Every year, more motorists are making the jump to electric vehicles. But even the most fervent EV devotee may find themselves stricken with a full-blown case of sticker shock when they take a look at the car’s price tag. There’s no getting around it – EVs cost more than similar model gas-powered cars.
But as we all know, the cost of buying a vehicle is much different than the cost of owning a vehicle. This is where EVs become more appealing from a dollar-and-cents perspective. Between tax credits, financial incentives and significantly lower operating expenses, these green vehicles are more financially practical in the long run than you may believe. In fact, over lifetime ownership, you may find an EV to cost about the same as gas-powered car.
Let’s break down the full cost of an EV, from purchase price through operating costs.
How Much Does it Cost to Buy an EV?
Just like gas-powered vehicles, EVs come in a wide range of price points. The most affordable models start below $30,000, while high-end, luxury cars can go well into the six-figures. The price of some of the most popular EV models include:
Starting Price: $27,400
Mini Cooper SE
Starting Price: $29,900
Chevrolet Bolt EV/EUV
Starting Price: $31,500; $33,500
Starting Price: $41,230
Starting Price: $43,895
Tesla Model 3
Starting Price: $46,990
Starting Price: $65,900
Tesla Model Y
Starting Price: $65,990
Starting Price: $71,300
EV Federal Tax Credits
There are numerous financial incentives available to EV customers. The most noteworthy tax incentive available is the federal tax credit, worth up to $7,500.
Although manufacturers might advertise the federal tax credit as a discount, it is not. You will have to pay the car’s full price at the time of purchase.
The federal tax credit only applies to new car purchases. If you are leasing an electric vehicle, the credit can be claimed by the car company. Manufacturers may pass some of those savings on in the form of lower monthly payments, but it’s not guaranteed.
It’s important to note you may not receive the full federal tax credit amount your electric vehicle is eligible for. The credit is non-refundable, meaning the government will not be writing you a check if you purchase an electric vehicle. Instead, the credit is applied to your tax liability, and at best, it can reduce your tax bill to zero. For example, if you are eligible for a $7,500 credit and you owe $5,000 in taxes, you will only receive a $5,000 credit. The remaining portion goes unused and cannot be applied to next year’s taxes.
Local Incentives and Tax Credits
The federal tax credit is not the only monetary assistance available to electric vehicle owners. Many state and local incentives exist across the country. New York, for example, has several financial programs available to electric vehicle owners. Through the Drive Clean Rebate, car owners can receive a discount between $500 and $2,000.
Additionally, qualified electric vehicles are eligible to receive a Green Discount Plan E-ZPass, which provides a 10% discount on all E-ZPass tolls. Through the MOR-EV program, Massachusetts offers a $2,500 rebate on all-electric vehicles and a $1,500 rebate on plug-in hybrid electric vehicles that cost less than $50,000.
The U.S. Department of Energy’s website lists all the current state and local incentives available to EV owners.
The initial upfront cost of EVs is generally higher than that of similar gas-powered cars. However, motorists will begin earning back the difference once they get on the road. Most notable amongst those savings is the absence of visits to the gas station. Electricity isn’t free, of course, but it’s typically less expensive than gasoline. Over time, that difference adds up. Past research done by AAA found that the electricity required to drive an EV 15,000 miles per year costs an average of $546, while the amount of gas needed to drive the same distance costs $1,255. This was before gas prices skyrocketed in 2022, creating an even greater potential windfall in savings.
EVs also typically cost less to maintain than gas-powered cars. The absence of an engine means one less component that can malfunction. It also removes the need for oil changes and air filter replacements. As such, EV owners can spend hundreds of dollars less in annual operating costs.
Add all these savings together and the true cost of owning an EV is comparable to that of a traditional gas-powered car.