September 30, 2025, marked the end of an era. After nearly two decades, federal tax credits for electric vehicles disappeared, leaving dealerships scrambling to adjust. But here’s what nobody saw coming. The used car market is about to get a serious upgrade from all those lease returns flooding back onto lots.
- Federal EV tax credits (up to $7,500 new, $4,000 used) ended September 30, 2025, creating a rush of last-minute purchases
- Used EV sales jumped 40% year-over-year before the deadline, with off-lease vehicles now entering dealership inventories at record levels
- Regional dealers from Midwest markets to coastal cities are receiving trade-ins and lease returns that were originally purchased with federal subsidies
Walk into a dealership today and you’ll see something different than six months ago. Those EV trade-ins everyone rushed to buy before the September deadline? They’re showing up on used lots. The timing makes sense. People who leased electric vehicles three years ago when the Inflation Reduction Act passed are now returning those cars. Dealers get them at auction, price them competitively, and suddenly you’ve got a two-year-old Tesla or Chevy Bolt for thousands less than new.
The numbers tell an interesting story. In August 2025, used electric vehicles sold for an average of $34,700, basically the same as a used gas-powered car. But get this. Those EVs were only two or three years old, while the gas cars were pushing six or seven years. You’re getting a newer vehicle for the same money.
Scott Case, CEO of Recurrent (an EV market research firm), noted that eligible used EVs sold six times faster than similar non-eligible vehicles. The $4,000 federal credit made that much difference. Now that it’s gone, dealers face a new reality. They need to find other ways to move inventory.
September brought chaos to showrooms nationwide. New EV sales climbed 21% compared to the same period last year. Used EV sales did even better, spiking 59% year-over-year in August alone. Buyers wanted that tax credit before it vanished. Car lots from California to Indiana saw record traffic. Even used car lots in Sellersburg, Indiana, reported increased interest in hybrid and electric trade-ins as buyers throughout the region looked for alternatives ahead of the incentive deadline.
But September 30 came and went. October arrived without federal support. What happens now?
Dealers are sitting on roughly 163,000 EVs. That’s a lot of inventory without the $7,500 sweetener that helped close deals. Manufacturers might cut prices to keep things moving. They’ve done it before when vehicles lost eligibility under previous credit programs. Some analysts predict price drops between 10% and 20% on certain models.
The lease return wave just got started. Most EVs leased in 2022 and 2023 are coming off lease this year and next. Used lots will have more electric options than ever. Younger vehicles with lower mileage. Better technology than five years ago. Batteries that hold their charge longer than older models.
Regional markets are handling this shift differently. Ohio and Indiana ranked as the two best states for buying and operating a car in 2025, according to National Business Capital’s analysis. Lower sales taxes, reasonable insurance rates, and competitive used car prices give Midwest buyers an advantage. Meanwhile, Western states like Arizona and California face higher costs across the board.
What about buyers who don’t want full electric? Plug-in hybrids are landing on used lots too. The Ford Escape Hybrid, Toyota RAV4 Hybrid, and Honda Accord Hybrid all offer better fuel economy without range anxiety. These models saw their own rush before the deadline since plug-in hybrids qualified for credits too.
Some states plan to step in. California’s Governor Newsom pledged to restart state-level EV rebates to replace the federal program. Other states might follow. But for most of the country, the subsidy era is over.
Prices on used lots should stabilize as more lease returns arrive. Supply and demand will find their balance. Buyers get access to better technology at lower entry points. Dealers can work with realistic pricing instead of inflated numbers propped up by government checks.
What This Means for Your Next Car Purchase
The federal government’s exit from EV subsidies doesn’t mean electric cars are going anywhere. It changes how they’re priced and sold. If you’re shopping for a used vehicle, the next six months will bring more electric and hybrid options than any previous period. Two and three-year-old EVs with solid battery health and modern features will hit lots at prices that finally compete with traditional vehicles.
For dealers, the challenge is moving inventory without the federal credit as a selling point. They’ll need to focus on total cost of ownership. Lower maintenance, no gas fills, and competitive pricing on newer models all matter now. The market will sort itself out, even without taxpayer dollars tipping the scales.
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