The price of new electric vehicles (EV) can be a major deterrent for potential buyers. But whether these vehicles pay for themselves is the main concern for these consumers.
Since electricity is significantly less expensive than gas, let’s dig into the details to figure out the return on investment of EVs.
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How Long Does It Take For An Electric Car To Pay For Itself?
It takes about 10 years for the vehicle to pay back itself in fuel savings. The return on investment will depend on the price of the EV and fuel prices. As fuel prices climb, customers often demand more electric vehicles, which can increase the price of the vehicles.
Even while an EV can ensure significant cost savings, this is not an assurance that it will ever pay for itself in full. It could take an electric automobile around 4-10 years to finally reach break-even.
However, it’s also important to note that electric cars depreciate faster than regular cars.
The rising costs for gas have made it possible to save money much earlier, like in four or five years instead of 10 years.
Electric vehicles can save money in other areas besides just gas expenses. An electric vehicle has fewer internal parts than a conventional car.
Because of this, there will be fewer visits to the mechanic’s shop.
Pavel Molchanov, a market analyst, asserts that even though EVs are more expensive than conventional vehicles, the cost of ownership is quickly recovered.
There are good reasons why electric cars are more expensive.
According to Molchanov, electric vehicles are a much better option than gasoline or diesel vehicles because of the rising cost of oil, government tax incentives for EVs, and cheap maintenance expenses.
Let’s examine the purchase cost, fuel expenses, cost of maintenance, depreciation, and how the savings might equal out between a Tesla Model 3 and a Mazda 3 of 2021.
|2021 Tesla Model 3 Standard Range||2021 Mazda 3 2.0L Sedan|
|Maintenance/Repairs||$282 per year avg. 0.6% of the purchase price||$1450 per year, avg. 6.7% of the purchase price|
|Depreciation||44% in 5 years||50% in 5 years|
The calculation based on the above table reveals that, even after investing in a home charger, Tesla ends up having lower monthly payments over the course of the loan’s six-year term. Read more here about whether a Tesla car is a good investment.
Of course, it also depends on how you finance your car. If you qualify for Tesla Lending you may want to factor in how much you actually end up paying.
Although depreciation didn’t have a major impact, Tesla nonetheless performed somewhat better.
Meanwhile, the original cost is the most important deciding element while shopping. It might be challenging to find a loan for $43,000 without having some substantial funds set aside for a down payment.
In fact, $21,000 might be too much for a new Mazda. In either case, Tesla saves more money.
How Do The Rising Gas Prices Affect The Calculation?
The world is being impacted by the Russia-Ukraine conflict bringing an upsurge in oil prices, which is one of the invasion’s many repercussions.
Even though America is one of the nations with the cheapest petrol prices, it reached an all-time high of around $5 per gallon.
People around the world are dealing with a similar issue. This year, the cost of gasoline and diesel has shattered all prior records in nations like Germany, the UK, Nigeria, Australia, and India, and this trend is projected to continue.
There is a crude oil price problem that affects nearly the entire world and isn’t going away anytime soon.
The average price of gasoline in America was $3.10 per gallon in July 2021, and in 2022 it increased by an astonishing 45% to reach $4.5 per gallon.
So, you should be happy your Tesla doesn’t run on gas!
While Molchanov predicts that gasoline prices will certainly continue to rise, the average cost of electricity will probably only rise by 6% this year.
This indicates that filling a car’s gas tank is now considerably more costly than charging an electric battery.
Furthermore, according to this survey, the Zero Emission Transportation Association (ZETA), driving a petrol vehicle is currently three to six times more costly than driving an electric vehicle.
When you drive an electric Ford F150 Lightning, the cost per mile drops to $0.06 from an estimated $0.20 when you drive a fuel Ford F150 truck.
Same like driving a fuel vehicle, such as a Honda Civic, costs roughly $0.13 per mile, driving a Tesla Model 3 can reduce this expense to $0.03 per mile.
Is It Reasonable To Assume An Electric Car Will Pay For Itself?
EVs will eventually pay for themselves, but how long it will take depends on several factors.
Even though an electric vehicle can ensure substantial savings, it is not certain that it will eventually pay for itself completely.
According to research from the National Renewable Energy Laboratory, 15 years of using an electric vehicle can result in fuel savings of up to $14,500.
For each year you drive, you save roughly $1,000. In other words, it is estimated that the cost of operating an electric vehicle is $2 per gallon.
Furthermore, given that the study examined gas prices in 2020, it is logical to assume that the benefits are considerably greater today.
According to Consumer Reports, drivers of electric vehicles can save several dollars each month.
They recently studied numerous electric vehicles in-depth and evaluated these against other fuel-powered automobiles on the market with his team. They discovered that maintaining electric vehicles took 50% less work, that running them cost 60% less, and that they retained their value.
The conclusion is that electric vehicles maintain their value at about the same level as traditional fuel vehicles.
Molchanov carefully evaluated the prices of purchasing and operating the Nissan Sentra (a gasoline vehicle) and the Nissan Leaf (an electric vehicle) in 2021 and 2022.
The Sentra had a price tag of $27,400 and the Leaf was $19,150. The electric car model cost an additional $7,890, which appears to be a lot of money.
Taking into account additional factors such as fuel cost, mileage, and maintenance costs, Molchanov discovered that the Nissan Leaf saved nearly $1,500 per year. This implies that the EV will pay for the additional cost in about five to six years.
The economic analysis of an electric vehicle has improved by two times.
In other words, the average rate of return last year was between 10 and 12 years. According to Molchanov, it is currently between five and six years old.
How Long To Break-Even On An Electric Car?
The return on investment for the EV depends on several factors.
Electric automobiles are considered more cost-effective as gasoline is more expensive than electricity; EVs need less maintenance, and there are several incentives.
The cost of electric vehicles, particularly the versions with the best charge rates, range, and efficiency, cannot be denied.
Here are a few examples of how long it takes an electric vehicle to break-even.
Among the major rivals of the Tesla Model Y is the X4.
Although Tesla models are no longer eligible for the government electric car tax credit, this analysis is still worthwhile due to the price of the BMW X4 and its high fuel usage.
|Model||BMW X4 xDrive30i||Tesla Model Y Long Range|
|Incentives||–||State and local only|
|Fuel Economy||24 MPG||3.8 mi/kWh (125 MPGe)|
|Range||413 miles||330 miles|
|Time to Refuel||5 min||20 to 30 min|
|Cost of Refuel $5 per gallon or $0.14/ kWh||$86.00||$10.50|
|Annual fuel cost 15000 miles||$3123||$477|
|Average annual maintenance cost||$228||$77|
|Time to break-even||4 years|
At the 2022 World Car Awards, the Hyundai IONIQ 5 came out on top, but is it a victory for your pocket?
The price of the Hyundai Santa Fe, which was just completely remodeled, is still significantly less than that of the IONIQ 5.
The table below will conclude the break-even of the Hyundai IONIQ 5.
|Model||Hyundai Santa Fe SEL||Hyundai IONIQ 5 SEL RWD|
|Incentives||–||Fed, state and local|
|Fuel Economy||26 MPG||3.4 mi/kWh (114 MPGe)|
|Range||489 miles||303 miles|
|Time to Refuel||5 min||20 to 30 min|
|Cost of Refuel $5 per gallon or $0.14/ kWh||$94.00||$10.15|
|Annual fuel cost 15000 miles||$2,883||$502|
|Average annual maintenance cost||$228||$77|
|Time to break-even||7 years (4.2 yrs with tax credit)|
The recent analysis on the above tables shows that the break-even point of electric vehicles has decreased from 10 years to around 4 to 7 years.
Break-even may take 6 to 10 years, depending on other factors such as car model, frequency of usage, depreciation, charging, gasoline price, maintenance cost, and so on.
Even the greatest electric vehicles may never fully recoup their costs, but they do offer considerable savings due to the growing cost of gasoline.
In fact, tax refund schemes have been implemented on a large scale in America to deal with the tax expense. There are several tax refund schemes and incentives available because many states want to encourage people to buy electric vehicles.
Are There Any Hidden Costs To Owning An Electric Car?
There can be some hidden costs of owning any vehicle, electric, hybrid, or gasoline-powered. Nearly 70% of all-electric vehicles sold in the U.S. in 2021 are to be sold by Tesla.
Although businesses like Ford, Nissan, and GM are also in the market to break Tesla’s market share.
In addition to the growing number of electric vehicles on the road, there are also some hidden costs associated with owning one.
As we know, electric vehicles are expensive compared to gasoline-powered ones. Besides that, the following are some hidden costs of an EV.
Higher Registration Fees
Due to the deterioration of the nation’s highways, states occasionally tack on a gas tax to help pay for necessary repairs and other issues.
Even so, since electric vehicles don’t require petrol, electric car owners might not be contributing fairly to these infrastructure fees.
To compensate for these revenue losses, some regions are introducing an extra registration fee for electric vehicles. State-to-state variations in fees result in an annual range from $50 to $200.
Electric vehicle insurance rates could be more expensive than those for conventional fuel vehicles. Insurance costs for EVs are roughly 25% more than those for gas-powered vehicles.
The factor that influences increased insurance costs is the potential expense of repairs and replacement for electric vehicles.
Challenges With Temperature
There won’t be any problems charging in a location like California, where it is 70 degrees Fahrenheit usually every day.
It may take longer for the battery to maintain a full charge indoors and outdoors in other regions with more significant seasonal changes from hot to cold.
This would require spending more money to cover charging fees to deal with the changing weather.
What About The Maintenance Costs Of Electric vehicles Vs. Gas vehicles?
According to a recent study, the first 3 years of maintenance on electric automobiles are 31% cheaper than those on gasoline vehicles.
Once you stop considering it in terms of a one-time payment and instead consider the monthly cost of maintaining an electric car, taking into account fuel expenses, maintenance expenses, and state incentives for electric car purchases, it will begin to look a lot more cost-effective than buying a gasoline automobile.
2019 Your Driving Costs report determines the maintenance costs of an electric vehicle vs. a gas car. It establishes how much you must spend on car maintenance per mile.
The expenditures for service items, including: wheels, brakes, oil filters, and fixes during a 5-year timeframe are divided into product categories like SUV, sedan, EV, and pickup.
The report revealed that electric vehicles are less expensive to maintain because they don’t require servicing like oil filter changes or other types of engine maintenance.
However, electric automobiles require less upkeep initially, but over time, that maintenance may end up costing more than it would for an internal combustion engine vehicle.
There may be a high cost associated with replacing a battery.
An electric vehicle will typically cost $4600 in maintenance over the course of its lifetime compared to a petrol or diesel car’s average cost of $9600.