Is EV really cheaper than gas

Electric vs. Gas Cars: Is It Cheaper to Drive an EV?

There are plenty of climate and air quality reasons to buy an electric vehicle (EV), but is it cheaper to drive? While this is a complicated question that has befuddled car shoppers for years, in most cases, an EV will indeed be cheaper in the long run. And with automakers slashing prices for EVs in the past year on top of federal incentives for eligible buyers, you may even be able to score a bargain up front. Lets sort out the details.

Sticker prices for electric vs. gas cars

According to data from Cox Automotive (parent company of Kelley Blue Book), the average price paid for a new EV has fallen significantlyin September 2023, it came down by $14,300 over the prior year. This amounted to a cost of just $2,800 more than the average paid for a new gas-powered vehicle. And with the EV market growing rapidly, the price margin is expected to shrink even more in the coming years as manufacturers produce more affordable models and improve battery technology, the most expensive part of an EV.

You can mitigate some of that cost by making use of tax incentives, which can shave thousands off an EVs price tag. The federal EV tax credit offers up to $7,500 for new EVs and, for the first time, $4,000 for used EVs, too, for eligible buyers and EVs. In addition, new rules from U.S. Department of the Treasury will soon allow participating auto dealers to provide the tax credit directly to consumers at the point of sale, making savings more immediate. One asterisk: Automakers must now meet new EV manufacturing requirements in order for their vehicles to qualify for those federal incentives, which will likely temporarily impact the availability of eligible EVs while supply chains catch up. Many states offer their own tax incentives, too, so take the time to search for whats available for the model youre interested in buying.

Be sure to also consider adding an EV charger to your home. Charging from a standard 120-volt outlet for eight hours overnight will add about 32 miles of range, which is typically plenty for daily driving needs. If you want to charge faster to be able to make frequent and/or longer trips, installing a Level 2, 240-volt outlet and charger in your garage can allow you to add more than 250 miles overnight. That installation will typically cost you about $2,000, but some states and local utility companies offer incentives to offset it, as does the Inflation Reduction Act.

Once you have an idea of what incentives you qualify for, you should be able to better compare car prices.

Cost of electricity vs. gasoline

Heres where EV owners win out. Going electric means you get to skip pricey trips to the pump, which is one of the biggest draws for making the switch. A 2018 study by the University of Michigans Transportation Research Institute found that the average cost to fuel an electric car was $485 a year, compared to $1,117 for a gas-powered vehicle. A 2020 Consumer Reports study similarly showed that EV drivers tend to spend about 60 percent less each year on fuel costs compared to drivers of gas-powered cars. And in 2023, the nonpartisan policy firm Energy Innovation released a report showing that these savings benefit drivers across the United States: Every EV model in every state is cheaper to fill than a gas-powered vehicle. These savings are largely based on the fact that current EVs are 2.6 to 4.8 times more efficient at traveling a mile compared to a gasoline internal combustion engine, according to real world data collected by the U.S. Department of Energy (DOE).

But these savings calculations arent the same for everyone. Heres where it can get a little complicated.

For starters, EVs can vary in efficiencythat is, how far they can go on the same amount of electricity. For an EV, efficiency is measured by how many kilowatt-hours (kWh) of electricity it consumes per 100 milessimilar to a gas-powered cars miles-per-gallon stat. (A lower kWh/100 miles rate is better.) The 2023 Hyundai Ioniq 6 is a standout in terms of efficiency, with 24 kWh/100 miles, but the more budget-friendly 2023 Chevrolet Bolt EUV is comparable, with a 29 kWh/100 miles rating. So make sure to consider this factor when comparison shopping.

Charging your car at home will cause your electricity bill to rise, but by how much will depend on factors like when you charge it and where you live. Electricity costs, like gas prices, can vary significantly by region. Many electric utilities offer lower electricity rates for charging during off-peak hours versus peak, so you'll want to take advantage of this when charging your EV, and many EVs can be programmed to automatically charge during those hours when rates are low. Taking these charging costs into account, a 2020 study broke down the lifetime fuel costs of battery-powered EVs versus internal combustion engine cars state by state. EV owners in Washington State, for example, can save as much as $14,480 over the life of their vehiclethe highest margin in the country. On the other end of the spectrum is Hawaii, where going electric could ultimately cost $2,494 more over 15 years.

To get a rough estimate of your own charging costs, multiply an EVs kilowatt-hour (kWh/100) mileage rate by your electricity rate (measured in cents per kWh), which you can find on your monthly bill. This will give you the electricity costs per 100 miles driven. After figuring in the number of miles you typically drive in a month, youll be able to see how much your electric bill may go up. Keep in mind that charging your car overnight, when electricity demand and prices drop, can save you 30 percent on that charge.

Also note that public charging stations tend to be more expensive than charging at home. If you rely exclusively on these stationswhich do offer faster, higher-voltage chargingyour fueling costs could significantly increase.

After you figure out how these factors apply to you and your preferred EV model, compare your final electricity cost estimate to what you typically spend on gas.

Electric vehicles vs. gas-powered cars: Which one is cheaper to buy and own?

By Leslie Albrecht

Price cuts by Tesla and Ford have made EVs cheaper, but are they a better deal than internal-combustion-engine cars?

Hello and welcome to Financial Face-off, a MarketWatch column where we help you weigh a financial decision. Our columnist will give her verdict. Tell us whether you think she's right in the comments. And please share your suggestions for future Financial Face-off columns by emailing our columnist at [email protected].

Editor's Note: This story has been updated to reflect that General Motors plans to make a new version of the Chevy Bolt.

The face-off

First Tesla cut prices on some of its battery-powered electric cars. Then Ford dropped the cost of the Lightning -- the electric version of its best-selling F-150 pickup truck -- by nearly $10,000 on some models. Current prices for the Lightning range from $49,995 to $91,995, depending on the model and trim levels. Tesla's base prices now start at $40,240 for the Model 3 and go up to $108,490 for the Model X Plaid.

The price cuts worked as intended in both cases, and orders for both Ford (F) and Tesla (TSLA)increased.

If you've been thinking about an electric vehicle, you might be wondering if those cheaper prices, and the $7,500 federal tax breaks on some EVs, mean it's time to take a closer look. So let's examine: Which one costs more, an electric vehicle or a gas-powered car?

Why it matters

Car prices have shot up over the last few years, and though they're not climbing as fast as they once did, they're still steep. Higher prices coupled with higher interest rates have made auto loans more expensive, and more people are falling behind on their payments.

Earth's temperatures are rising as well, and we just put the hottest month ever into the record books. These are two separate trends, but they both factor into the question of buying an EV vs. a gas-powered vehicle. Americans are looking for ways to bring down the cost of car ownership, and we're also looking for ways to fight the climate crisis, which is caused in part by vehicle emissions from internal-combustion engines. Is there a way to save money while helping to save the planet?

The verdict

If you look only at the cost of the car, gas guzzlers are cheaper than electric vehicles on average. In June, the average transaction price for an EV was $53,438. That's a 20% drop from a year prior, but still above the $48,808 average price for new gas-fueled vehicles, according to Kelley Blue Book.

But if you look at the total cost of ownership over the life of the car, an EV can often be less expensive than a gas guzzler.

My reasons: Here's when an EV is cheaper than a gas-powered car

If you're lucky enough to be in the market for a luxury car, the EV version will usually beat out the ICE vehicle when you take into account the cost of fueling the car, maintenance, repairs, insurance, depreciation and other out-of-pocket expenses over time. For example, it costs $39,547 to own a Tesla Model 3 for five years, vs. $63,075 for the Audi TT, Kelley Blue Book found. In fact, the Tesla Model 3 has the lowest five-year cost-to-own of any luxury car, according to Kelley Blue Book.

An EV "almost always is going to cost less to drive than a gas-powered car," said Keith Barry, a writer and editor covering autos at Consumer Reports. But whether the EV's cheaper operating costs will offset its higher average sticker price "really depends on where you live and what kind of car you purchase," he said.

If you're interested in a pickup truck and you live in a region like the West Coast, where gas prices are relatively high and electricity prices are relatively low, the Ford F-150 Lightning Extended Range pickup will probably be cheaper over time than the Ford F-150 Hybrid, according to Consumer Reports' latest analysis of EV costs -- and that was written before the Lightning was eligible for the $7,500 tax break, so the Lightning is arguably even a better deal now, if the buyer meets the tax break's income requirements.

Where you live can play a big role when comparing prices on EVs vs. ICE vehicles. That's because in addition to the federal $7,500 tax break that some EVs qualify for, there are also some state and local financial incentives for EVs. In some cases, your local power company may give you money for installing an electric-car charger. Both Consumer Reports and Kelley Blue Book have tools for finding these incentives in your area.

And speaking of chargers, if you're thinking of getting an EV, it's important to figure out where you'll charge it and how much it will cost you to install a charger at home (where most people charge their EVs) before proceeding.

Is my verdict best for you?

On the other hand, if you need a three-row SUV, you may not have much of a choice on the EV vs. gas guzzler question, because EV versions of three-row SUVs are hard to come by, Barry said. Several automakers have plans to make this type of EV but they're not on the market yet.

And when it comes to smaller, relatively cheaper cars around $30,000 and under, the EV version is not necessarily cheaper to own over time than the gas or hybrid version. For example, Consumer Reports found that Toyota Corolla Hybrid (7203.TO) was a better deal over time than the Nissan Leaf SV Plus (7201.TO), an electric vehicle. The Toyota Corolla Hybrid costs $25,154 up front, vs. $33,385 for the Nissan Leaf.

Unfortunately for budget-conscious EV shoppers, General Motors (GM)is ceasing production on the cheapest EV in the U.S, the Chevy Bolt, which sells for $26,500. GM says it plans to make a new version of the Bolt, using a new EV platform, but it hasn't released details on when it will be available or how much it will cost.

Keep in mind that cost-to-own calculators comparing EVs to ICE vehicles are based on many moving parts, such as the projected resale value of an EV, and the cost of gas per gallon. This Car & Driver cost-to-own calculator was written in 2022, when the national average for a gallon of gas was $3.70. Prices went up to $4.00 per gallon after that; they're currently at $3.80 per gallon. The U.S. Department of Energy has a handy vehicle-to-vehicle comparison tool; it assumes a $3.08 per gallon gas price.

Energy Innovation Policy & Technology LLC, a think tank that analyzes climate policy, just released a calculator that shows the cost to fill up an EV vs. an ICE vehicle in every state. It found that every EV model in every state is cheaper to fill than a gas-powered vehicle. Energy Innovation also compared the costs of EVs vs. ICE vehicles over time in a 2022 report and found that most new EVs were cheaper to own over the life of the car; the report is now being updated.

Behind Door No. 3: Consider hybrids or leasing

If the higher price tags on new EVs are out of reach for you, but you still want to lessen your car's environmental impact, definitely consider a hybrid, Barry said. While they've traditionally been considered "poky" cars designed solely for fuel-efficiency, today's hybrids are more powerful and more enjoyable to drive, he said.

"A hybrid is a compromise, but it's a pretty good one at this point if you're not ready to fully go electric," Barry said. Hybrids are powered by a combination of gas and electricity, but they don't need to be plugged in, because the engine charges the battery. Plug-in hybrids also run on both gas and electricity, but their batteries need to be recharged at charging stations. "Plug-in hybrids provide many of the same strengths as electric cars without some of the limitations," according to Kelley Blue Book.

Another more affordable option for people who are curious about EVs but may be hesitant to buy one is to lease an EV, said Rachel Goldstein, a research and modeling manager at Energy Innovation. "There are some pretty attractive economics there," Goldstein said of leasing an EV, especially because leased electric vehicles now qualify for the $7,500 tax credit.

Leasing -- which usually lasts about three years -- lets you try out an EV while the technology on these cars is still evolving, and protects you from fluctuating resale values. "I actually think leasing is a sweet spot for EVs," Barry said. With makers like Ford and Tesla slashing prices, it's unclear what will happen to those prices in the future, which can affect your car's resale value. "It's too new a marketplace to know what's going to happen to these cars when it comes to resale value, and leasing protects you against that."

Tell us in the comments which option should win in this Financial Face-off. If you have ideas for future Financial Face-off columns, send me an email at [email protected].

From the archives [April 2023]: Here's a list of the 10 cheapest electric cars out there

-Leslie Albrecht

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

08-12-23 0842ET

Copyright (c) 2023 Dow Jones & Company, Inc.