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Should You Buy an Electric Car? – 5 Cost Considerations


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Buying an electric car is an exciting prospect: getting in on the ground floor of a nationwide movement. Right now, existing automakers like Ford and Honda as well as startups like Rivian are rolling out dozens of new electric models.

But along with the thrill of trying this new clean technology, you probably have some concerns. How does charging work? What do you do if you run low on charge miles from the nearest charging station? But most of all, are electric cars really worth the money?

The answer to that question is different for everyone. To figure it out, you have to weigh various lifestyle and cost factors.

Should You Buy an Electric Car? Cost Considerations

Buying an electric car is a trade-off. You pay more upfront for a vehicle that costs less to fuel and maintain. You also have to change how you refuel your car, trading gas stations for charging stations — which can be a perk in some situations and a hassle in others.


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By carefully considering all the factors that go into electric versus gas-powered vehicle ownership, you can make the right choice for you.

1. Purchase Price

EVs cost more to buy than comparable gas-powered or hybrid vehicles. According to Kelley Blue Book, the November 2021 average price for all new vehicles was $46,329. In contrast, the average purchase price for a new electric vehicle was $56,437. 

Experts predict that the price gap between electric and gas-powered cars will shrink over time. Battery technology is improving, and prices will drop as automakers start producing enough EVs to achieve economies of scale.

A Bank of America analysis (via Axios) predicts that by the mid-to-late 2020s, the prices of gas and electric cars will be about equal. That’s a good reason to consider waiting a little longer before making the switch to an EV.

2. Tax Credits and Incentives

In some cases, you can reduce the cost of an electric car by taking advantage of federal, state, and local tax credits and other incentives. The biggest such perk is the federal EV tax credit. It gives you up to $7,500 off your federal income taxes to purchase an electric vehicle.

The exact amount of the credit depends on the type of battery your vehicle has. New-model all-electric cars get the maximum credit, while plug-in hybrids get a percentage of the credit based on battery capacity. 

Unfortunately, this credit doesn’t reduce the upfront cost of the car. You don’t get it until you file your income taxes for the year you bought it. And it can’t reduce your taxes to less than zero, so if you owe less than the amount of your credit in tax, you don’t get the full credit.

Also, the credit doesn’t apply to every electric car model. It’s designed to help automakers ramp up their EV offerings, so it phases out for companies that have already sold at least 200,000 plug-in vehicles. Check the United States Department of Energy’s federal EV tax credit page to see which vehicles qualify.

Depending on where you live, state and local governments and utilities may also offer additional incentives to purchase an electric car or home charger. For instance, in New Jersey, these cars are exempt from state sales tax. Check the Plugstar website to find available incentives in your area.

3. Cost of Maintenance

Electric vehicles are simpler than gas-powered cars, with fewer moving parts. As a result, they require less maintenance. They don’t need regular oil changes or belt replacements, and their regenerative braking reduces wear and tear on the brake pads.

With an electric car, a typical visit to the mechanic just involves checking and replacing small items like the tires, cabin air filter, and windshield wiper blades. Eventually, an EV will need a new battery pack, which typically costs between $5,000 and $10,000. But this won’t happen for at least eight years or 100,000 miles. 

As a result, electric cars have lower maintenance costs than any type of gas-powered vehicle. According to a 2021 Department of Energy study, the cost is about $0.04 less per mile driven. At 10,000 miles per year, that’s a $400 savings.

4. Cost of Refueling

The cost of powering an electric car depends on where you plug it in. As it turns out, it’s not always cheaper. 

Cost of Home Charging Stations

If you use a home charging station, EVs cost much less to fuel than gas-powered cars. Home electric rates are lowest at nighttime, which is when most electric car drivers hook up their car chargers.

According to 2021 AAA data, EVs cost on average about $0.03 or $0.04 cents per mile to charge. Gas-powered vehicles cost closer to $0.07 to $0.12 per mile.

But that analysis occurred in early 2021, when the average U.S. gas price was below $2.50 per gallon, according to price-comparison app GasBuddy. In January 2022, it was over $3.25 per gallon, making electric cars even more cost-effective to run. 

Electric cars come with a Level 1 charger, which can hook up to a standard 120-volt wall outlet. However, charging a car this way is very slow. It takes about an hour of charging to restore just 4 miles’ worth of driving range. 

For faster charging, you can put a 240-volt Level 2 charging station in a driveway, carport, or garage. It can provide up to 25 miles of driving range per hour. According to energy transition company Qmerit, the cost is usually $500 to $800 for the charger and $750 to $1,750 for installation.

However, installing a dedicated charger isn’t usually an option if you don’t own your home. In some cases, you can find a way to plug your Level 1 charger into a wall outlet, but charging will be slow. 

Some apartment and condo complexes provide parking lot charging stations for residents. Some workplaces also offer this perk, so you may be able to fuel up at work instead.

Cost and Availability of Charging Stations on the Road

Most new electric cars have between 200 and 300 miles of range. That’s the maximum distance they can go on a full charge. For road trips longer than that, you need to find charging stations along your route to refuel.

Unfortunately, fast charging stations are much harder to find than gas stations. Although charging infrastructure is growing fast, the stations can still be dozens or even hundreds of miles apart. They’re sometimes in out-of-the-way areas, and they don’t always work. 

Fortunately, finding available charging stations is easier than it used to be. Tools like PlugShare show you the available stations nearest you. They can also help you plan a road trip, figuring out in advance where you can stop to recharge.

Unfortunately, refueling on the road takes much longer than filling up with gas. Even with fast charging, it takes at least 30 minutes. If you have to do that every 200 miles, a 1,000-mile trip requires 2.5 hours’ worth of charging time.

Plus, your car might not make it that far. An EV that can go 200 miles on a full charge may last only 150 miles if it’s not fully charged. Cold weather can shorten your range as well. As a result, long road trips in an EV can trigger “range anxiety”: fear about whether the car can make it to the next charging station.

There are two kinds of public charging stations.

  • Level 2. Many public parking lots and garages offer Level 2 charging stations similar to a dedicated home charger. Some are free, while others operate on networks like ChargePoint or Blink. According to MyEV, a full hour on a Blink charger costs $2.40 to $3.60 and only provides about 25 miles of driving time. 
  • Level 3. Level 3 fast charging stations can bring your battery up to 80% in as little as half an hour. Two major networks are Tesla’s (for Tesla drivers only) and EVgo. These stations typically charge $0.25 to $0.30 per minute. At around 2 miles of driving range per minute, that’s about $3.62 per 25 miles.

At those rates, charging costs more per mile than filling up your tank at a gas station. However, that could change if gas prices keep rising.

5. Total Cost of Ownership

If electric cars cost more upfront than gas-powered cars but are cheaper to run, then which is more affordable in terms of the true cost to own? That turns out to be a tricky question to answer.

A 2020 Car and Driver analysis compared two electric car models with their gas-powered equivalents. It found that if you buy your car with cash, claim the $7,500 tax credit, and sell it after three years, an electric vehicle costs anywhere from $350 to $8,000 more.

However, when Consumer Reports compared nine electric cars to the bestselling gas-powered vehicles in the same class, it came to the opposite conclusion. It found that the average electric car would cost $4,700 less than a gas-powered car over seven years. The savings for electric pickup trucks was even better: $9,000 over seven years.

Why were the findings so different? One big factor was the cost of depreciation. According to most sources, EVs lose value faster than other cars, at least for now. That means you lose a lot of money if you sell one after three years, as Car and Driver assumed.

But most drivers don’t do that. The average owner keeps a car for around six years, according to R.L. Polk research (via Autotrader). Over that longer period, the lower running costs of an electric vehicle are likely to make it a better value than a gas-powered car. And that’s exactly what Consumer Reports concluded.

How many miles you drive is also a factor. The AAA pamphlet shows that an EV has a slightly higher total cost to own than the average car if you drive 10,000 miles per year over five years. But it costs a bit less than the average at 15,000 miles per year and significantly less at 20,000.


Electric Vehicle Options That Influence Cost 

Buying a new all-electric car isn’t the only way to become an EV owner — or at least an EV driver. You could also buy a plug-in hybrid car, which combines an electric motor with a small gas engine. Or you could buy a used electric vehicle or lease rather than buy. Each of these choices affects the overall costs and benefits of EV ownership.

Battery Electric vs. Plug-In Hybrid

A plug-in hybrid electric vehicle eliminates many of the problems with a battery electric vehicle. You can charge it at home, saving money and time. But on the road, you can fill it up with gas, so you don’t need to worry about finding charging stations or taking time to refuel. 

There are many plug-in hybrid models available, from small cars like the Toyota Prius Prime to big SUVs like the Jeep Wrangler 4xe. Plug-in hybrids also qualify for the federal tax credit, but many of them don’t qualify for the full $7,500 amount. The website shows how much you can claim for different plug-in models.

Most plug-in hybrids start on battery power only, then switch to the gas engine if the battery runs low. Their electric-only range is shorter than a battery-powered vehicle’s, often less than 20 miles. But they can go an additional 200 to 300 miles on a tank of gas.

A plug-in hybrid works best if most of your trips are short enough to do on electric power, but you occasionally need the longer range of a gas engine. If you regularly travel more than 100 miles at a stretch, a plug-in is likely to be a better choice than a battery-powered model. 

Alternatively, you could have a battery-powered vehicle for everyday use and a separate gas-powered vehicle for long trips.

Buying vs. Leasing

Leasing is the most expensive way to own a car in most cases. But for EVs, it can make sense. 

Automakers who lease electric cars can claim the federal EV tax credit on them, and they often pass the savings to the user in the form of a lower monthly payment. That lets you benefit from the credit immediately rather than waiting until you file your taxes. And you don’t have to deal with the tax paperwork yourself.

Also, automakers sometimes offer special promotional lease deals just for EVs. That helps them boost their EV sales numbers to meet regulatory requirements.

Leasing can also help you save on maintenance. EVs have lower maintenance costs than gas cars overall, but when parts fail outside the warranty period, they can be expensive to replace. With a typical three-year car lease, your vehicle is always under warranty coverage.

Finally, leasing is a way to ensure you always have the latest in electric vehicle technology. EVs are improving all the time, especially in terms of range. With a lease, you can trade in your EV for a new one after three years without having to sell your older, outdated model.

Used vs. New

Most sources agree that new EVs generally depreciate faster than gas-powered cars. That means buying used rather than new can be a good way to save on cost. 

For instance, Kelley Blue Book puts the price of a 2022 Hyundai Kona electric at $35,225 — $12,850 more than the gas-powered Kona. But at the time of this writing, a 2019 Kona electric was only $27,025, just $5,456 more than the gas-powered version.

Buying a used EV is easier in some ways than shopping for a used car in general. Since EVs require so little maintenance, you don’t have to worry as much about the car’s maintenance history. All you need to know is that the battery is in good shape. You can check it by fully charging the car and comparing its predicted range to the car’s original advertised range.

However, there are a few downsides to buying a used EV. For one, you don’t qualify for the federal tax credit with a used vehicle. You miss out on the latest features, such as longer range. And you probably won’t have the protection of a warranty.

If you’re considering a used EV, note that some depreciate faster than others. Teslas tend to hold their value, so they’re more costly to buy used. 

By contrast, a used Chevy Bolt can be a great value. At the time of this writing, Kelley Blue Book estimated that a 2019 Bolt cost around $22,000 with an EPA-estimated range of 238 miles, as good as many new EVs that cost much more.


Pros and Cons of Electric Vehicles

The pros and cons of electric vehicles go beyond cost. For many people, the biggest advantages of EVs are their great performance and environmental benefits. But for others, the hassles of owning and driving an EV are a deal-breaker.

Pros

The benefits of owning an electric car include:

  1. Great Performance. Electric motors don’t need to rev up like internal combustion engines, so EVs can accelerate very fast. They also offer nimble handling, smooth shifting, and very little noise, and most come with standard all-wheel drive.
  2. Easier to Refuel at Home. Refueling your car at home is quicker and easier than taking it to the gas station. Instead of standing at the pump, just hook up the charger and walk away. You can also schedule charging to start when the electric rates are at their lowest.
  3. Cheaper to Refuel at Home. It’s significantly cheaper to refuel an EV on your home charging station than it is to buy gas for a traditional car. And that benefit only increases as gas prices rise.
  4. Low Maintenance. Electric cars require much less maintenance than gas-powered vehicles. That saves you both money and time spent taking the car to the mechanic.
  5. Eco-Friendly. EVs produce zero tailpipe emissions, and it’s possible to power them with renewable energy rather than fossil fuels. They still have some environmental costs, especially from the rare materials used in their battery packs. But over their lifetime, they’re significantly greener than gas-powered cars.
  6. Special Perks. Some states offer special perks for drivers of EVs and plug-in hybrids. For instance, they may pay lower tolls, gain access to dedicated parking spots, and get to use carpool lanes. Check PlugStar to see what benefits your state offers.

Cons

The downsides of buying an electric vehicle include:

  1. Fewer Choices. There are more EV models today than ever before, but there are still far fewer electric cars than gas-powered ones. Choices are especially limited for pickup trucks; as of January 2022, models like the new Ford F-150 Lightning are still in the pre-order stage. And some EV models aren’t available in all 50 states.
  2. High Purchase Price. Finding a suitable electric car is even harder if your budget is limited. EVs cost significantly more than comparable gas-powered cars. If you have less than $30,000 to spend, your only choices are compact hatchbacks like the Nissan Leaf.
  3. Requires a Regular Charging Station. It’s impractical to own an EV without regular access to a charging station at home or work. Hooking one up at home adds hundreds or thousands to the cost, and it may be impossible for apartment dwellers.
  4. Harder to Refuel on the Road. Even new electric cars can only go 200 to 300 miles between charges. To refuel while on the road, you need to hunt for available charging stations and spend at least half an hour plugged in. 
  5. Faster Depreciation. As a general rule, EVs lose value faster than gas-powered cars. If you like to trade in your car for a new one every few years, you’ll take a big hit when trying to sell your EV. But if you keep driving your old car as long as possible, it won’t affect you much.

Final Word

The costs and benefits of buying an EV depend partly on how you use your car. Electric cars are perfect for commuters who seldom venture far from their home charging station. But they’re a poor choice for long road trips where fast charging stations are few and far between.

That said, all the problems with electric vehicles are getting better as the EV market grows. As technology advances, new models are getting cheaper and battery ranges are getting longer. And the number of available models to choose from keeps expanding. 

So, if you’re on the fence about whether to buy an electric vehicle, it may make sense to put off the decision a little longer. By being a late adopter, you can save some money and get a better, more advanced electric car when you finally decide to buy.

Amy Livingston is a freelance writer who can actually answer yes to the question, "And from that you make a living?" She has written about personal finance and shopping strategies for a variety of publications, including ConsumerSearch.com, ShopSmart.com, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.

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