The market for electric vehicles is growing fast. Bloomberg New Energy Finance estimates that EVs will make up 25% of all auto sales by 2025, 28% by 2030, and well over half by 2040. In California, where I live, Teslas are everywhere, and dozens of additional EV models are now hitting the market every year.
Next time you visit a car dealership, you’ll probably see several electric cars in the showroom. And you might be surprised at how affordable they’ve become.
New Electric Cars and New Gas-Powered Cars Have Similar Price Tags
In January, the average price of a new vehicle in the U.S. reached $40,000 for the first time. For comparison, the sticker price for the popular Tesla Model 3 is around $38,000.
Leasing a Tesla costs between $350 and $400 per month, according to the company, plus several thousand dollars in up-front costs. The average lease payment for any new vehicle in the U.S. in 2020 was $467, according to Credit Karma.
Vehicle prices can vary for a lot of different reasons, of course. Trucks and SUVs are more popular than ever and are much more expensive than sedans, driving average prices up. And there is a large market for used gas-powered vehicles and hybrids, while EVs are still so new that there aren’t very many used models available.
Generally, though, EVs are no longer prohibitively expensive to purchase. They are within the price range of most other used vehicles.
Keeping the Vehicle Charged
AAA recently studied the costs of powering an electric car and found that they were actually less than those of gas-powered cars. The gas required to drive 15,000 miles cost around $1,255, the study found, whereas the electricity required to go the same distance cost only $546.
Most EV owners install a 240-volt outlet in the garage so they can charge their car overnight, according to Car and Driver. How much this will add to your monthly electric bills varies widely depending on where you live and how much you drive. The Kelley Blue Book has a helpful guide to calculating the cost of charging an EV at home, and estimates that the average driver will spend $25 to $33 monthly.
It costs about $2,000 to buy and install a Level 2 charger in your garage, which charges vehicles twice as fast as a normal 240-volt outlet.
Public charging stations generally charge a per-minute rate. EVgo, a national network of fast-charging stations, charges around 30 cents per minute for fast charging, though rates vary from state to state.
Most electric vehicles have a range of between 200 and 400 miles, so for most EV owners, charging at home overnight will be sufficient most of the time. How long a vehicle takes to charge can vary widely, but generally, it’s an hours-long process — not nearly as quick as getting gas.
Charging stations are increasingly easy to find, especially in California, which is in the process of installing 38,000 new charging stations by 2025. The infrastructure plan recently proposed by the Biden administration would significantly expand the number of charging stations nationwide.
In 2021, keeping an electric vehicle charged is on par with or cheaper than fueling a gas-powered car. Charging can be done at home with minor garage improvements.
Insurance and Maintenance Costs
The AAA study of electric vehicle costs found that, since electric vehicles don’t need standard procedures like oil changes or air filter replacements, EVs cost about $330 less annually than gas-powered vehicles to maintain.
A 2021 study from ValuePenguin found that insurance policies for electric cars were about 23% more expensive than gas-powered cars. The average car insurance policy costs $1,592 per year, so that would be a difference of about $366 per year.
Tax Breaks and Incentives
New electric vehicles — except for Teslas and General Motors vehicles — are eligible for a federal tax credit of $7,500. (Tesla and GM have both sold more than 200,000 EVs, so they’re no longer eligible for this tax credit, which was created in 2008 to incentivize manufacturing of these vehicles.)
Lots of states, counties, and other jurisdictions also offer incentives for purchasing an electric car, especially if you’re taking a gas-powered car off the road. Credits and rebates are also available for charging costs and utility bills. In California, the Clean Air Vehicle (CAV) decal program lets you use the HOV lane. Plug In America has a helpful roundup of current incentives.
If you’re leasing an EV, you can’t claim these credits, but the dealership might be able to claim them and discount the lease. Ask your dealership about their policy.
How much you’ll benefit from these credits depends on where you live, but they can add up to significant savings. Make sure to work with your CPA to claim all the credits you’re eligible for.
EVs are Part of Our Sustainable Future
A team of researchers at MIT found that not only were electric vehicles much better for the climate than gas-powered cars, but that many were cheaper over the life of the vehicle. These trends are likely to accelerate in the coming years as EVs become more and more popular.
As climate change accelerates, each of us will need to make more changes to adopt sustainable habits. Impact investing is a strategy my family has adopted. Purchasing an electric vehicle may be a good fit for yours. And it might make good financial sense, too.
