Since electric vehicles have become a hot ticket in the automotive market in recent years, there’s been a big debate between consumers and experts alike. Is owning an EV cheaper over the life of the car than a gas-powered model? Or is going with the gas model still better for your wallet in today’s day and age?
The EV boys are going to tell you that the fuel savings make up for the higher sticker prices of electric cars, while Team Internal Combustion says that the initial price, as well as depreciation, makes gas-powered a better buy.
But when you really take a dive into answering the question of it’s cheaper to drive a gas or electric car, there are quite a few things to consider, and it can get a little complicated. That’s why I’m going to break it down for you in this article and, hopefully, by the end, you’ll have a better idea of whether a gas or electric car is better for your bank account.
This is electric versus gas cars, which is the cheaper option? Let’s go!
The first thing we need to look at when comparing gas-powered cars to EVs is how much it’s going to cost you to drive one off the lot. EVs are a relatively new arrival to the market. Well, actually, not really. EVs have been around since before 1900! Can you believe that? Well, if you want to know more about that, make sure you check out our video about the history of the electric car.
But I think we all know that EVs haven’t really become widely popular until the last few years. So, like any new technology, it’s only natural that they should be more expensive. The average sticker price for an electric vehicle is on average $19,000 more expensive than the sticker price for a gas-powered vehicle.
However, Uncle Sam has something to say about that. If you’ve looked into getting an EV, you’ve probably heard about the Federal Tax Credit for EVs and plug-in hybrids. Basically, the feds are offering $7,500 in tax credits to anyone who buys an electric vehicle or plug-in hybrid, but only if you owe $7,500 or more in taxes that year.
If you only owe $5,000 in that year, that’s how big of a credit you’re going to get. No, unfortunately, they won’t be sending you that other $2,500 in cash. The tax credit has also been phased out for Tesla and General Motors models, so if you’re looking at getting a Model S or a Hummer EV, don’t expect any help from the White House. The qualifying rules also get a little fuzzier for plug-in hybrids, but in terms of EVs, you can expect the full $7,500 if your tax liability is equal to or greater than that.
Alright, so when we compare the cost of driving an EV off the lot, we have to include the tax credit because that’s obviously going to have a big effect on how much you’re really paying for it. So now, let’s do a little comparison.
If you go to the dealer and get yourself a 2020 Mini Cooper Hardtop, you’re looking at just about $23,400 MSRP. A 2020 Mini Electric, on the other hand, has an MSRP of $29,900. But, if you get that tax credit in full, that brings it on down to just $22,400, which is cheaper than the gas version.
Another example, the 2020 gas-powered Hyundai Kona, will run you $20,300 MSRP, while the 2020 Hyundai Kona Electric has an MSRP of $37,190. Add in that tax credit, and you’re looking at $26,690, over $6,000 more than the gas-powered version.
Now, the difference in the sticker price between gas and electric cars has a lot to do with the fact that EVs are generally more luxury-minded these days and are marketed toward higher-income individuals. As EV technology gets lower in cost and more available to the general public in the future, the price gap will probably shrink. But today, it seems as if EVs are still more expensive to purchase upfront.
But sticker price isn’t the only factor that affects which is cheaper. Let’s take a look at that sneaky expense that everyone hates paying, maintenance.
In terms of the general car market, it seems that EVs are cheaper to maintain than their gas-powered counterparts. It makes sense if you think about it. No oil that needs to be changed, no tricky engines that are going to need repairing, far fewer components that can wear down. EV motors are just simpler than internal combustion engines, and so the costs to maintain them are generally a lot lower.
Of course, in the case of Tesla, having your motor repaired could take weeks or even months, so you might want to factor in the cost of a rental car for two months while your Tesla’s in the shop if you’re doing your own cost analysis. For the purpose of this cost analysis, let’s ignore that and just look at the average maintenance cost per mile for the same vehicles we were just looking at.
We used AAA’s Your Driving Cost tool to figure out these average costs, which is a great resource if you want to compare the cost of ownership for cars that you’re looking at buying.
For a 2020 Mini Cooper Hardtop, the maintenance cost per mile was about 8.5 cents, while the 2020 Mini Electric was about 6.6 cents. The gas-powered 2020 Hyundai Kona was about 9.1 cents per mile, while the electric variant was also about 6.6 cents per mile. If you were to drive these cars for 3 years, assuming you drive 45,000 miles over those 3 years, you’d save about $855 driving the Mini Electric over the gas-powered, and about $1,125 driving the Kona Electric over the gas-sipping Kona.
But, of course, the main difference between the gas and electric versions of these cars, is the kind of fuel they consume. Let’s look at the cost comparisons of what each kind of car would take to power for three years.
Using the average gas prices nationally as well as the average per kilowatt price of charging an EV at home around February 2020, we calculated that it’d be right around $2,500 cheaper to run a Mini Electric for 45,000 miles than it would be to run the gas-powered Mini Cooper. In terms of the Kona, the electric variant would save you about $1,900 over that 3-year, 45,000-mile span.
You should consider, however, that EV charging costs vary heavily between different states in the USA. If you live in Louisiana, for instance, you’re looking at paying about 9 cents per kilowatt. In Hawaii, that cost is going to be as high as 32 cents per kilowatt. So if you’re looking into buying an EV, check out what your state’s electricity costs are before you make your decision.
So that pretty much covers what it’s going to cost you to buy and run an EV versus a gas-powered car for 3 years. But what about when you want to sell it? How do they compare in terms of depreciation?
While EVs pretty clearly cost less to run, they also seem to depreciate more heavily than their gasoline counterparts. So, what’s up with that? Well, the truth is it has a lot to do with all the new technology in EVs, which a lot of people think will be replaced by later and greater tech in the near future.
But, it has even more to do with those federal tax credits. See, since people are basically deducting up to $7,500 from the sticker price, the basis for depreciation is already $7,500 higher than it really should be. A $30,000 MSRP EV’s depreciation should really be calculated from a basis of $22,500, since that’s essentially what it was bought for new.
So, while we estimated that the Mini Electric would depreciate about $5,000 more over 3 years, and the Kona Electric about $1,500 more over three years, if you factor in that tax credit, the electric variants actually lost less of the initial amount that you would pay for one new.
Let’s get down to it. Which is actually cheaper, gas or electric?
After our side-by-side comparisons, it seems like EVs are pretty definitely cheaper to own these days. And that has a ton to do with those federal tax credits. $7,500 is no small amount of money, and when you pile those savings on top of what you’re going to save in maintenance, fuel costs, and depreciation over the life of your EV, you’re looking at a big chunk of change.
However, if you’re looking into buying an EV from Tesla and General Motors, remember that there’s no tax credit for you. Will running your Tesla Roadster still be cheaper than a comparable gas car? Quite possibly. Try doing your own comparison and see what you find!