From our ‘Thinking outside the box’ series, Professor John Rose and Dr Andrea Pellegrini share how we tend to talk about electrifying transport as if the transition happens in the new car showroom. Policy targets focus on new registrations. Industry headlines focus on new model releases. Incentives are designed around the first owner. But most households do not buy their cars new. They buy them used.

If electrification is going to be widespread rather than niche, it has to work in the second-hand market. That is where budgets are tighter, risks feel sharper, and decisions are less about aspiration and more about exposure. The second-hand market is not a side story in the transition. It is the main stage.

The difference is not just about price. It is about the kind of decision people think they are making. In the new market, buyers compare features, specifications and finance packages. In the used market, buyers try to infer quality. They ask what might fail, what might cost them later, and whether the discount they are being offered is really compensation for hidden problems.

Economists have long understood that when quality is imperfectly observed, markets behave differently. Buyers rely on signals. Odometer readings, service histories and condition ratings become substitutes for certainty. A low price is not automatically attractive. It is attractive only if it feels safe.

With a used petrol car, many buyers feel they understand the risk. Engines wear out in familiar ways. High mileage means something concrete. There is a shared mental model of how these vehicles age.

With a used battery electric vehicle, that mental model is weaker. A large share of the perceived risk is concentrated in one component, the battery. It is expensive. It is technical. It is not easy to assess from a listing or a test drive. The buyer sees the advertised range, but has to guess how that range will evolve. The discount on the sticker price has to compensate not only for age but also for uncertainty.

In our recent study of vehicle choice across both new and second-hand markets in New South Wales, we asked people to choose between vehicles that varied in price, powertrain, age, condition and other attributes¹. Two patterns are especially revealing. Second hand buyers are more price sensitive than new car buyers, which is hardly surprising given tighter budgets. More importantly, second hand buyers respond strongly to quality signals such as odometer readings and condition ratings. Observable cues play a central role in shaping choice.

For used EVs, however, the most consequential quality attribute is also the hardest to observe directly. Battery health sits in the background of every comparison. Even when people focus on range, they may be reading it as an indirect signal about ageing rather than simply as everyday capability. The same range figure can mean reliability to one buyer and hidden degradation to another. What looks like a technical specification is also a psychological cue.

This creates a deeper challenge than simply closing a price gap. If buyers interpret used EVs through a lens of uncertainty, then the second-hand market will discount them accordingly. That discount feeds back into expectations about resale value, which in turn influences decisions in the new market. The used and new segments are connected, not separate.

Much of EV policy still assumes that if enough new vehicles are sold, the second-hand market will naturally follow. Prices will fall, and adoption will broaden. That view treats the used market as a passive spillover. Our results suggest it is anything but passive. It is a distinct decision environment in which risk, trust and signals matter in their own right.

If affordability in the second-hand market depends not only on price but also on predictability, then the transition hinges on something less visible than subsidies. It hinges on information. Credible, standardised reporting of battery health. Assurance mechanisms that reduce downside risk for second or third owners. Market institutions that narrow the gap between what sellers know and what buyers can verify.

Thinking outside the box means shifting the focus from how to sell more new EVs to how to make used EVs feel ordinary. The transition will not be secured by early adopters alone. It will be secured when households with tighter budgets see an electric vehicle on a used lot and treat it as a manageable purchase rather than a technological gamble.

The second-hand market is where most households participate in the car market. If electrification does not feel predictable there, it will not feel mainstream anywhere.

¹https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6129013