The Economic Advantages of Going All-Electric (Updated)

Credit: @SassyCritic with her new Tesla Model 3

Inflation and the ongoing high price of gasoline and diesel have been tough on many U.S. households over the past year. In order to help save money on transportation costs, many people have been reconsidering alternative-fueled cars. I often hear would-be buyers express frustration and uncertainty when looking for a more fuel-efficient, cleaner, and environmentally friendly car. They ask, “Which is better in the long run – a traditional hybrid (HEV), plug-in hybrid (PHEV), or battery electric vehicle (BEV)?” 

Source: https://futuretronlabs.in/blog/index.php/2019/08/26/types-of-ev-electric-vehicle-phev-hev-bev/

When it comes down to it, there are cost savings for transitioning to ANY of these options compared to a traditional gas-only fueled engine. I’ve previously shared about how choosing a plug-in hybrid is a better option than a traditional hybrid model, 5 reasons to buy an EV, and why you should get off the fence about buying an EV. However, if you’re going to make the switch to a vehicle with an electric drivetrain, the fully electric vehicle has economic advantages compared to traditional and plug-in hybrid models. Here’s why: 

Updated: Full electric vehicles qualify for higher U.S. federal tax credits, including used vehicles. Last year, the U.S. Congress passed historic climate legislation as part of the Inflation Reduction Act, which eliminated the tax credit cap on EVs sold by manufacturers. The good news is that popular EV brands, like Nissan, GM, Toyota, and Tesla, now qualify for a federal tax credit again. The tax credits are calculated based on the battery capacity of the vehicle. Since all-electric vehicles have larger batteries, they are eligible for more money. (See guidance from the IRS on new vehicles and a list of eligible vehicles and background in this Consumer Reports article.

For the first time, certain buyers that meet income requirements can also get a tax credit for used EVs, up to $4,000 or up to 30% of the EV cost, which opens up even more access to the EV marketplace (see guidance from the IRS). These vehicles must have at least 7 kWh battery capacity, which excludes certain plug-in hybrid cars like the Toyota Plug-In Prius, which has 4.4 kWh battery, though other plug-in hybrids, like the Ford Escape Plug-In with a 14.4 kWh battery, are eligible.

EVs cost less to maintain. First and foremost, it’s as simple as “less is more”. Why have two propulsion systems in your vehicle when you can have just one? Consumer Reports dug into the maintenance of EVs, PHEVs and internal combustion engines (ICE) vehicles and found that EV and PHEV drivers spend half as much as ICE owners to maintain and repair their vehicle, saving an average of $4,600 in repair and maintenance costs over its lifetime. The average repair and maintenance cost per mile from the detailed maintenance report is in the table below. The BEV maintenance costs are staggeringly less per mile – and this only gets cheaper with newer models. Consumer Reports explains that most of the EVs used to assess the 100k to 200k range were older EV models like the first Nissan LEAFs. All indicators point to the fact that EVs – especially newer models – will be far less expensive to maintain at higher miles and more likely to achieve higher mileage. 

Source: https://advocacy.consumerreports.org/wp-content/uploads/2020/09/Maintenance-Cost-White-Paper-9.24.20-1.pdf

All-electric repairs are easier than plug-in and traditional hybrids. Here is a list of typical maintenance you can expect for an EV. Compare that to this list for traditional ICE vehicles. PHEVs and HEVs still have an internal combustion engine, thus requiring essentially the same maintenance as ICE vehicles, even though the engine is used less. 

The major repair of an EV is replacing its battery pack. A battery that is being used loses capacity over time, thus reducing your maximum range. At some point you’ll want to replace the battery pack, but you can continue to operate the vehicle risk-free until then. With PHEV, HEV, and ICE vehicles, engine and transmission problems can happen suddenly and are more likely to cause catastrophic damage or leave the combustion engine inoperable until repaired. 

EV prices – and models – are more competitive than ever. The EV market is expanding rapidly, meaning that there are even more opportunities to purchase different-sized vehicles and even used EVs. Newer EV models now offer longer battery ranges than their predecessors and are rapidly lowering in price as battery manufacturing costs have declined nearly 80% since 2013

If you have specific models in mind, the Department of Energy’s Vehicle Cost Calculator is a great way to compare costs using your daily driving distance. You can also see a comprehensive list of all current EVs and PHEVs here and here, respectively. 

EVs fuel costs are consistent and less expensive. Gasoline prices are subject to supply and demand which can be affected by everything from weather events, to terrorist attacks, to geopolitical events, such as the Russia-Ukraine conflict. While HEVs and PHEVs are still tethered to the gas pump, EVs are divorced from the gas price fluctuation headaches because electricity prices are far more predictable and stable over time. In 2020, the National Renewable Energy Laboratory found that, depending on which state you live in, you can save up to $14,500 in fuel savings over the lifetime of an EV when compared to ICE vehicles.  

That being said, there is an up-front cost of purchasing and installing a Level 2 charger in your home if you want a quicker charge. These estimates are between $1,000 – $2,900 depending on your setup and features. While this up-front equipment and installation costs are significant, there are federal, state, and local discounts, and utility and charging companies, who can often provide discounts, financing, tax credits, and rebates to help. 

Overall, buying an EV is not just a great decision. It’s also one that will benefit your pocketbook for years to come. 

Note: Originally published on May 1, 2021, and updated on January 2, 2023.

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