One in four new car shoppers now consider purchasing an electric vehicle or hybrid just as they would with a traditional gas-powered option, according to Kelley Blue Book (KBB). And choosing electric — or any alternative fuel vehicle — can prove to be worthwhile for both your wallet and the climate. But before setting out to the dealership it is wise to explore electric vehicle options and understand the difference in cost of ownership.
What is an electric car?
EVs have been exploding in popularity over recent years, especially as the awareness of climate issues continues to evolve. This, combined with inflation and steep gas prices have all led to drivers looking to save money by driving electric.
Unlike the typical gas-powered vehicles lining highways and parking lots, EVs have a motor that is powered by a battery. There are three types of electric vehicles.
Hybrid electric vehicles (HEVs)
Powered by both an electric motor and an internal combustion engine, HEVs boast the strength of a traditional gas-powered vehicle with the benefit of improved fuel economy. You do not charge an HEV like some of its EV counterparts but rather the battery is charged through the engine.
There are a large variety of makes and models of HEVs available on the market. Some highly rated options according to KBB include the Honda Accord Hybrid, the Toyota RAV4 Hybrid and the Hyundai Elantra Hybrid.
Plug-in hybrid electric vehicles (PHEVs)
A plug-in hybrid is exactly as it sounds, a hybrid vehicle that you plug in to charge. It is powered through a battery pack inside the vehicle that is charged through an external cable. PHEVs also use another fuel, usually gasoline, to power the internal combustion engine (ICE).
This type of vehicle uses the electric charge until it is spent and then taps into the ICE capabilities. Options for PHEVs are a bit slimmer, but KBBs standout options are the Ford Escape SE Plug-in Hybrid, the Hyundai Tucson Plug-in Hybrid and the Kia Niro Plug-in Hybrid.
Fully electric vehicles (EVs)
A fully electric vehicle ups the ante and is powered completely by an electric motor — no ICE or additional alternative fuel source involved. These have a battery pack that powers the vehicle and is charged in a similar way to a PHEV.
EVs are charged through a specialized outlet. While charging stations can be found locally, it is important to remember the added cost of a charging station if considering a full EV. KBBs favorite fully EV options include the Chevrolet Bolt EV, the Nissan Leaf and the Ford Mustang Mach-E.
Price of electric vs. gas cars
Before diving headfirst into the world of electric and hybrid cars it is important to understand the price differentiation between gas and electric. While it is true that driving an EV can come with lower overall costs, the upfront price tag can still serve as a roadblock for many.
Lately, buying a new vehicle is expensive no matter what the power source. July 2022 saw record high average transaction prices for new vehicles of over $48,000, according to KBB. But the average price for an EV is still higher than a gas-powered option. The KBB estimate for an EV is over $60,000 — which aligns with an average luxury vehicle price tag.
But it is forecasted the EV market will reach 40 percent by 2031, according to TransUnion. This estimation is supported by more vehicles hitting the market. And, fortunately, this increase in EV availability serves as a potential equalizer. As more drivers consider buying electric cars, the average cost will go down.
This growth is already clear in the number of new options that are entering the market. In the first quarter of 2022, 4.64 percent of new vehicle registrations were EVs, and 7.18 percent were hybrids, according to Experian’s report on automotive market trends. This made for a 60.4 percent growth for EVs over the first quarter of 2022, and a 10.7 percent growth for hybrids.
Cost to own electric vs. gas cars
While the upfront cost of your next vehicle is important you must also understand the cost to maintain and own the vehicle over the lifetime of ownership. Consider the five-year cost-to-own comparison for two popular sedans according to Edmunds.
The first, a 2022 Chevrolet Bolt EV, comes in at $31,955 MSRP and has a large range, spacious cabin and well-rated handling. The second, a 2022 Mazda 3, is a popular gas-powered option with a lower MSRP of $24,115 that offers a premium interior, a smooth ride and a turbocharged engine.
Consider how the following costs accrued over five years of vehicle ownership influence which vehicle you would prefer.
|2022 Chevrolet Bolt EV||2022 Mazda 3|
|Taxes and fees||$2,603||$1,814|
|True cost to own||$25,522||$31,277|
On the most basic level, driving a fully electric vehicle will mean no more trips to fill up at the gas station. In a 2020 study, Consumer Reports found that EV owners will spend, on average, 60 percent less money to fuel their vehicles. The difference in cost of fuel between the Chevy and the Mazda is even steeper than that average.
But getting power for your EV is not as simple as choosing regular, midgrade or premium. EV charging can be broken down into three options that all carry different costs and benefits.
- Level one charging. This is the most common form of charging and is available through the same outlet you would charge your cellphone with. They are the slowest charging option and provide between two and five miles of charge per hour.
- Level two charging. These chargers, typically installed and found in your garage, use the same power that your washing machine would. You can gain 10 to 20 miles of charge in an hour.
- Level three charging. Also known as DC charging, these are available in public settings. They are the quickest option and drivers can receive an 80 percent charge in only 20 minutes.
Just as running your washing machine several times in a row will add to your electric bill, the additional cost incurred from charging at home can add up. This ongoing cost is on top of the one-time average price to install an at-home charger — which can range from $300 to $50,000, depending on the level of the charger.
But keep in mind that many communities now have access to chargers, meaning you might not need to pay for installation right away. Check out PlugShare, a free EV station map, to see chargers in your area.
Although you can finance your vehicle — electric or gas powered — simply by applying online or in person with a few lenders before picking the best loan for your needs, financing a green car can come with some added perks.
Green auto loans serve drivers looking to finance an electric car. These types of loans are typically found through a credit union and tend to have lower interest rates than conventional auto loans.
You may also qualify for EV tax credits, a financial incentive offered in certain states in the U.S. You can benefit from a credit worth up to $7,500, depending on your home state.
Insuring your vehicle is a vital part of ownership that protects yourself and your passengers. EV insurance carries the same approach you would take to cover a conventional vehicle option. It will cover collision, bodily injury, liability and comprehensive coverage. And as with any vehicle, your exact price will be based on a variety of factors.
However, insurance for an EV will typically cost more than traditional gas-powered options. One reason is the price of the vehicle parts. A minor accident could result, for example, in the need for a battery pack replacement — something that can cost more than $15,000.
Bankrate analyzed 12 vehicle models provided by Quadrant Information Serves and found that, on average, premiums will be higher for electric cars. This is demonstrated by the higher insurance costs projected for the Bolt over the Mazda 3.
Pros and cons of electric vehicles
EVs can provide a ride that’s better for the environment and your wallet over the long term, but they’re not without downsides.
Pros of electric cars
Some benefits to driving an electric car include:
- Less maintenance. Electric cars require fewer trips to the mechanic, which can mean less money spent on costs, such as oil changes and brake system checks.
- Lower cost over the life of the vehicle. Vehicle ownership can be expensive, but EVs carry a lower lifetime cost.
- Better for the environment. EVs do not release tailpipe air pollutants, making them better for local air quality and overall greenhouse gas emissions.
- Advanced technology available. Many newer electric car models come with advanced control panels and mobile apps to control and monitor the vehicle.
Cons of electric cars
Some drawbacks that come with driving an EV include:
- Higher purchase cost. On average, buying an EV carries a steeper upfront cost, close to $12,000 more, according to KBB’s average July 2022 transaction prices.
- Range anxiety. Charging stations can be few and far between in some areas, leaving some drivers feeling stressed when searching for a place to get power.
- Faster vehicle depreciation. Battery deterioration and vehicle incentives create quick value loss when it comes to electric cars.
- Cost to install a charging station. If you prefer the convenience of charging at home, installation can cost up to $50,000.
Is an electric car right for you?
Determining if your next set of wheels should be electric should be considered in the same way that you would pick which model or style of a traditional car is right for you — focus on your lifestyle and needs. If your commute works with the available range an EV offers or if you prefer the sleek style and environmental benefits, then an EV may be a great option.
But if jumping into a full EV is too much of a financial commitment, you may want to consider leasing, or opt for a hybrid or plug-in if you’re set on buying. Hybrids and PHEVs tend to cost less upfront and still carry some of the money-saving benefits that a fully electric car does.
Consider these main factors when shopping to ensure that an EV is worth investing in.
The vehicle range
If you have a long commute to work and do not have access to chargers along the way or at your destination, consider the vehicle range that your potential new car holds. The average battery range can vary greatly depending on the model. Be sure you do not purchase a car that you cannot easily keep charged for your daily outings.
Access to chargers
Before going to the dealership to shop, check for access to chargers in your area or consider the cost of installation and upkeep of an at-home charger. This means weighing the level one, two and three options with your needs.
Not only is it important to consider your lifestyle in terms of form but also in function. EVs tend to operate differently than what you may be used to. Due to its reliance on regenerative braking, for example, you can expect a slower brake but a smoother overall drive.
The bottom line
The true cost to own an EV can be less expensive than a gas-powered option. Even with steeper vehicle depreciation and potentially higher insurance and financing, the lower maintenance and five-year cost to own an EV makes it a promising choice. As a car buyer, it is important to determine which costs matter most to you, and whether EV fits the rest of your lifestyle.