The used electric vehicle market will see significant growth in late 2026 as a wave of off-lease EVs enters the wholesale market. The latest Manheim Used Vehicle Value Index report, released July 8, indicates that the supply of three-year-old used EVs will increase sharply, changing the segment for dealers in the coming years.
Lease maturities fuel supply glut
This surge in off-lease EVs comes from a rebound in leasing that started in 2023, with most leases lasting 36 months. Jonathan Gregory, senior director of Economic and Industry Insights at Cox Automotive, stated that the supply increase is the main reason for the expected growth in the used EV market.
Lease maturities across all vehicle types will rise to 3 million in 2026, marking a 26.6% increase from 2.4 million in 2025. Growth will accelerate in 2027, reaching an estimated 4.3 million lease maturities, a 42.2% jump from the previous year.
Used EVs will represent a growing portion of these returns. They made up 4.4% of all lease maturities in 2025, a share projected to nearly double to 9.9% in 2026. By 2028, that figure could reach 18.4%, according to Cox’s projections.
Tax credits and residual values shape the market
The Inflation Reduction Act of 2022 helped boost EV leasing through a provision allowing many luxury and foreign-made EVs to qualify for a $7,500 tax credit—only if they were leased. This incentive led to a sharp rise in EV leases, with maturities expected to nearly double in the second half of 2026 compared to the first half.
Cox Automotive estimates that EV lease maturities will almost double in the second half of 2026, to 195,446, vs. 105,653 in the first half of 2026. The numbers increase even more in 2027 and 2028.
Before the pandemic, it was the usual practice for OEMs and their captive finance companies to employ artificially inflated residual values as a form of lease incentive. During the new-car shortage, resale values rose, making it more profitable for lessees to buy out their leases at the lower residual value.
As the market stabilizes, a higher proportion of off-lease EVs are expected to go to auction, instead of being purchased at lease end by the first owner or by the originating dealer. Jeremy Robb, chief economist at Cox Automotive, explained that many off-lease EVs are now worth less than their residual values, pushing more of them into wholesale auctions.
Fuel prices may influence demand
Whether the influx of off-lease EVs will overwhelm the market or meet strong demand depends partly on fuel costs. Robb initially expected disruptions in the Strait of Hormuz to ease, which would lower gas prices. By early July, that expectation had faded.
“Apparently it’s not over yet,” Robb said during the July 8 briefing. “As of this morning, it looks like the deal is off and oil prices are rising in response.”
Higher gas prices could increase demand for used EVs. Retail prices for three-year-old models have risen even as supply grows, showing that fuel costs already affect buyer decisions. “Obviously, with these higher gas prices that we saw through Q1 and at least the most of Q2 also, this has definitely driven some more demand in the used EV market,” Robb said.
The days of artificially inflated residual values are ending. As return rates climb, the wholesale market will handle most of the adjustment—especially for EVs, where the gap between residual values and actual worth remains large.
The Gordie Howe Bridge opening later this month may also affect cross-border vehicle trade, though its impact on used EV pricing remains uncertain.
