

The report notes that success will depend on preparation. Dealers that invest in understanding EV reconditioning, battery condition assessment and customer education may be better positioned to take advantage of the incoming inventory. For them, the large number of lease returns may represent a supply opportunity rather than a disruption.

The situation is already playing out in other markets. The analysis points to auction data in Europe showing similar dynamics, with lower resale values creating financial pressure as electric vehicles cycle back into the used market.

Ultimately, the coming wave of lease maturities is the result of decisions made during the industry’s most optimistic period for EV growth. Leasing activity surged in 2022 and 2023, driven by incentives and enthusiasm, and those vehicles are now returning at a time when market conditions have changed.

Whether the influx becomes a burden or a benefit may depend largely on how the industry responds. For finance arms and automakers, lower-than-expected residual values represent a financial hit. For dealers willing to adapt, the same vehicles could provide a significant source of inventory at prices that make electric vehicles more accessible to a wider audience.

For people who are thinking of going electric, odds are good you’ll be able to find a bargain on a used one very soon. Any time the market is flooded with anything, prices drop. Great for buyers, but not good news if you have one that was not leased.

Finally, this is exactly why I have been telling you for many years that if you go electric: LEASE IT. Finance companies are looking at massive losses here. Better than you taking that loss, eh?