Australians Are Buying EVs in Record Numbers. Here's the Depreciation Trap Hidden in Your Finance Contract.

June 2026: The Biggest Car Sales Month in Australian History

The numbers are staggering. In June 2026, Australians registered 140,058 new vehicles — the highest monthly figure ever recorded in this country. Battery electric vehicles accounted for 23.3 per cent of all sales, up from just 7.6 per cent in June 2025. That's a near-threefold increase in EV market share in just six months. BYD alone sold 18,881 cars in a single month, closing to within 243 units of Toyota — a brand that has led the Australian market for 23 consecutive years.

Australians are making a massive shift. Fuel prices, government incentives, and a flood of affordable Chinese EVs from BYD, Chery, MG and others have combined to push electrification mainstream almost overnight. On paper, it looks like a consumer win. In your finance contract, there may be a very different story.

What Dealers Aren't Telling You About EV Depreciation

Here's the part of the EV conversation that gets suspiciously little airtime in dealership finance offices: electric vehicles — especially Chinese-brand EVs — are depreciating at rates that would make a traditional car buyer's eyes water.

According to industry data, a one-year-old EV in Australia loses an average of 25% of its value, compared to just 11.5% for petrol vehicles and 1.7% for hybrids over the same period. After three years, the average EV retains 60.3% of its value — compared to 92.4% for hybrids.

For some Chinese-brand EVs, the numbers are even more confronting. The MG4 retained just 50 per cent of its resale value after two years. The BYD Atto 3 kept 54 per cent. Analysis from Savvy found that some leading Chinese-manufactured cars dropped in value by upwards of 40% in just over a year. One model — the Chery Tiggo 7 Pro — saw a staggering 42% drop in value in just over a year of being on sale in Australia.

Now ask yourself: what happens when that car is sitting on a standard car loan?

The Finance Problem Nobody Is Talking About

When you take out a standard car loan over five to seven years, the repayment schedule is built on the assumption that the car holds enough value to cover your debt. Slow, steady depreciation — like you see on a Toyota RAV4 or Ford Ranger — makes that relatively safe. Petrol utes from Toyota and Ford are holding on to more than 85 per cent of their showroom value after two years. That's a very different risk profile to an EV dropping 40–50% in the same window.

Here's where it gets financially dangerous. If your EV drops 40% in value in year one or two, but you've only paid down 10–15% of your loan principal (because early repayments are mostly interest), you are deeply underwater. You owe more than the car is worth. That's called negative equity — and it traps you in your loan, forces you to roll the debt into your next car purchase, and means you're paying interest on money you effectively lost.

And it's not a rare edge case. It's a structural feature of how fast-depreciating EVs interact with slow-amortising car loans.

Why Chinese EVs Depreciate So Fast — And Why It May Continue

The depreciation pressure on Chinese EVs isn't random — it has specific, ongoing causes that aren't going away soon.

• Aggressive new-car price cuts. When BYD or MG slash the price of a new model, every used version of that car loses value overnight. Buyers won't pay $38,000 for a two-year-old EV when a brand new one with better tech costs $34,990. BYD reduced new-car pricing across several models in 2024 and into 2025, and when new-car prices fall, the used-car market adjusts within months.
• Technology obsolescence. A 2022 EV that felt cutting-edge now has a 2025 replacement with noticeably better range, faster charging, and more refined software. Buyers know this, and it's reflected in what they're willing to pay for older tech.
• Battery anxiety. Fear of battery degradation continues to discount EV values, even where real-world data suggests modern liquid-cooled EVs hold up well. Used EV prices can move more sharply than petrol or hybrid cars when new EV prices drop.
• Growing supply from expiring leases. A wave of off-lease EVs — particularly from the FBT exemption novated lease surge — is actively building and will continue to exert downward pressure on used EV values through 2026 and 2027.

The result: the used EV market follows rules that differ fundamentally from the petrol market. Price cuts arrive without warning. Buyers compare ranges far more precisely. Technology cycles are faster than almost any other category in automotive history.

The ATO Car Limit: A Small Bright Spot for Business Buyers

If you're buying an EV or any car for business use, there is at least one number worth knowing right now. As of 1 July 2026, the ATO has updated the car depreciation limit to $69,883 for the 2026–27 financial year. That's the maximum value you can use when calculating depreciation deductions on a passenger vehicle. If you're buying an EV under that threshold for business use, the ATO's diminishing value method allows you to claim 25% of the remaining book value each year — giving bigger deductions up front, in years when your car is also losing real-world value fastest. That alignment isn't nothing. But it doesn't fix a bad loan structure, and it doesn't help private buyers at all. Speak to a financial adviser about your specific situation before making any decisions based on tax thresholds.

The Specific Models Finance Is Getting Wrong Right Now

Not all EVs depreciate equally, and this is important for anyone financing one today. Industry analysts in mid-2026 identify a clear split:

• Holding value relatively well: Tesla Model Y Juniper (2025 model), BYD Atto 3 (Extended Range), Kia EV6, Hyundai Ioniq 5. These models have strong used-market demand, future-compatible charging architecture, and mid-range pricing that gives them a broader buyer pool.
• At higher risk: Entry-level and older-generation Chinese EVs, luxury EVs over $100,000 (which can halve in value within five years), and any model where the manufacturer has repeatedly cut new-car prices.
• The standout exception: The BYD Shark 6 plug-in hybrid ute is holding value more like a conventional ute than a typical EV, because ute buyers have different needs, a bigger pool, and no range anxiety concerns driving the discount.

The finance industry has been slow to price this risk properly. Many lenders are still writing EV loans the same way they write loans on a petrol Mazda CX-5 — using residual value assumptions that may have been reasonable eighteen months ago but look increasingly optimistic today.

What This Means for How You Finance Your EV

If you're buying a new EV in 2026 — and with record sales numbers, plenty of Australians are — here's what to think about before you sign anything:

• Understand what happens at the end of your term. On a standard loan, the car is yours at the end — but if it's worth 45% of what you paid, you own an asset that's worth far less than you've paid for it in total. On a standard Guaranteed Future Value (GFV) loan, the dealer sets a residual that may look guaranteed but comes with fine print conditions around kilometres, condition, and wear that can erode or eliminate that guarantee entirely.
• Depreciation risk isn't shared on most loans — it's all yours. Under most standard finance structures, every dollar the car loses in value is your problem. The lender gets repaid regardless. The dealer already banked their margin. You absorb the loss.
• Ask specifically about negative equity protection. If the car depreciates faster than your loan amortises, you need to know what your options are. Some products — like Milam's structure — are designed so that depreciation risk is priced in from the start, your weekly payments are lower, and when you return the car you receive an equity payout rather than walking away with nothing. That's a fundamentally different deal to a standard loan on a fast-depreciating EV.
• Compare total cost of ownership, not just the weekly payment. The weekly number on the contract is almost always the smallest version of what you'll actually pay. Factor in depreciation, interest, fees, and what you'll realistically get — or not get — when the term ends.

The Bottom Line

Australia just bought more cars than at any point in its history, and a record proportion of them were electric. That's a genuinely exciting shift. But the finance industry hasn't fully caught up to what fast-depreciation EVs mean for everyday borrowers. A car that loses 40–50% of its value in two years, financed on a structure designed for a car that loses 10–15%, is a mismatch that will cost Australians real money — and many won't realise it until they try to sell, refinance, or hand the car back.

Before you sign a car finance contract in 2026 — especially on an EV — make sure you understand exactly what you get at the end of the term, what you owe at every point in between, and who carries the depreciation risk. If the answer to that last question is "you," it's worth asking whether there's a better structure available. Speak to a financial adviser to understand what finance product is right for your circumstances.