How About a Cheap Used Car? It's Only Two Years Old, but There's a Catch...

Hertz is unloading 30,000 used cars on the market. The mileage might not be the lowest, but they're all 2022 or newer and lovingly maintained by the company's team of professional mechanics. While most used-car prices remain sky-high, the prices on these gently used babies is shockingly low.

There's just one catch: they're all Teslas.

Hertz, you might have read, came out of bankruptcy a couple of years ago and placed a big bet on electric vehicles. The rental firm had originally planned to buy no fewer than 100,000 EVs for their fleet but ended up with quite a bit fewer at 30,000 — almost all of them Teslas.

Now Hertz is selling them all for the simple reason that people didn't want to rent them. The company bought those Teslas when prices were high, and now they have to sell them at fire sale prices in a market already saturated with new EVs selling at lower prices and bigger discounts than ever.

What an ignominious way to emerge from bankruptcy, right?

While the deals may look tempting — and a used EV sold for $24,999 or less can get buyers a $4,000 tax credit — used EVs come with a bigger caveat emptor than the typical used car.

First, there's the depreciation. iSeeCars reported in January that, on average, "electric cars have a five-year depreciation rate of 49.1%... compared to an overall industry average of a 38.8% five-year depreciation rate." Executive analyst Karl Brauer added, "This pattern will continue until electric vehicles don't require heavy incentives to sell and consumers gain confidence in their long-term ownership costs."

Then there are the little problems that used cars can have — that turn into big problems with electrics.

New York magazine told the story this week of one of those Hertz buyers, Bijay Pandey of Texas. He got a screaming deal on a 2022 Long Range Model 3 with 70,000 miles that ended up costing him about $25,000. They're almost $50k new.  

But almost immediately, there were problems. After getting a temporary title, he found the car wasn’t reading voltage correctly. Soon, a body shop found a quarter-size hole in the undercarriage he hadn’t seen before, which led to revelations of deeper issues inside. “The high-voltage battery pack is damaged and could cause extreme safety concerns,” a Tesla technician texted him. Because the hole was “exterior damage,” it wasn’t covered by the warranty, which meant a $13,078.58 repair bill.

Ouch.

There's an old joke that there's nothing more expensive than a cheap BMW, but they might have to rewrite it for EVs.

To their credit, Hertz was willing to work with Pandey and swap out his damaged Tesla for another one, but the process took two months. And, of course, two $500 car payments for a car he couldn't drive.

Between market saturation and the added risks buyers face with used EVs, Hertz has sold only 10,000 of their 30,000 EVs — and sales have slowed. New CEO Gil West said the sell-off will be "complete by the end of the year." 

But you have to wonder how much more money the company will have to lose in this market to make that happen, and what other little $13,000 "exterior" problems owners might find along the way.

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