You may have read that electric vehicles (EVs) cost more to purchase, but that the cars can actually save you money over time. That assessment often comes from comparing what can be higher purchase costs for an EV to the fuel costs they later save (EVs are much more efficient than gasoline cars). How should you factor that into a purchase decision? More precisely, how can you weigh future savings against purchase costs, particularly if there are any other cost factors between EVs and traditional cars, like vehicle maintenance, or even resale value, that would make sense to better understand at the point of purchase? Combining all of those elements would produce a single number that makes it easier to compare the total cost of an EV to a traditional gas car.
A recent study gives us a “cost advantage” number to do just that.
There have been a few high-quality comprehensive looks at costs, but now there is a recent study by a well-known resource: Consumer Reports. Their October 2020 study demonstrates a good grasp of both the automaker and consumer aspects of the market and provides a comprehensive look at EV costs and savings.
Their numbers are subject to all the usual caveats – no one can predict the future, fuel costs may vary in your area, and specific costs related to specific vehicles depend on how far you drive, etc. Moreover, the Consumer Reports study solely examines owner costs; benefits to the grid and society, which are significant, are left for others to calculate. (For example, Recharge America examines some of those numbers at https://recharge-america.org/benefits-summary).
The study examines many different situations that confront potential vehicle owners and presents a wide range of numbers to accommodate them. The bottom line: the average EV has a total lifetime “cost advantage” of $6,000 to $10,000 over a comparable traditional gas car.
That means that for an individual owner weighing their options between two vehicles, owning the EV will come out roughly $8,000 ahead over its lifetime even factoring in the likely higher initial cost for the EV. Consumer Reports has already made the initial price difference part of its overall study calculation by converting those future savings to today’s dollars. The EV will still save that owner $8,000 when compared to a comparable traditional gas car, despite what will likely be a “lower” initial price tag for the gas car.
If you drive more than the study assumes, you can save even more. And if you drive a larger vehicle (like an SUV or pickup), you can save even more. Perhaps best, if you compare the EV to a traditional gas car that matches its performance (which would mean a more expensive vehicle given how much better EVs perform than traditional alternatives) the study shows that consumers save even more.
Another interesting twist in terms of consumer benefits – the EV cost savings accrue over time, meaning that the longer you keep it, the more of the benefit you will reap. The good news is that this is a boon for used EV buyers, who can save far more money as a percentage of their purchase, yet the average new-car buyer still comes out ahead in most cases. Even in the few cases where they do not, the cost differences are small, yet they are still receiving the many benefits from driving electric – a smoother, quieter, more convenient car with class-leading performance.
SAMPLE STUDY FINDINGS
We offer a link below to the full report for those wanting to explore further. Here we present two of the easier-to-understand study charts that spotlight savings available to consumers. The first (CR Table 4.1) compares the total cost of owning several popular EVs to the best-selling gas car in their class. Note that CR calculated larger savings than these; but because the savings are in the future, they “discounted” the future savings at 3% per year. That means these savings are directly comparable to the money you spend to buy the car today. They are saying that in terms of ownership costs, the EV is this much cheaper than the gas car, even though the highly-visible price tag cost may look higher.
The second (CR Table 4.4) shows similar savings numbers over the vehicle lifetime and for the first owner. In this case, however, they are comparing to a gas car in the same class that has similar performance to the EV (these vehicles are more expensive because EVs feature better performance). These higher-end gas cars cost more both to purchase and to fuel, so the savings are larger. Note that the substantial vehicle lifetime savings mean that used vehicle purchasers, which account for most people in the US car market, often time save almost as much as the new car purchaser while confronting lower initial vehicle costs.
The Consumer Reports study includes:
- Actual purchase costs, not just MSRP
- Financing costs
- Incentives – the federal $7,500 tax credit for cars that are eligible
- Reasonable vehicle lifetime assumptions – 200,000 miles over 15 years
- Depreciation based on real data. Excluding compliance vehicles, and included a weighted average for state incentives, EV depreciation appears to be identical to gas vehicle depreciation
- Maintenance costs based on real data. EVs cost almost exactly half as much as gas cars to maintain from CR’s data; and they cite other sources that report even lower EV costs
- Future gasoline costs based on recent US Energy Information Administration baseline projections
- Electricity costs covered both at-home charging and trip charging at DC fast-charge stations
- A reasonable range of gas car comparisons in each class – each EV was compared to the best-selling, best-rated, most efficient, and most-similar performance gas vehicle in its class
Their study does not include sales tax, registration fees, insurance or charging station installation, as these numbers can vary widely based on location and owner characteristics.
EV Cost savings:
- “Overall, these results show that the latest generation of mainstream EVs typically cost less to own than similar gas-powered vehicles, a new development in the automotive marketplace with serious potential consumer benefits.”
- “For all [of the 9 most popular] EVs analyzed, the lifetime ownership costs were many thousands of dollars lower than all comparable ICE vehicles’ costs, with most EVs offering savings of between $6,000 and $10,000.”
- “Overall, these results show that many EVs on the market today can provide consumers the two features they say they most want improved in their next vehicle—lower fuel and maintenance costs—in addition to the feature the auto industry advertises most often —performance—all at a lower overall cost.”
- “Savings really ramp up when buyers seek an ICE vehicle that achieves the same acceleration performance as an EV.”
- “For ICE vehicles this used-car savings is partially offset by higher expected repair and maintenance costs for older vehicles, and the need to continue to pay for fuel, which makes up a large fraction of the total lifetime ownership costs for ICE vehicles. However, as shown in the previous chapters, EVs significantly reduce these costs, while their biggest drawback—higher purchase prices—is partially offset by depreciation.”
- “While new EVs were found to offer significant cost savings over comparable ICE vehicles, the cost savings of 5- to 7-year-old used EVs was found to be two or three times larger on a percentage savings basis.”
DC Fast charging:
- “Owners of EVs with a range of 250 miles or greater will be able to do 92% of their charging at home, needing only six stops at a public fast-charger per year.”
Chad Schwitters is an EV Technical Consultant