The EV Depreciation Penalty: What the Number Actually Measures

The most repeated objection to buying an electric car is that it loses value faster than a petrol one. A study published on 30 September by Transport & Environment (T&E), the European clean transport group, argues that most of that penalty is an effect of how depreciation is measured rather than a real loss, and that correcting for it shrinks the gap by 80%.

The headline gap

T&E looked at 2025 used car transactions in the European Union's four largest markets, Germany, France, Italy and Spain, using data from the vehicle analytics firm Autovista. On the industry's standard measure, that data shows a 12.9 percentage point gap between the share of its original price a used combustion car retains and the share a used electric car retains. That is the figure quoted whenever someone says electric cars hold their value badly, and it is treated as a settled fact in a lot of conversations about whether an electric car makes financial sense.

Where the difference goes

T&E identifies five variables the standard calculation omits: purchase subsidies for electric cars, acquisition taxes on fossil fuel cars, inflation, fleet composition, and the stabilisation of new electric prices. It says four of those together cut the 12.9 point gap by 5.2 points, and the fifth, the fall in new electric prices, takes off a further 5.1 points. The result, on T&E's numbers, is a gap of 2.6 percentage points.

The report itself expresses the same result in two stages. Adjusting for inflation, purchase subsidies and acquisition taxes brings the 2025 gap from 12.9 points to 7.7. Comparing used electric cars with the price of a new one today, rather than with what the first owner paid, brings it to 2.6. The mechanism in that second step is worth sitting with: when a manufacturer cuts the price of a new car, every used example reprices downward on the same day, even though nothing about the used car has changed.

One number, two questions

The 7.7 and the 2.6 answer different questions, and running them together is the easiest mistake to make with this study. The 7.7 figure is the gap once you stop comparing a subsidised purchase price with an unsubsidised one and correct for the money itself losing value. The 2.6 figure asks something narrower: how much of a used electric car's apparent loss is simply that a new one now costs less than it did when the used car was sold.

The volatility has gone

Two further findings cut against the folk version of the story. Across the four markets, the volatility of electric depreciation matched that of fossil fuel cars in both halves of 2025, which is to say used electric values are no longer the unpredictable line in the market. The report records the decline in electric residual values tailing off from 2.3 points in the second half of 2024 to 0.7 points in the second half of 2025, a gentler slide than petrol's.

What it means for UK buyers and leases

Depreciation assumptions are not academic. They are an input that sets PCP monthlies and lease rates, so a figure that overstates how much an electric car loses makes electric deals look worse value than they are. That is T&E's argument, and it is worth holding as their finding rather than settled fact: T&E is an advocacy group and the study is built to make a policy case for binding fleet electrification targets. The transaction data underneath it is the factual base, and the arithmetic on top of it is theirs.

For a UK reader the direction is already familiar. The AA's EV Readiness Index, published in September, puts used electric cars at 1% more expensive than comparable petrol models, down from 3% the quarter before, and our own reading of the used EV parity data reached the same conclusion from another angle. Auto Trader's index separately recorded the first annual rise in used electric prices since December 2022 in June, a turn we tracked in our depreciation piece. A gap that is genuinely closing and a gap that has been overstated both point the same way for a buyer.

The industry asks

T&E wants leasing firms to offer longer second-hand electric lease terms, and carmakers to standardise battery health certificates and approved used schemes. The evidence that certification helps is modest but real. BCA, Europe's largest car remarketer, found that certified used EVs achieved around 1.4% higher resale value and sold 2.7 days faster on average, and the leasing firm Arval has issued more than 30,000 battery health certificates across the UK and EU.

Demand is moving as well. Used electric values in Ireland rose almost twice as fast as petrol and diesel year on year in July 2026, and used battery electric sales in Germany were up 64% year on year over the first seven months of 2026, both figures drawn from T&E's report.

The honest read

None of this makes electric depreciation disappear. Electric cars still shed more value in cash terms than petrol cars of the same age, and the second-hand market has real reasons for caution, from charging access to battery uncertainty. What the T&E study does is separate the part of the gap that reflects a genuine loss from the part created by comparing the wrong two numbers. For a UK buyer weighing up a used electric car, the sensible response is the one we keep returning to: check the battery and the service history, and treat a headline depreciation figure with the same scepticism you would apply to any other number in a car advert.