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How Much Does It Cost to Run an Electric Car?

February 27, 2024

lectric vehicles (EVs) have gone from a niche product to a fast-growing segment of the auto market. With more models becoming available and costs dropping, interest in EVs continues to rise among US car buyers. But misconceptions still exist around what it really costs to own and operate an electric car.

Looking past the upfront sticker price and taking a close look at factors like charging costs and maintenance reveals that EVs can be cheaper than gas-powered cars over the long run.

Upfront Costs – EVs Getting More Affordable

In the past, the high initial price tags on EVs have been intimidating to buyers and a significant barrier to mainstream adoption. But those costs have been dropping sharply in recent years.

Falling EV Prices

According to Cox Automotive, which tracks US auto industry data, the average amount paid for a new EV fell by $14,300 between September 2022 and September 2023. That brought the price premium for EVs versus gas-powered cars down to just $2,800 more on average.

With the EV market expanding rapidly as more models become available, prices are projected to continue becoming more competitive with gas vehicles in the next few years. Improved battery technology, which is the most expensive EV component, will also help lower costs.

Federal Tax Credits

The federal government offers tax credits up to $7,500 for new EVs and $4,000 for used EVs to help make them more affordable for buyers. New Treasury Department rules will also soon allow car dealerships to apply the credit directly at the point of sale, making the savings more immediate.

However, automakers must meet specific US manufacturing requirements for their EVs to qualify for the full incentives. During a transition period, this has temporarily impacted the availability of some models. Still, the credits can lop thousands off the final price when taken advantage of.

State & Local Incentives

In addition to federal incentives, many states and some municipalities provide their own tax credits or rebates up to a few thousand dollars to further reduce EV costs. These can make a significant difference in the upfront affordability calculation.

Home Charging Costs

Most EV owners prefer to charge at home, which simply requires installing a 240-volt outlet or Level 2 charger in the garage. This typically costs around $2,000 including parts and labor. However, states, utilities and the federal Inflation Reduction Act offer rebates to defray much of that expense.

Accounting for available incentives at all levels, buyers can significantly mitigate the higher sticker prices on EVs in most areas of the country.

Charging Costs – Home Is Where The Savings Are

For many prospective EV buyers, anxiety over charging costs is a nagging question. But looking closely at average residential electricity rates shows home charging is far cheaper than trips to the gas pump.

How to Charge EV at Home

EVs Are Energy Efficient

Modern EVs convert electricity to motion 2.6-4.8 times more efficiently than gas vehicles. So they can travel the same distance using far less energy, according to US Department of Energy data.

Combine that with electricity’s lower per-unit cost compared to gasoline, and the savings for EV owners add up quickly.

Average Annual Fuel Costs

Research by the University of Michigan’s Transportation Institute in 2018 determined the yearly cost to fuel a compact EV was just $485 on average. For a comparable gas car, the annual fuel expenditure was over twice as high at $1,117.

A 2020 Consumer Reports study similarly found EV owners spend about 60% less on fuel per year versus those driving gas vehicles.

State-By-State Savings

An analysis by Energy Innovation showed EVs are cheaper to fuel than gas cars in every state. Projected lifetime fuel savings for Washington EV owners are highest at $14,480. But even in Hawaii, with the lowest differential, driving electric still saves $2,494 in fuel costs over 15 years of ownership.

Charging Is Cheapest At Home

EVs can charge on public networks, but it costs significantly less to plug in at home overnight on residential rates. Many electric companies offer special lower rates during off-peak hours, typically late at night, which saves EV owners an extra 30% or more on charging.

Estimating Home Charging Costs

To get a personalized estimate, calculate your EV model’s efficiency rating, shown as kWh/100 miles. Multiply that by your electric rate per kWh from your utility bill. That provides your electricity cost per 100 miles.

For example, the 2023 Hyundai Ioniq 6 averages 24 kWh/100 miles efficiency. At a flat rate of 15 cents/kWh, the cost to drive 100 miles would be:

24 kWh/100 miles x $0.15/kWh = $3.60

Compare that to the cost of gasoline to drive the same distance in your current car or the EV’s gas-powered equivalent.

Public Charging Is More Expensive

Level 2 public chargers and DC fast chargers along major routes allow EV road trips but cost more than home charging. Public charging station companies set their own rates based on local electricity prices, demand, and other factors. So costs can vary significantly across regions and providers. But for most drivers focused on daily commutes, home charging does the job.

Maintenance – Far Fewer Fluids & Filters

EVs have vastly fewer moving parts than internal combustion engine vehicles. With regenerative braking, they rarely need brake pad replacements. And of course, no spark plugs, oil changes or transmission maintenance are required either.

AAA found EVs cost about 50% less annually to maintain than gas cars – $330 in savings per year typically. There are still items like tires, cabin filters and wiper blades. But the reduction in fluids, filters and brake service adds up to major long-term savings.

Total Lifetime Ownership – The EV Advantage

For an accurate projection of total costs over the 15-year lifespan of a typical new vehicle, it’s necessary to look at the big picture – both upfront and ongoing costs.

Upfront – Purchase Minus Incentives

Start with the purchase price or lease terms of a specific EV minus available federal, state and any local credits or rebates. Also factor in the cost to install a home charger after any utilities incentives. That provides a true upfront out-of-pocket cost.

Ongoing – Charging, Maintenance & Insurance

Calculate projected annual charging costs based on your local electric rate and mileage as shown in the example above. Add savings on maintenance compared to an equivalent gas car. Insurance costs are similar for both.

Total Lifetime Cost

Add the upfront and ongoing annual costs over a typical 15 year span of ownership. Compare that to a similar gas-powered vehicle. Analysis by Consumer Reports and others repeatedly shows EVs cost less to own overall.

And that’s before factoring in thousands of dollars in societal benefits from less pollution and greenhouse gas emissions. For most US drivers, the switch to electric pays off both personally and environmentally.

EV Owner Experience Alleviates ‘Range Anxiety’

Surveys show a majority of Americans are intrigued by the prospect of buying an electric car. Yet sales make up just 5% of the total auto market as anxiety around factors like range, charging and costs remain barriers to taking the plunge.

But a recent AAA study found that hands-on experience with EV ownership had a dramatic impact on perceptions.

No Worries About Running Out of Juice

Range anxiety has long been a top concern. But following real-world experience, virtually all EV owners found it was not the issue they anticipated. 95% reported never running out of charge mid-trip.

After driving electric cars, over three-quarters said range was no longer a concern at all. Test drives don’t fully alleviate range fears. Actual ownership and day-to-day use does.

Driving More on Electricity

The study found that EV owners actually drive their electric vehicles more than previous gas cars – 39 miles a day on average. Range isn’t restrictive with the reality of home charging.

Choosing Electric Again

The proof is in the pudding. 96% of first-time EV buyers said they would go electric again for their next vehicle purchase. Experience overcame preconceived worries about range, charging, and even cost.

This suggests consumer education and experience rather than simply incentives may be the key to accelerating mainstream EV adoption in the US market.

The Future Is Electric

Early adopters have proven EVs make financial sense for many Americans. As more models reach price parity upfront with gas vehicles, concerns over lifetime cost should dissipate entirely.

Few technologies can save owners thousands of dollars, reduce environmental harm, and provide an exciting driving experience. For more and more US car shoppers, the future is electric.

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