Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
At first, electric vehicles (EVs) were marketed as luxury cars with price tags that put them out of reach for most people. However, as interest in eco-friendly cars rises, more automakers are releasing electric cars aimed at the masses. S&P Global Mobility forecasts there will be more than 28 million electric cars in operation by 2030.These cars promise to be environmentally friendly and save you money at the gas pump. However, the price of gas isn’t the only cost to consider. Read on to learn the factors that can affect the cost of an electric car, as well as look at whether electric cars are more cost-effective.
Introduction to Electric Car Costs
Electric cars, also known as electric vehicles or EVs, are expected to surge in popularity as tax incentives make electric car costs more affordable.Consumers who buy a new electric car in the years 2023 through 2032 may be eligible for a $7,500 clean vehicle tax credit. The Inflation Reduction Act of 2022 also offers federal tax credits of up to $4,000 for eligible consumers who buy a used electric car.Electric cars are typically more expensive than your average auto, but the ongoing cost of maintaining an electric car can be cheaper. One of the reasons for this is that electric cars have fewer moving parts than traditional cars and don’t require oil changes.
How Much Does an Electric Car Cost?
As of August 2023, the average price of an electric car stood at $53,376, down 18.7% from the year before, according to Kelley Blue Book® data. Across the auto industry, the average transaction price of new cars stood at $48,451.Although the average transaction price of electric cars has declined in 2023, electric cars still remain more expensive than conventional cars on average.Here are some of the average car transaction prices by category as of August 2023, according to KBB data:
Category
Average transaction price
Compact car
$26,281
Electric vehicle (EV)
$53,376
Full-size car
$48,061
Full-size pickup truck
$65,567
High performance car
$136,471
High-end luxury car
$120,231
Mid-size car
$31,943
Mid-size SUV/crossover
$46,831
Minivan
$48,139
Sports car
$48,035
Van
$61,771
What Are the Added Costs of Owning an Electric Car?
In addition to the price you’ll pay to drive an electric car off the lot, there will be other costs you’ll have to account for over the life of the vehicle, from charging to maintenance to insurance. We examine some of those added costs below.
Electric Car Maintenance Costs
Electric cars have fewer moving parts than their gas-powered counterparts. As a result, there are fewer parts subject to wear and tear and therefore in need of regular maintenance. You’ll never have to worry about getting an oil change with an electric car.Any vehicle can have ongoing maintenance costs, such as the costs of rotating tires or replacing windshield wipers. But the average cost of maintaining an electric car over a five-year period is about $300 less than the cost of maintaining a gas-powered vehicle, according to the National Automobile Dealers Association (NADA).Over the course of a vehicle’s lifecycle, some metrics suggest that electric car maintenance costs are 60% to 70% less than the average cost of maintaining a traditional car. The average internal combustion engine (ICE) car has nearly 10,000 parts, whereas an electric car has about 700, according to Cox Automotive.Electric cars generally have an expected battery lifetime of 12 to 15 years. If your battery dies, one of the most expensive car repairs is replacing your electric car battery. EV battery replacements can cost $5,000 to $15,000, but the battery may have a manufacturer’s warranty covering eight years or 100,000 miles.
Fueling and Charging Costs
When you charge your electric vehicle, you’ll pay per kilowatt-hour (kWh). The price typically ranges from 10 cents to 35 cents per kWh, whereas regular gasoline typically costs between $3 and $4 per gallon in 2023.If you charge your electric car at home, it could inflate your electric bill by $48 to $72 each month. By comparison, pumping 25 to 40 gallons of gasoline into a gas-powered vehicle at a price of $3.50 per gallon each month could cost between $87.50 to $140.Charging your electric vehicle at home is typically the slowest but most cost-effective method of charging. You can also go to public charging stations, which are typically faster but more expensive than charging at home.Some charging stations may offer free charging, although the fastest charging stations with direct current (DC) fast charging may cost up to 40 cents per kWh. Overall, the cost of recharging your electric car is typically lower than the cost of fueling up a gas-powered car.
Insurance Costs for Electric Cars
In general, owners of electric vehicles can face higher insurance premiums compared with those of gas-only vehicles. This is due in part to the fact that vehicles that are more expensive tend to cost more to insure. Additionally, repairs for electric vehicles may be more costly due to the price of their parts as well as the more limited options in technicians who know how to repair electric vehicles.Of course, as electric vehicles grow more popular, their sticker price and the cost of repairs will likely go down, which will likely also push down insurance rates for EVs.As of 2023, the average five-year cost of collision and liability insurance for electric cars is $6,824 vs. $5,707 to insure the average gas-powered vehicle, according to Kelley Blue Book data cited by NADA.
Depreciation and Resale Value
Electric cars have a higher rate of depreciation than conventional cars, according to new research. An empirical analysis of the depreciation of electric cars vs. gasoline vehicles found electric cars can lose 13.9% of their value each year compared with 10.4% for gas-powered cars.Cars typically depreciate in value over time, and car depreciation diminishes the resale value of your vehicle.
Environmental and Health Benefits
Here are some of the environmental benefits of electric cars:
Electric cars are powered by electric motors fueled by rechargeable batteries, not internal combustion engines
Electric cars produce zero tailpipe emissions
Electric cars typically have a smaller carbon footprint than conventional cars
Electric cars don’t leak motor oil and don’t require any oil changes by design
Electric cars don’t emit carbon dioxide or smog when operating on the roadways. This can help improve air quality over time, although manufacturing electric cars and recharging their batteries can create carbon pollution.When comparing the carbon footprint of electric cars vs. conventional cars, the U.S. Environmental Protection Agency says electric cars typically have a smaller carbon footprint than gas-powered vehicles.In the future, electric cars can become greener over their lifecycle if and when power plants and energy grids transition to zero-emission electricity. The United States has set a goal of 100% carbon pollution-free electricity by 2035, according to a May 2023 report prepared by the U.S. Department of Energy’s Office of Policy.
Pros and Cons of Electric Cars
If you’re choosing between an electric vehicle and a traditional gas-powered option, it’s important to weigh out the pros and cons of electric cars:
Pros of electric cars
Cons of electric cars
Owning and operating an electric vehicle reduces your carbon footprint.
Limited battery life means electric cars have a shorter range before needing to be charged than gas-powered vehicles.
Electric cars don’t run on gas, so they are cheaper to fuel.
Installing a charging station at home may be costly.
With fewer moving parts, EVs are subject to less wear and tear and are cheaper to maintain. Plus, oil changes and filter changes aren’t needed.
While repairs may be fewer and farther between, some will still be costly. Batteries should last a decade, but when they need to be replaced, they cost $5,000 to $15,000 in parts and labor.
To encourage more drivers to choose electric vehicles, federal and state governments offer tax credits and incentives. The federal government offers a tax credit of up to $7,500 for new electric vehicle purchases. Incentives will vary by state.
For now, electric vehicles are more expensive to buy on average than their gas-powered counterparts. Additionally, electric cars tend to have poorer resale value than conventional models.
Because EVs tend to lose value faster than gas-powered vehicles, this can make it easier to find more affordable used electric vehicles.
Insurance premiums are usually higher for electric vehicles due to their higher sticker price and the higher cost of some repairs.
Is Owning an Electric Car Cheaper Than a Gas Car?
While the average upfront cost of purchasing a new electric vehicle may be more than the average gas-powered car, they are cheaper to operate and maintain, and you could ultimately save thousands of dollars over the life of the car. What’s more, government incentive programs may reduce your out-of-pocket costs by a significant amount, making an electric car a more feasible option for those with smaller budgets.Still, there is some give and take with the costs of owning an electric vehicle to keep in mind. For one, insurance premiums tend to be higher. And while there is less maintenance needed overall, some repairs like battery replacement can be costly.You’ll also want to keep in mind the cost of charging, including if you want to install an at-home charger, the most cost-effective option. All told, however, the annual cost of charging electric cars is typically cheaper than the annual cost of fueling up a gas-powered car.
How Can I Pay for an Electric Car?
When it comes to purchasing an electric vehicle, your options are the same as buying a traditional car. Here’s a look at the ways you can pay for an electric car:
Cash
If you have enough savings on hand, you can buy a vehicle in cash. Doing so may give you some leverage as you negotiate a purchase price. It will also mean you don’t have to pay any extra costs in the form of loan fees and interest. You’ll own the car outright with 100% equity and no lienholders listed on your car title.
Financing
You may also choose to finance your car purchase, taking out a loan through a bank or other financial institution. Or, you may consider dealership financing. These are among the different types of car loans you can explore.When you take out an auto loan, you usually make a down payment and then pay off the rest of the cost of the vehicle, also known as your car loan principal, over a series of monthly payments. In return for allowing you to borrow the funds, your lender will typically charge interest, adding to the cost of your loan. Some lenders offer 0% annual percentage rate (APR) car loans.The amount of interest a lender charges will depend on a number of factors, including your credit score, income, and whether you’re using a co-borrower. Lenders typically offer their best rate to borrowers with excellent credit.Recommended: Guide to Auto Loan Shopping
Leasing
Another option you have when it comes to getting an electric car is leasing. There are a number of benefits to leasing an electric car as opposed to buying it outright, including being able to avoid the steep depreciation that comes with electric vehicles, steering clear of dealing with eventual battery degradation, and getting access to newer, evolving technology when you trade in your car at regular intervals.However, you’ll lose out on potential federal and state tax credits when you lease instead of buy — though sometimes the leasing company may pass on their savings to the consumer. Plus, with leasing, you won’t actually own the vehicle.
Refinancing Your Electric Car Loan Terms
In the future, you may consider refinancing your auto loan. When you refinance car loan debt, you take out a new loan with better terms or interest rates and pay off your old loan.You may be wondering, when should you consider refinancing a car? If your financial situation improves, interest rates drop, or your electric car payments become unmanageable, looking into refinancing may be worthwhile. It’s important to consider the benefits and disadvantages of refinancing, though. On the plus side, you may be able to settle on more manageable monthly payments, save money on interest, and free up cash to put toward other financial goals. On the other hand, you may also find yourself dealing with prepayment penalties and fees to originate a new loan.
The Takeaway
While you’ll skip costs at the gas station with an electric vehicle, there are still costs of an electric car to keep in mind if you’re considering getting one. Added costs can include charging — both at public stations and at home — as well as maintenance and insurance. Still, overall, the average cost of an electric car does tend to be cheaper in terms of operation and maintenance than its gas-powered counterparts, even if their sticker price is currently higher.If you choose to finance your purchase of an electric car, remember you may be able to refinance for lower interest costs or a lower monthly payment. If you’re interested in auto loan refinancing, Lantern by SoFi can help. Just fill out one simple form to access loan offers from multiple lenders in our marketplace.Lantern can help you compare prequalified rate offers in minutes.
Frequently Asked Questions
Do electric cars have a higher or lower resale value than traditional cars?
Are there any tax credits or incentives available for electric car buyers?
What is the cost of an electric car?
How can I pay for an electric car?
Is owning an electric car cheaper than a gas car?
Photo credit: iStock/Prostock-Studio
LCAU0823001
About the Author
Austin Kilham
Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.
