A peer-reviewed study from the University of Michigan found that three-year-old battery electric vehicles (BEVs) deliver the lowest seven-year total cost of ownership (TCO) of any powertrain in the U.S.

The researchers analyzed roughly 260,000 used listings across multiple vehicle classes and 17 cities, modeling purchase price, depreciation, financing, insurance, maintenance, energy costs, taxes, and resale value. In most scenarios, used BEVs came out cheapest to own over seven years.

Source: Environmental Research Letters via TechXplore (Jan 27, 2026)

Shout out to Bill Pierce for sharing the study on LinkedIn!

The key mechanism is early depreciation. BEVs depreciate more sharply in the first three years than ICE or hybrid vehicles, lowering acquisition cost for second owners. After that, depreciation curves look more comparable. The study does note that out-of-warranty battery replacement materially changes the math, which makes warranty remaining a critical variable.

Now place that into the current Q1 2026 wholesale environment.

Cox Automotive’s mid-February Manheim Used Vehicle Value Index shows:

Source: Cox Automotive (Feb 18, 2026)

Translation: wholesale demand is strong heading into spring, tax refunds are supporting retail, and inventory is being absorbed. This is not a distressed market. Good units are getting chased.

Importantly, EV values have firmed from January, not softened. That suggests the “EV discount” window still exists but is tightening in certain lanes.

Layer in another dynamic: increased EV lease returns in 2026 are expected to expand used EV supply. Car and Driver notes that rising off-lease EV volume could materially increase auction activity this year.

Source: Car and Driver (Jan 19, 2026)

Put those together and the picture becomes clearer:

The opportunity is stock where depreciation has already done the heavy lifting, and where ownership math now favors the second buyer.

That’s the window Q1 dealers are operating inside.

So, what do we do with this information today?

Read on.

Spring demand is here. Buy clean. Buy fast. Price tight.

Target:

Avoid:

If you can’t explain the warranty in one minute, don’t stock it.

Use these lines:

Keep it financial. Not philosophical.

When retention is expensive, buy utility at a discount.

Ask:

If it hits two of three and depreciates faster than Toyota, you have room.

Before you bid:

If any answer is weak, price the risk or pass.

Depreciation created the opportunity.
Spring demand will decide who catches it.