(NerdWallet) – You might want to buy an electric car, but the price gives you a severe case of sticker shock. It leaves you wondering, “Why is the cost so much higher than gas cars?”
For example, the cheapest 2023 gas-engined model vehicle available in the U.S. is the Nissan Versa at $15,730 plus destination. The cheapest EV is the Chevrolet Bolt at $25,600 plus destination.
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That price difference is pretty easy to attribute — it’s the large, costly battery that takes the place of an internal combustion engine in an electric car, or EV. A lithium-ion battery that provides ample driving range can cost $10,000 to $20,000 alone, according to Karl Brauer, executive analyst for car search engine site iSeeCars.
But there are other factors driving up the price of EVs, says Liz Najman, a climate scientist and communications and research manager at Recurrent Auto, an EV research and analytics firm focused on the used-vehicle market. She cites continuing supply-chain problems, low inventories and the fact that EVs require 10 times more semiconductors than a gas car.
Also, Najman notes that “there is unprecedented buzz and excitement about EVs,” triggered by California’s plan to phase out the sale of gas cars by 2035 and the increased incentives from the recently passed Inflation Reduction Act — which will promote the sales and use of EVs.
How much more are EVs vs. gas cars?
Looks can be deceiving when it comes to car prices, says Jesse Toprak, chief analyst for Autonomy, an electric car subscription service. The EVs produced up to now have been premium models since “early adopters are generally less price-sensitive.” Therefore, he says, the average EV price versus that of a gas car “is not really apples to apples.”
The average price of a new EV is $64,249, while a new gas car is $48,281, nearly a $16,000 difference, Najman says. This enormous difference reflects the market reality that most available EV models are still higher-end cars.
In the used-car market, there are many “gently used” EVs from 2022 and 2021, which drives up the average price, Najman notes. Recurrent’s data shows the average price of used EVs at $37,597, which is about $10,000 above the average price of used gas cars.
Incentives and maintenance costs
So far, we’ve focused on the purchase price of EVs which, admittedly, seems pretty steep. But if you’re shopping for an EV, there are a number of factors that can level the playing field.
“If you look at the total cost of ownership, even over a few years, EVs are very competitive with gas cars,” Najman says. “And, the higher the price of gas goes, the quicker EVs catch up.”
Here are a few factors to consider when trying to determine the impact of owning an EV and staying within your budget.
Tax credits. There is a federal clean-vehicle tax credit of up to $7,500 when you buy an EV. If you lease, you can indirectly benefit if the dealership or leasing company passes along the credit in the form of a lower monthly payment. Beginning in 2023, for the first time, used vehicles may qualify for a credit of up to $4,000.
Rebates. Some state and local governments offer rebates. For example, the California Air Resources Board offers a rebate ranging from $1,000 to $7,000 to anyone who purchases or leases an EV.
Reduced fuel costs. If an EV is charged at a private residence, the cost can be much cheaper than buying gas. However, commercial fast chargers can nearly rival the cost of gas.
Less maintenance. With fewer moving parts, EVs require fewer trips to the service bay. An EV never needs the oil changed, and brake pads last much longer than in gas cars because of regenerative braking.
Lower cost per mile. Recurrent data shows that EVs cost less than 8 cents a mile to drive compared with 9.6 cents for gas cars.
Are affordable EVs coming?
A stampede of new foreign and domestic EVs is coming in 2023, including pickup trucks and larger SUVs. More competition could bring down the price of EVs.
We could see “EV batteries that are leaps and bounds ahead of what’s available today within the next decade,” Toprak says. “Manufacturers across the globe are now fully committed to the EV revolution, and there is no turning back.”
Brauer was more cautious, noting that prices for lithium, a key component of the battery, have gone up due to the war in Ukraine. It’s unpredictable, and a battery breakthrough could come in five years or 25 years, “which will make selling EVs to mainstream consumers difficult in the near term due to their price.”
Tips for EV shoppers
While researching which EV to get, remember these key points:
- The sticker price is not the real cost. The advertised price will be offset by incentives, rebates, lower fuel and ownership costs and, possibly, your negotiation.
- Determine ahead of time what incentives will apply to the car you want to buy. Yes, it’s complicated, but it’s worth it to find every way to reduce the initial cost.
- Carefully choose between buying and leasing. Each financing method has advantages and can affect the overall cost of the vehicle.
- If you intend to use the federal tax credit, remember that you won’t see that savings until you file your taxes.
- EVs come with nonfinancial advantages that might let you justify the higher cost. Carpool lane access, increased acceleration and handling, and a quieter ride are a few things popular with EV owners.
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- Use internet search engines to cast a wide net when looking for the best deal. You can even buy the car out of state and have it shipped to your house.