Estimating the cost of driving an electric vehicle is more complicated than calculating the cost of operating a conventional car.
Soaring gasoline prices may inspire you to buy an EV, but the pump prices you’ll avoid are part of the story.
When it can cost $100 to fill a gas tank but only $10 to charge an electric car, buying an EV seems obvious. But EV economics is complicated, and you must be savvy about many unknown factors before sticking it to the oil companies.
You bought a new car.
You have to buy an EV, and driving an EV is often a pricey proposition. Even after you trade in your current, conventional car, you could easily be in the hole of $10,000 or more.
It’ll take you several years to break even. Assume a scenario where you buy a cheap EV, live in a place with cheap electricity, and always charge it at home. There are a lot of “ifs” when purchasing a new EV.
This is not a new concern. Several people have bought a hybrid or other fuel-efficient car at a cost far higher than they will ever save on fuel.
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Trading in a Porsche Cayenne for a Cayenne Hybrid will take 11 years to break even on fuel cost savings.
Tesla Model 3 set the electric car market on fire but starts at $47,000, $10,000 more than a year. Average transaction prices range closer to $60,000.
A pure EV will save you far more energy than that Cayenne Hybrid. However, the EV’s initial purchase price, potentially higher insurance, and high repair costs can blunt its advantages.
Conversely, conventional cars can have maintenance costs that EVs don’t incur, like more frequent brake service and fluid changes.
Many people buy an EV to save the environment and money. It is a noble intent that repays their investment with fuel savings and environmental benefits.
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But consider other more effective ways like installing rooftop solar or using a top-notch Zoom room to reduce business air travel and improve your carbon footprint.
Depreciation
Depreciation is the “other price” and an important consideration when purchasing an electric car.
New and late-model car values drop as you own them, creating a cost per mile that is often worse for EVs due to their higher price and often greater depreciation.
For example, Subaru, not known for electrified cars, has an average resale value of 66% of its original price after five years.
A new $35,000 Subaru will depreciate $11,500 over the first five years, or $6.30 daily. That’s you and a friend having a latte seven days a week.
A Tesla will retain 58% of its value after five years, No. 3 among luxury brands. With a $60,000 Tesla Model 3, you’ll lose $25,000 in depreciation over the first five years.
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That’s $13.80 daily, buying you and three friends a latte daily. Another pain is that Tesla has been so successful at selling EVs that its cars have ceased to qualify for the $7,500 federal tax credit.
Battery replacement
Central to an EV is its battery pack, equivalent to the value of a conventional car’s engine. Unlike modern car engines, EV batteries require replacement during the vehicle’s service life.
A basic form of depreciation unique to EVs is the eventual replacement of the battery pack, which is unlikely for a modern conventional car engine.
Replacing an EV’s battery pack is likely as the vehicle ages and delivers an unsatisfactory range. Replacing a battery can cost an estimated average of $10,000.
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Having said this, the cost remains hazy because few EVs have been on the road long enough for their battery packs to degrade significantly.
It’s also uncertain which EV owner will shoulder the battery-replacement cost.
A late-model used EV may end up with the new owner holding the bag when its range drops, triggering an expense or loss of value that erodes the overall electric driving economy.
Electricity cost isn’t simple.
The cost of electricity can vary far more than gasoline. It depends on where you live and whether you charge at home or a commercial or public charger.
In California, residential electricity costs 18 cents per kilowatt hour. Still, it’s 8 cents in Idaho and 28 cents in Hawaii.
This difference is like paying $5 a gallon for gasoline in California and $2.50 in Idaho. It is $8 for a gallon in Hawaii. The cost of electricity isn’t always precise; it is buried instead in murky tariffs and times of the day.
You can check this at Fueleconomy.gov to compare car, electric, or gas costs. A straight comparison between a BMW 330i xDrive and a Long-Range Tesla Model 3 shows a stark difference in energy costs, making Tesla seem like an absolute cost-saving machine.
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However, a 2021 study by Anderson Economic Group (PDF) ascertains that driving an EV can cost substantially more than a conventional vehicle. It’s a controversial conclusion but not entirely unfounded.
It assumes that there is much more charging at commercial locations than at home and that you make a healthy salary that accounts for wasted value. At the same time, you wait for your car to charge.
The story is much rosier for those who charge at home, but Anderson wisely amortizes the almost $2,000 cost of a Level 2 charger, which most EV owners will have.
The worst-case take on owning an EV shows it costs more than a gas-engine car.
The answer
To answer the question we started with. Does it cost less, the same, or more to operate an EV than a gas-engine car?
While it is not a very satisfying answer, an EV will probably reduce your actual cost of getting around, but probably not overnight.
A shift to EVs is inevitable for various technological, political, and financial reasons. Still, it would be best to be concerned about how EVs will work for you.
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