By Nathan Gomes

March 11 (Reuters) - Steep depreciation and improving reliability are drawing more Americans to used electric vehicles, turning the pre-owned market into a key entry point for buyers priced out of new EVs as federal incentives fade.

Falling resale prices that are also driven by rapid advances in battery technology, range and software have pushed many second-hand EVs closer in cost to comparable gasoline vehicles, while over-the-air updates and a growing charging network are easing earlier concerns about ownership.

The rollback of incentives that once fueled EV purchases, coupled with higher vehicle prices, is also helping them gain a larger slice of the roughly $800 billion U.S. pre-owned car market.

Used EV sales in the U.S. reached 31,503 units in January, up about 21% from a year earlier, according to Cox Automotive. In 2025, used EV sales totaled 378,140 vehicles, roughly 35% higher than the prior year, according to CarEdge.

Like luxury gasoline vehicles, electric cars depreciate quickly as rapid advances in the features offered mean newer models can outpace vehicles just a few years old.

"We're seeing used EV prices normalize in ways that are opening the category to a much broader set of buyers," a Carvana spokesperson said.

That has helped narrow the price gap between electric and gasoline vehicles in the used market. The premium for used EVs over comparable gasoline vehicles narrowed to $1,376 in January from $2,591 in December, according to Cox Automotive, an industry research firm.

"Used EVs can provide a more accessible entry point for customers who are interested in electric vehicles but may not be ready to buy new," said Wess Dunn, CarMax's senior vice president.

Analysts also expect the used EV space to keep expanding as more vehicles come off lease and trade-ins increase, boosting inventory and giving buyers a wider range of lower-cost options.

EVs account for nearly half of the top ten leased models in the broader market, analysts say.

Leasing shields drivers from the steep depreciation that can hit EVs as battery technology improves rapidly, making newer models more capable than vehicles just a few years old, said Sam Fiorani, vice president for global vehicle forecasting at AutoForecast Solutions.

Tesla TSLA.O dominates the used EV market, with the Model 3 and Model Y among the most widely available and sought-after vehicles.

The company's repeated price cuts on new models and car rental firm Hertz's HTZ.O large-scale sale of Teslas in recent years boosted the supply of affordable used EVs and made them more attainable for consumers.

Concerns that once slowed EV adoption, including battery durability and charging access, have eased as technology improves and charging networks expand.

"Modern EVs should see their battery packs survive the life of the vehicle," Fiorani said, adding that some degradation over time is comparable to the gradual performance loss seen in aging gasoline vehicles.

Meanwhile, days of supply, a measure of how long vehicles sit on dealer lots, had been lower for used EVs than gas cars over the past 10 months.

Buyers have also been drawn in by 'fewer miles on the clock' and the bare minimum service that EVs require, making them practical options for everyday driving.

"Most EV drivers do little more than top up windshield washer fluid and check their tires," said CarEdge analyst Justin Fischer, adding that EVs generally avoid such routine expenses as oil changes and engine repairs.

(Reporting by Nathan Gomes in Bengaluru; editing by Arpan Varghese and Maju Samuel)

((Nathan.Gomes@thomsonreuters.com;))