Cost of Electric Cars: Will an EV Save You Money?

Hand of a woman charging electric car
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When shopping for a new vehicle, potential customers often look at the sticker price of an electric vehicle and flinch. EVs are on average much more expensive than comparable gas-powered cars.

However, the sticker price doesn't account for federal tax credits, potential state rebates, and the lower cost of fuel and maintenance. Add those, in and you get a figure known as the total cost of ownership. 

Comparing the total cost of ownership over the lifetime of a vehicle, EVs can compete with and even be less expensive than comparable gas-powered vehicles.  The price parity point, when the overall cost of comparable vehicles is the same, is roughly four to five years. After that, EV owners save money.

Purchase Price

Rebates and tax credits can significantly reduce the purchase price of an electric vehicle. The current federal electric vehicle tax credit is $7,500 on electric vehicles. The credit, however, only applies to cars made by automakers that have sold fewer than 200,000 plugin vehicles in the United States, so EVs from General Motors and Tesla no longer qualify. Proposed legislation would boost the tax credit amounts for model years 2022 and extend it to all EVs. Some U.S. states also offer tax credits or rebates, while utility companies around the country may also offer their own incentives. After the federal tax credit, the base purchase price of an electric vehicle in 2021 can range from $23,250 for an electric Mini Cooper SE to $178,850 for a Porsche Taycan Turbo S, with a median price of $47,485.

State EV Rebates and Tax Credits
State Maximum Incentive
California $7,000
Colorado $5,000
Delaware $2,500
Maine $5,500
Massachusetts $2,500
New York $2,000
Oregon $5,000
Pennsylvania $1,750
Vermont $4,000

Fueling Costs

Electric vehicle charging costs range depending on where you charge your car. Four-fifths of EV charging is done at home,

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Electric vehicle charging costs depend on where you live and where you charge your car. Four-fifths of EV charging is done at home, so local electric utility rates determine fuel costs most of the time. The average residential electricity rate in the United States is roughly 13 cents/kilowatt-hour, though that figure varies widely from state to state. That translates into $1.16 for an eGallon, the U.S. Department of Energy's term for the equivalent in electricity of one gallon of gasoline. Over the course of a year, with the average American travels almost 40 miles per day, the average fuel cost of a 2021-model electric vehicle would be $667.50, according to the U.S. EPA's Fuel Economy Guide Model Year 2021.

Electric vehicles can be charged simply from a standard 120-volt household outlet, just like charging a phone. However, many electric vehicle owners who can charge at home choose to install a higher-speed Level 2 charging station, which runs on 240 volts, the kind that a clothes dryer plugs into. Level 2 charging stations can cost anywhere from $300 to $700 to purchase, plus installation (and potentially permitting) costs. These can add another $1,000 or more to the total cost. Fortunately, a federal tax credit of up to $1,000 can apply to the installation of EV charging stations, and many states and utilities also offer incentives to reduce the price.

Charging an electric vehicle at public charging stations generally costs more, although some businesses offer free charging for employees or customers. Paid public charging is generally billed on a per-minute basis (rather than by the amount of energy charged). Like home charging, rates for public charging depend on local electricity rates, but they also depend on the charging speed. Level 2 charging at a public charging station can cost roughly 50% more than local utility rates. High-speed charging usually costs more, from $0.13 at Tesla's Superchargers to $0.99 at Electrify America's direct current (DC) Fast Charge stations. Some charging stations offer monthly subscription plans, which can range from $4.00 to $8.00/month, with reduced-rate charging ranging from $0.30 to $0.35 per minute.

Maintenance Costs

According to Toyota, “a single [internal combustion engine] car has about 30,000 parts, counting every part down to the smallest screws.” Without an internal combustion engine, however, an electric vehicle with far fewer parts requires less maintenance, limited mostly to the parts that EVs have in common with gas-powered cars, such as many fluids, wheels, brakes, and air conditioning. Do-it-yourself maintenance like changing wiper blades and washer fluid amounts to minimal expense, while repairs to larger items like suspension systems and brake pads can add up. Consumer Reports estimates that, on average, maintenance on an electric vehicle costs roughly $0.03 per mile. The average car is driven 11,467 miles per year, putting the average annual maintenance cost of an EV at $344.01, or $1,720.05 over a five-year period. Using California prices, Pacific Gas & Electric's EV Savings Calculator estimates the five-year maintenance cost on a Hyundai Ioniq Electric to be $2,939, a Nissan Leaf to be $2,914, and a Tesla Model 3 to be $3,032.

Battery replacement costs may or may not be a factor in considering maintenance costs. The battery is the most expensive part of an EV: excluding labor, replacing the battery in a Nissan Leaf can cost up to $5,500, while a new Tesla battery can cost $13,500. Yet the battery itself is likely to outlive the useful life of the vehicle. The average car in the United States is on the road for 11.6 years, while EV batteries have been estimated by the National Renewable Energy Laboratory to last 12 to 15 years. A standard warranty on a battery is a legally mandated eight years/100,000 miles.

Comparing Costs With Gas-Powered Cars 

Hand refilling the car with fuel, close-up.
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How do these costs stack up against those of an internal combustion engine vehicle? In short, while the initial total ownership cost of an electric vehicle is higher for the first few years, incentives, plus lower fuel and maintenance costs, make it a worthwhile longer-term investment. By the fifth year of ownership, savings can be in the thousands of dollars. Own your electric vehicle even longer, and the savings continue to increase.

Purchase Price

According to Kelley Blue Book, the average price for a light vehicle in the United States in April 2021 was $40,768. That's $6,717 cheaper than the average electric vehicle cost of $47,485 (after the federal tax credit, though not including any state or utility incentives). 

Fuel Costs

The average cost of a gallon of gasoline in the United States in early June 2021 was $3.04. Using a cost of $3.02/gallon, the EPA's Fuel Economy Guide Model Year 2021 estimated annual fuel costs for gas-powered vehicles to be $2,077.02. Annual diesel fuel costs were slightly lower at $1,936.67. With the price of an eGallon at $1.16 and an annual fuel cost of $667.50, fueling an electric vehicle costs less than a third (32%) of the cost of fueling a gasoline car. More conservatively, the Consumer Reports study noted above states that electric vehicles “were estimated to save consumers about 60% on fuel costs compared with the average vehicle in their class.” (This 60% figure is consistent with that of the U.S. Department of Energy.)

Maintenance Costs

While Consumer Reports found that EV owners spend $0.03 per mile on maintenance, the cost to maintain a gasoline-powered car was double—$0.06 per mile. Confirming the Consumer Reports analysis, PG&E's EV Savings Calculator found that over 75,000 miles, the maintenance cost of a Hyundai Kona Electric was $2,255, while maintenance on the gas-powered version was $4,130, or $0.03 and $0.06 per mile, respectively.

Total Cost of Ownership

The longer you own an electric vehicle, the more you save. Addressing the question of whether an EV is less expensive to own over the long term, Car and Driver's three-year, 45,000-mile analysis answered: “sort of. Sometimes.” Its study found that, including the federal tax credit, an electric Mini Hardtop was $358 cheaper than the gas-powered version over a three-year period, while the Hyundai Kona Electric was $7,994 more expensive than the gas-powered version. Add in any state and local incentives, however, and “as they say, it's complicated.”

Compared to Car and Driver's three-year time frame, however, Consumer Reports, AAA, and the U.S. Department of Transportation calculate total ownership costs based on a five-year/75,000-mile ownership period—an industry standard. Given the higher upfront costs of an electric vehicle, it takes longer than three years to reach the price parity point with a comparable gas-powered car. Consumer Reports points out that the fuel efficiency of a gas-powered engine decreases more quickly than the efficiency of an electric motor. A five- to seven-year-old used EV saved owners two to three times more in fuel costs than the owner of a new EV owner saved compared to a comparable, new gas-powered vehicle. Over the entire life of a vehicle, Consumer Reports concluded that electric vehicle owners could save between $6,000 to $10,000.

Using PG&E's EV Saving Calculator to analyze the same vehicles as the Car and Driver report, a Mini Electric Hardtop 2 Door was $15,285 cheaper to own over five years/75,000 miles than the gas-powered version, while the Kona Electric was $6,788 cheaper to own than the gasoline model. For the Kona, the price parity point came in the fourth year, and by the eleventh year (the average life span of a car), the electric model was $10,266 less expensive. Similarly, it compared a 2021 Tesla Model 3 (MSRP $38,990) with a 2021 Honda Insight Touring edition (MSRP $ $29,040) and found the price parity point in the fifth year, with the Model 3 costing $444 less to own. Extend the period to 11 years, and a Model 3 that cost $9,950 more to purchase than was, in the long run, $1,912 cheaper. A similar comparison between a Model 3 and a Nissan Altima (MSRP $26,800) found their lifetime costs comparable. As the years and mileage increase, so do the savings of owning an electric vehicle.

Think Long and Hard

A vehicle is usually a long-term investment. Thinking long and hard means doing a bit of math and having a bit of patience. In the long run, an EV will save you money. The savings to the environment are priceless.