With average gas prices in August 2022 up almost 22% compared to the same month last year - and continuing to fluctuate - switching to an electric vehicle might be a no-brainer. You might also be concerned about the rising cost of maintaining your car, which is up $279 compared to last year, or reducing your carbon footprint. All of these concerns, along with incentives from federal and state governments, can be enticing enough for any driver to switch to an electric vehicle. But will driving an electric vehicle actually help save both your budget and the environment? Unlike gas-powered and even hybrid cars, the true cost of an electric car isn't so straightforward. Here are some things to consider if you're thinking about buying an EV.
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If you're exploring the purchase of an all-electric car, you may have already realized how different the process is compared to buying a gas-powered car. Even something as fundamental as range is completely different in an all-electric car. Instead of being measured in miles per gallon and tank size, the driving range of an electric vehicle is reported in its miles per gallon of gasoline-equivalent (MPGe). Not only will you have to consider how much range you need for daily driving, but also the electric vehicle's battery size to calculate the cost per kilowatt per hour to recharge either at home or at a public charging station.
On top of refueling costs, car insurance will be mandatory in almost every state regardless of whether you drive an electric or gas-powered car. What many drivers may not realize is that car insurance for electric vehicles can be substantially more expensive. These higher insurance costs are primarily due to more expensive parts and specialized labor to repair electric vehicles. A comparison of average insurance premiums obtained from Quadrant Information Services for electric and gas-powered vehicles is below:
A major perk promoted by car manufactures when buying new all-electric and plug-in hybrid vehicles is the federal tax credit. While the maximum credit amount is $7,500, the actual amount will vary depending on the battery's capacity, state and local incentives, and other stipulations. For example, if you lease a qualified vehicle, this credit will go to the lessor instead of you. Lastly, keep in mind that every car manufacturer has a limit on these credits and they change all the time, as buyers considering Tesla or Chevrolet models today are no longer eligible for this benefit. A current list of eligible vehicles and the maximum credit amounts can be found on the U.S. Department of Energy's website.
State and local incentives for purchasing an electric vehicle also exist as well. This list compiled by the National Conference of State Legislatures shows all the different incentives that exist in each state for electric vehicle buyers. Some benefits and extra incentives include rebates on home energy costs, help with financing home charger installations, HOV lane exemption with appropriate vehicle tags, and more. Some electric utility companies also offer rebates and incentives for owning and charging an electric vehicle at home.
When it comes to buying a new electric vehicle, there are also unique financing options available. Green auto loans, tailored specifically for electric and fuel-efficient vehicles, take into account the higher purchase price of these vehicles by offering buyers extra benefits. This could include lower interest rates and longer repayment terms, making the monthly payment more affordable.
You might have made plans to buy or finance your new electric car, and have an estimate of what your car insurance premium might be, but the costs of an electric vehicle don't end there. Learn more about the hidden costs that can come with owning an electric vehicle.
Within its first year, a brand new car's value can depreciate up to 20%. For an electric car, this can be even greater, depending on how quickly technology has improved. Newer cars could have longer range and improved battery life, making older models obsolete. Car brand and model matter too - a comparison by CarEdge found that, after five years, a Tesla Model 3 maintained around 71% of its resale value, while a Nissan Leaf only maintained 55%. A Toyota Camry, on the other hand, maintained 76% of its resale value.
When it comes to electric vehicles, there's another problem car owners can run into as the car gets older: battery degradation. A gas-powered car's tank doesn't get smaller as it gets older, but as an electric car ages, its battery range dwindles, decreasing the maximum amount of miles you can drive before it needs to be recharged. While many factors can impact battery lifespan, from improper charging to cold weather conditions, it's unavoidable that an electric vehicle's battery will not always have the same range as it did when it was new. And, just like with the battery on a gas-powered vehicle, you will eventually have to replace it. We'll get to the cost for that in a moment.
All-electric vehicles have fewer moving parts compared to gas-powered vehicles, which may lead to the assumption that they are cheaper to maintain. In some respects, this is true - electric vehicles don't require oil changes or regular tuneups, and because of regenerative braking, brake systems may also last longer.
Instead, one of the largest costs associated with electric vehicles may be its eventual battery replacement. Those buying a brand new car may not need to worry about this just yet, but those wanting to go the pre-owned route may see this cost come up sooner rather than later. Green Cars estimates that the average cost of replacing the battery is between $5,000 to $15,000, even before labor. However, it can help to know that modern batteries can last up to 10 years or more, depending on the car itself, how it's driven and charged, and more. Additionally, according to Autoweek, many manufacturers offer warranties on EV batteries, sometimes up to 100,000 miles or 10 years.
Currently, vehicle quality is another factor driving up maintenance and repair costs of electric vehicles. J.D. Power's 2022 Initial Quality Study found that while quality issues were noted in almost every car manufacturer and model, electric and plug-in hybrid models had significantly more issues compared to gas-powered cars. Factors like a shortage of crucial components, more advanced technology, supply chain disruptions and labor disruptions have all contributed to lowering vehicle quality and rising repair costs, which may continue until these issues ease.
J.D. Power's 2022 U.S. Initial Quality Study
Problems per 100 vehicles
*Tesla models are shown separately due to their predominance, which could obscure the legacy automakers that have recently introduced BEVs.
How to charge an electric vehicle may be the first concern of any prospective electric vehicle owner. Fully charging an electric car could take anywhere from thirty minutes to a few hours, and whether you charge at home or at a public charging station, there may be higher rates during peak hours. For this reason, those who rent or live in a townhouse or condominium where installing an at-home charger isn't feasible, owning an electric vehicle comes with more challenges.
But if you're able to charge from home, installing an EV charger is convenient, although it does add another cost to your EV ownership. You'll typically need to purchase a separate charger and hire an electrician to retrofit your home. Additionally, you'll want to do a calculation to accurately estimate the total cost for your electric vehicle to see if it offsets the cost of fueling your current car. The first step starts with knowing how much your electricity costs per kilowatt during peak and off-peak hours. As we mentioned earlier, some electric utility companies do offer incentives and rebates for EV owners who charge their vehicles at home, so you may want to check with your electricity company to see if any cost savings are available.
Part of buying an electric vehicle is taking the time to understand whether or not it fits your needs and lifestyle. Before you decide to make a switch, here are some resources to help you calculate the cost of owning an electric vehicle:
Given the detrimental impact gas-powered cars have on the environment, it's no wonder that many drivers are switching to electric vehicles. California has even announced a plan to restrict and ban the sale of new cars powered by internal combustion engines by 2035, a measure that could be adopted by other states and even at the national level at some point.
Still, the decision to buy an all-electric vehicle is a personal one. Having an electric vehicle might mean adjusting your routine, especially if you don't live with convenient charging options. Costs associated with ownership, like insurance, maintenance, and installing a home charger, can add up. But if you're able to benefit from the convenience of an electric car, receive a significant advantage from all incentives available to you - and you care about partially reducing your carbon footprint - switching to an all-electric vehicle might be worth a look.
If an electric vehicle isn't right for you, there are still great options available for economical and green cars. Car manufacturers are consistently increasing the range of different gas-powered and hybrid gas models within their lineup, so you can go farther with the same or even less gas. And if you're not fully sure an all-electric vehicle could fit your lifestyle, a plug-in hybrid might be the ideal compromise and give you the best of both gas-powered and all-electric vehicles.
Bankrate utilizes Quadrant Information Services to analyze 2022 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:
To determine minimum coverage limits, Bankrate used minimum coverage that meets each state's requirements. Our base profile drivers own a 2020 Toyota Camry, commute five days a week and drive 12,000 miles annually.
These are sample rates and should only be used for comparative purposes.