Will a Cheaper Model Y Kill the Used Tesla Market?

When it comes to buying an electric vehicle—as opposed to leasing one—your best bet is often a used version, as the prices are much lower. This is thanks in part to the staggering costs of new vehicles in general and EVs specifically, which can be on the higher side, tax credits or not, and because EVs can suffer somewhat brutal depreciation. Everyone wants cheaper new EVs, and Tesla in particular has been promising a more affordable model for years—until recently it revealed what that cheaper Tesla will look like: A more basic Model Y SUV.

The idea of a new Tesla Model Y coming in at well under $40,000 is an intriguing proposition, as that would put it within the same price market at most new ICE SUVs of the same general size. But what effect would that have on the already battered used Tesla market? Could it drive prices lower due to falling demand for a used Tesla thanks to a new one being affordable? Or could it have zero impact at all?

First, why should a cheap Tesla Model Y exist? When looking at the average price of a new ICE-powered car versus a new EV and versus a used EV, you’ll be better able to find a used EV for under $25,000 while you’ll be lucky to find a used combustion-powered vehicle for under $20,000 or a new vehicle under $50,000; looking for a new EV for under $60,000? That might be tough, too, according to Recurrent Auto. This alone is why a $30,000 to $40,000 new EV is a compelling argument.

When looking at the current state of the market, EV purchases have had a steady period of new vehicle sales and registrations. By the end of 2024, there were just over 292 million new cars on the road and 1.4 percent were electric vehicles according to Experian Automotive. At the same time, there were 373,890 used EVs driving around the U.S. with new owners behind the wheel, according to Edmunds. This is where the question of what price pressures, if any, a cheaper new EV might have on the used EV market comes into play—let's focus on the Tesla example.

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While Tesla is still leading the market on registrations of all EVs thus far in 2025 at 42.5 percent, it is down by 11 to 12 percentage points year over year, according to Automotive News. This includes both new and used Teslas. Comparing 2024 and 2025, used Tesla pricing has tanked, too. From a $33,070 high, the average price of a used Tesla has plummeted to just under $28,000; and since that average also includes used Cybertrucks, it’s not a great outlook. It also widens the gap between today's used Teslas and the least-expensive brand-new ones; a sub-$40,000 Model Y that closes that gap again could incentivize some buyers to spring for the new Tesla instead of a used one. That, of course, could lessen demand for used Teslas further, lowering their values even more.

But on the other hand, some shoppers who might otherwise have been interested in buying a new Tesla might seek out used examples for some... let's call it cover. There's no avoiding the polarizing foray into government and politics of Tesla CEO Elon Musk. It's why some Tesla owners have taken to affixing stickers to their cars excusing their purchase ("I bought this before Elon went crazy" is a common one). Buying a used Tesla, the thinking goes for some, allows them to get a right-priced, solid EV backed by a nationwide charging network without directly supporting the company's bottom line. There is more evidence, however, that existing Tesla owners have been offloading their Teslas—flooding the used market—out of dissatisfaction with Musk's behavior or not wanting to be perceived as holding certain political views.

Owners have been reported saying they have buyer’s remorse (to CNN) after everything that went down with Musk's cozying up to President Trump, and looking at the pricing tracker on CarGurus, there is an undeniable link in the timing of Musk’s first interactions with the Trump campaign and the decline in value of used Teslas. Equally so between his time at the Department of Government Efficiency (DOGE) and the steeper decline in price that has continued to track mostly downward. Used Tesla values have also been trending counter to all used vehicle pricing trends since 2024.

This all being somewhat speculative, it's not guaranteed what the impact of a sub-$40,000 Tesla Model Y might be on the used Tesla market. Most likely, though, its effect might be minimal. Past price fluctuations of entry-level Teslas have impacted used Tesla values, but mostly for those purchased (for more money) just before price drops, but given the larger trend downward of used Tesla prices already, a cheaper new Model Y isn't likely to change that trajectory, which has more to do with the brand's public image (and that of its CEO) these days. Given how Tesla's board recently gave Musk $29 billion worth of shares as part of a pay package approved in August, according to CNBC, it seems Musk won’t be going anywhere for some time—so don't look for those decreasing used Tesla values to improve anytime soon.