Cost is a major consideration no matter what kind of car you’re buying. Electric vehicles are great options for helping to save the environment, but what use is that if they’re outside of your budget? Let’s take a look at the factors that go into pricing electric vehicles and see how they stack up against traditional cars.
Electric vehicles have a higher up-front cost than gas cars but are less expensive over the course of their lifetime, primarily due to cheaper fuel. Several studies break down this total cost of ownership. Consumer Reports estimates that “for all EVs analyzed, the lifetime ownership costs were many thousands of dollars lower than all comparable ICE (internal combustion engines) vehicles’ costs, with most EVs offering savings of between $6,000 and $10,000.”
That’s great, but the long-term nature of these savings is a big caveat. Even though batteries are getting cheaper and cheaper, the up-front cost of EVs is getting more and more expensive. Yes, the savings on fuel will eventually make an EV worthwhile, but you still need to be able to afford the car in the first place. Cox Automotive estimates that the average initial price of an EV is still about $65,000. By comparison, mid-sized cars are about $32,000 and full-sized cars are $44,000. EV sticker prices put them between full-size pick-up trucks ($60,082) and luxury mid-size SUVs ($69,608).
Up-front costs for hybrids are typically cheaper than EVs. The May 2022 average cost of a hybrid car sits at $38,335, which is below the overall industry average of $46,426, and comparable to small/mid-sized pickups, which average $39,783.
If you buy a plug-in hybrid, calculating lifetime gas costs will really depend on your use case. If your commutes are short enough to rely on battery and you’re only using the gas power in an emergency, you could be getting the best of both worlds: a lower up-front cost and cheap fuel.
Like gasoline, the price of electricity varies significantly, so nailing down a direct comparison is tricky. That said, one 2020 study pegs the difference in EV fuel savings at a minimum of $3,000 over 15 years, and up to $10,500. Another study from 2018 suggested it’s twice as expensive to keep a gasoline vehicle on the road compared to an EV.
Maintenance costs will depend heavily on how hard you are on your car, but EVs have a leg up. With fewer moving parts than traditional cars and without the mechanical stresses of internal combustion, EVs can last quite a bit longer. Even with the higher rates mechanics charge for EVs due to the greater computerization involved, recent research suggests electric vehicle owners pay about 30% less in service costs after three years of ownership.
Insurance for electric vehicles is indeed higher. This is because individual repairs can be more expensive, though they happen less frequently. The gap isn’t huge, though. One study estimated that insurance costs are on average 15% higher for EV owners. Luckily, insurance companies are likely to lower rates as they develop confidence in the reliability of EVs.
Yes, electric vehicles have rebates, but their availability can be hard to pin down. For one, rebates and discounts will depend on region. Some states and even some cities will have rebates not available elsewhere. The other challenge is nailing the timing. The budget for those rebates is typically for a set amount of time.
Subsidies are a huge part of what makes EVs financially viable. Research suggests “financial subsidies have enabled battery electric vehicles to reach cost parity in the U.K., California, and Texas, but this is not the case for plug-in hybrid electric vehicles which haven’t received as much financial backing.” To find rebates for your area, be sure to check out the U.S. Department of Energy’s database.
Unfortunately, due to growing supply chain issues and a preponderance among manufacturers to cram bigger batteries into their vehicles to assuage range anxiety, up-front costs for EVs are going up. Data shows that from April 2021 to April 2022, the average EV cost has gone up 16.1%, compared to an industry average of 13%. That said, gas prices are also going up and may make up the difference over time.
There are a lot of variables at play when weighing the costs of your vehicle, but generally, EVs are cheaper than gasoline-powered cars in the long run, especially if you take advantage of rebates and you’re a moderate user.
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