Massive EV Lease Returns in 2026 Could Trigger Used EV Price War Buyers Have Been Waiting For

A record wave of electric vehicle lease returns is set to flood the used car market in 2026, creating what analysts are calling an “EV avalanche” that could dramatically reshape pricing dynamics and deliver unprecedented opportunities for budget-conscious buyers.

At least 243,000 EV leases will expire in 2026, with the figure potentially reaching 330,000 vehicles, according to J.D. Power data reported by Autoblog. This represents more than three times the volume of EV lease returns seen in 2025, setting up a supply surge at precisely the moment federal tax credits have vanished from the market.

The timing couldn’t be more significant. These returning vehicles represent the tail end of the “lease loophole” era when federal incentives made leasing EVs more attractive than purchasing, driving lease rates to historic highs. Now those same vehicles are returning to a market fundamentally transformed by the September 30, 2025 expiration of the $7,500 federal tax credit.

Used EV Prices Already Dropping Below Gas Vehicles

The used EV market is already showing signs of the coming shift. Edmunds data shows that used EVs currently average $29,922, approximately $1,100 below the average cost for a comparable gas-powered vehicle. This price advantage marks a significant reversal from just two years ago when used EVs commanded premium pricing due to limited supply.

More importantly, used EVs are moving faster than any other powertrain type. According to Edmunds’ Q3 2025 analysis, electric vehicles sold in an average of 34 days compared to 41 days for the overall used market. Eight of the 20 fastest-selling three-year-old vehicles were EVs, despite limited 2022 model availability.

The question now is what happens when supply triples in 2026. Dealerships already dealing with slower new EV sales following the tax credit expiration will face hundreds of thousands of lease returns requiring remarkably space and remarketing resources.

The Loyalty Gap: Sentiment Versus Reality

While 94% of current EV owners say they will “definitely” or “probably” consider an EV for their next vehicle, according to J.D. Power’s 2025 Electric Vehicle Experience Ownership Study, actual behavior tells a different story. In 2025, only 62% of returning franchise EV lessees actually chose to purchase or lease another EV.

That 32-percentage-point gap between stated intention and actual behavior becomes critical when applied to 243,000 returning leases. If the 2025 pattern holds, roughly 92,000 lessees who could have gone electric again will instead choose gas vehicles or hybrids—adding significantly to dealer used EV inventory challenges.

The disconnect reflects broader market uncertainty. With tax credits gone, EV tax credits expiring, and automakers continuing to prioritize hybrid powertrains, drivers may choose to wait rather than commit to electrification. Current EV market share has dropped to just 6% of new vehicle sales in November 2025, down sharply from 12.9% in September when buyers rushed to secure the expiring tax credit.

Post-Tax Credit Market Reality Sets In

The September 30, 2025 tax credit expiration fundamentally altered EV economics overnight. New EV sales plummeted 24% in October compared to September, exactly as industry analysts predicted. Without the $7,500 federal incentive effectively reducing purchase prices, EVs must now compete purely on operational economics and total cost of ownership.

This creates unusual market dynamics. A three-year-old Tesla Model Y or Chevrolet Bolt returning from lease in 2026 could be priced thousands below a comparable new model, even without factoring in the now-expired tax credit that would have applied to new purchases. For buyers focused purely on price, the value proposition of used EVs becomes increasingly compelling.

Automakers are already responding with aggressive tactics. Tesla eliminated down payment requirements on Model Y leases in mid-November, effectively absorbing roughly $3,000 in upfront costs to maintain competitive lease pricing against the rising tide of used inventory. The move signals recognition that new EV sales must compete not just against gas vehicles, but against their own lease returns.

Dealer Dilemma: Inventory Management in Uncertain Times

Dealerships face a complicated calculus. Vehicle leases written in 2022-2023 assumed EVs would retain roughly 50% of their value after three years. Currently, EVs are retaining only about 40% of their value, creating a gap between expected residual values and actual market prices.

Autoblog reports that leases written during the peak incentive era presumed value retention that no longer exists in today’s market. Every day a vehicle sits unsold on the lot represents depreciation, and with 243,000-330,000 units potentially flooding the market, dealers will face pressure to move inventory quickly.

This dynamic benefits buyers tremendously. Models like the Nissan Leaf, Chevrolet Bolt, and Tesla Model Y—which dominated lease sales in 2022-2023—are expected to be widely available at competitive prices. Battery health concerns, once a major barrier to used EV adoption, have largely been addressed by real-world data showing most EVs retain 80-90% of battery capacity after 36,000 miles.

EVXL’s Take

We’ve been tracking this exact scenario for six months, and watching it unfold feels like witnessing a slow-motion car crash that was entirely predictable. Back in July, we reported that nearly 1 million EVs leased between 2022 and early 2025 would be maturing, with 123,000 returning in 2025 alone and 329,000 in 2026. When Senate Republicans pushed to end the $7,500 tax credit in June 2025, we warned the industry was about to face its moment of truth.

Then came the predicted collapse. October EV sales cratered 24% in a single month after the September 30 tax credit expiration. Within weeks, GM announced layoffs and idled $2 billion in battery plants. The dominoes fell exactly as we said they would.

Now we’re watching the next phase: an artificially created lease return tsunami meeting a market stripped of the subsidies that created those leases in the first place. It’s market correction on a massive scale, and it’s going to be painful for dealers and automakers who bet on sustained government support.

But here’s the silver lining that mainstream coverage misses: this is exactly what the used EV market needed. For years, limited supply and inflated new EV prices kept electric vehicles out of reach for average buyers. The “lease loophole” that boosted new EV sales from 2022-2024 is now about to democratize EV access through a flood of three-year-old vehicles hitting the market at prices gas cars can’t match.

The irony is delicious. Federal subsidies artificially inflated new EV demand through generous lease incentives, creating a bubble that must now deflate without those same subsidies. The 2026 lease returns represent the chickens coming home to roost for an industry that became dependent on government support rather than building products that could compete on pure economics.

For buyers, 2026 could be the year EVs finally become genuinely affordable without requiring taxpayer subsidies to bridge the gap. Models with 250+ miles of range, modern tech features, and known battery health will be available for $20,000-$30,000—a price point that actually competes with used gas vehicles on total cost of ownership.

The EV revolution doesn’t need tax credits to succeed. It needs EVs that make economic sense without them. This market correction, painful as it may be for dealers and automakers, might be exactly what moves the industry from subsidy-dependent to genuinely competitive.

What do you think? Share your thoughts in the comments below.