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All You Need to Know About the Costs of Owning an Electric Vehicle

All You Need to Know About the Costs of Owning an Electric Vehicle
Austin Kilham
Austin KilhamUpdated March 22, 2022
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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 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 vehicles aimed at the masses. By the end of 2022, there may be over 100 different electric vehicle models for sale in the United States.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.

How Much Does an Electric Car Cost?

As of November 2021, the average price of an electric car hovered around $56,000, up nearly 6.2% from the year before, according to data from Kelley Blue Book. The price of an electric car is about $10,000 more than the industry average of $46,329.That said, the price of an electric vehicle will depend on the make and model that you choose. For example, a 2022 Nissan Leaf has a starting price of about $28,000. Meanwhile, a Tesla Model S could cost more than $100,000.

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.

Charging Station Costs

When you charge your electric vehicle, you’ll pay per kilowatt-hour. The national average is around $0.12 per kilowatt-hour, according to data from electricity marketplace Electric Choice, though price tends to vary by state. And as a rule of thumb, the faster you charge your vehicle, the more expensive charging will be.That said, the price of a kilowatt-hour is much more stable than the price of gas. The nationwide average cost today is only a couple cents more than it was a decade ago.

Charging an EV at Home

Charging your electric vehicle at home is the most cost-effective method of charging. In fact, one Consumer Reports study found that individuals could save $800 to $1,000 on fuel costs if they charged their electric vehicles at home. Plus, at-home rates will vary in price much less than public charging stations, as each network has its own rates.You will have to install some sort of charging station in order to charge your EV at home though. Depending on how your house is wired and what type of station you want or need, installation costs can vary widely, ranging up to about $2,500. Equipment costs tend to be anywhere from $200 to $1,000, while the cost of installation can range from $800 to $1,300 or more, according to data from Edmunds, an online automotive resource. Higher prices tend to correspond with the need to do a lot of electrical work to prepare the charging site.

Maintenance

Electric vehicles have fewer moving parts than their gas-powered counterparts. Consider one of Tesla’s claims to fame: Their cars have only 17 moving parts, compared with the 200 or so in a traditional vehicle. As a result, there are fewer parts subject to wear and tear and therefore in need of regular maintenance.Research shows that individuals who buy an electric vehicle can expect to save about $4,600 in maintenance and repair costs over the life of the car, per data from Consumer Reports. If you take a look at a mile-for-mile breakdown of maintenance costs, electric vehicles typically cost about $0.03 per mile to maintain, compared to $0.06 per mile to maintain a car with an internal combustion engine.

Insurance

You’ll also need to take into account the cost to insure an electric vehicle. In general, owners of electric vehicles can face higher insurance premiums compared to 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. 

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. 

Is Owning an Electric Car Cheaper Than a Gas Car?

While the average up-front 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 average cost per year of charging an electric car is about half that of gas vehicles, according to the U.S. Department of Energy.

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. 

Financing

You may also choose to finance your car, taking out a loan through a bank or other financial institution. Or, you may consider dealership financing. 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 charge interest, adding to the cost of your loan.The amount of interest they charge will depend on a number of factors, including your credit score, income, and whether you’re using a co-borrower.

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 Car Loan With an EV

In the future, you may consider refinancing your auto loan. When you refinance, 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.Here’s a rundown of what to ask when refinancing your car to help you make a decision for your financial situation.

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 vehicle, remember that you may be able to save more money in the future by refinancing if interest rates drop or your credit improves. Visit Lantern by SoFi to learn more about your options for refinancing your car loan.
Photo credit: iStock/Prostock-StudioThe tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice. SOLC0122002

Frequently Asked Questions

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?

About the Author

Austin Kilham

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.
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