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Residual Values On Battery-Electric Cars: KBB Is Not Optimistic

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2013 Ford Focus Electric

2013 Ford Focus Electric

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The year 2014 looks like it could be a very good one for plug-in vehicles, with new launches and expected sales increases heading the list of reasons to cheer.

But it wouldn't be a new year without a few doom and gloom predictions, and the latest come from Kelly Blue Book's figures for electric car residual values.

They aren't good, in short. But the figures do carry a few caveats--and it isn't as bad as things first seem.

As The Car Connection reports, KBB predicts some staggering losses for electric car owners after the first five years of ownership.

Among them is a residual value of just 28 percent for the Chevrolet Spark Electric, coming in at under $8,000 from a new price of $28,305. A Focus Electric would drop even more, worth just $7,200 from a starting price of nearly $36,000, and less than its gasoline equivalent.

Worst of all is the Nissan Leaf--after five years, KBB predicts a value of just $5,355--15 percent of its original value.

However, you'll note that none of the above prices take into account the $7,500 Federal tax credit that many buyers are eligible for.

While this isn't immediately available to buyers at time of purchase--although it is often used to cut the total sum of a lease--it's applicable when the buyer files their taxes for the next year and does trim the price somewhat.

There are also several regional and state incentives available, depending on where you live. It isn't unheard of for some buyers to save more than $10,000 on the MSRP of an electric car, and while this wouldn't offset all the depreciation predicted by KBB, it goes a long way toward mitigating it.

For the Chevy Spark, including the tax credit revises the residual value from 28 percent to 38 percent--only 2 percent away from the class average. The Focus Electric is still poor retaining only a quarter of its original value, but that's better than a fifth. The Leaf improves too.

It's worth noting that many buyers also lease these vehicles, where incentives are taken into account at time of purchase--and where pricing often side-steps depreciation woes (though does contribute to the depreciation at the same time).

2014 Chevrolet Volt

2014 Chevrolet Volt

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KBB's data does show that plug-in hybrids and range-extended electric cars hold their value very well though, while Tesla Motors bases its lease prices on guarantee of high resale value, so its Model S should depreciate fairly slowly for the class.

Then there's lower running cost, which significantly offsets the cost of low residual values: 15,000 miles in an electric Spark costs around a third in electric charges the fuel cost of a gasoline Spark, at $515 versus around $1,500.

And finally there's the potential for technology improvements--low residual values partly hinge on expectations of dying battery packs as the cars age, but more affordable replacements as battery costs decline could make such changes much less of an issue for future used buyers.

In the end, buying an electric car isn't something to shy away from based solely on residual value predictions.

For many buyers, the low day-to-day running costs and low environmental impact of running an EV will be more than enough to push thoughts of low resale to the back of your head.

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