July 27, 2022

It's Time to Bust the Myth That Electric Vehicles Are Too Expensive for the Average Driver

4 Min. Read

Electric vehicle (EV) adoption is rising, but EVs still carry a higher initial price tag than gas-powered cars. As inflation rises and households see their budget shrink, you may wonder if switching to an EV is an intelligent financial decision. Let’s look at whether electric vehicles are too expensive or actually compare favorably to gas-powered vehicles in terms of cost of ownership.

Significant cost increase for all vehicles

Anyone shopping for a car these days is in for sticker shock. Prices have jumped considerably on nearly all makes and models. EVs do come with a higher up-front cost than cars with internal combustion engines (ICEs), but all cars are getting more expensive. In fact, the average new car price in the U.S. topped $47,000 in December 2021.

Supply and demand are obvious factors. However, the two main problems being blamed for the price inflation are shortages in microchips needed for today’s cars and demand for newer technology features. The global chip shortage stymied automakers trying to build new cars to meet demand. So, vehicle manufacturers focused production on higher-profit models with more expensive features. This resulted in a shortage of inexpensive new cars at dealers.

The shortage of affordable new cars forced many buyers to seek used cars instead. This has driven up the price of used vehicles too. The average preowned vehicle sold for over $28,000 by the end of 2021. That represents a 28% increase from 2020 to 2021 and a 42% jump since the pandemic started.

EV pricing in the near future

If gas-powered cars have gotten so expensive, what about EVs, which have typically averaged a $10,000 higher cost than gas-powered cars (not counting the cost of installing a Level 2 charging station)? Does that mean electric vehicles are too expensive now for you and other would-be buyers? While EV makers were impacted by pandemic-related shortages too, the pricing difference between ICE vehicles and EVs is likely to disappear.

Many of the EVs that have been available in recent years were luxury autos with higher price tags. If an EV manufacturer offered a comparable ICE model, the electric one cost more because the powertrain cost considerably more, largely because of battery pack costs. However, EV battery prices are dropping dramatically, and some experts expect ICEs and electric vehicles to achieve parity in a few years.

Additionally, EVs at all price points are expected to flood the market soon. Some analysts estimate that globally there will be 40 million EV models for sale in the next few years. The burgeoning supply, including cars from every ICE automaker and from newcomers hoping to top Tesla, and battery affordability are expected to drive down prices.

Other considerations when looking at total cost

When evaluating whether electric vehicles are too expensive for you, it is important to look at the total cost of ownership, not just the sticker price. Here are factors that you need to evaluate if you want to gauge whether you can afford an EV now:

• Fuel costs. Charging an EV battery costs way less than filling up a gas tank. In addition, EV drivers spend 60% less on fuel than those driving ICE cars. Even in areas with high electric rates, an EV is still cheaper to drive per mile than a gas-powered car.
• Tax incentives. Federal, state and local incentives can negate all or most of the price difference between gas-powered cars and EVs. The federal government established a tax credit of up to $7,500 for new EVs. However, the credit is limited to the first 200,000 EVs sold by the automaker. Tesla and General Motors have surpassed this number, and Toyota is expected to top that threshold soon. So, no credit is available if you purchase an EV from these manufacturers. EVs that still qualify for federal tax credits are listed here. Additionally, many states, such as New York and Illinois, offer rebates for taxpayers who buy an EV. Plugstar has a tool to help find incentives. Plug-In America has a map of incentives, including those from local utilities.
• EV parts are expensive, so repairs can be costly. However, EVs have fewer parts and fluids, so they require fewer repairs. Lifetime maintenance costs for EVs average about half the costs for ICE cars. In another study, Ford found that maintenance on its electric F-150 truck was 40% less than maintenance on its gas-powered F-150 over eight years and 100,000 miles.
• Auto insurance actuaries factor in the cost of the vehicle, parts and repairs when pricing coverage. A more expensive vehicle typically costs more to cover because damage to parts, such as the EV battery pack, can be costly. Some insurance companies offer discounts for EVs. Take the time to price your coverage.

Adding it up and taking action

The U.S. Department of Energy calculated that over their lifetime, EVs cost less to own and maintain than ICE cars. So, while it might seem that EVs are expensive, based on today’s sticker prices, potential buyers need to look at the big picture and consider all the costs involved in a purchase. They also need to consider getting an EV charger installed by experts to maximize the value of their car.

Through our network of Certified Installers, Qmerit can help you get even more out of your new EV with convenient and affordable @Home charging solutions. Qmerit simplifies installation for EV drivers across the U.S. and Canada by deploying certified, trained electricians who specialize in EV charging technologies. Get started today by providing some information about your home and a few photos, and instantly receive a free online estimate.