One of the benefits of owning an EV is spending no more of your green on gasoline, oil changes, and all the other costs associated with owning a conventional, internal combustion vehicle, but the desire to be greener comes with a cost.
You want to do your part for the planet by purchasing an electric vehicle, but you also are not made of money. Do you need to think about hidden costs that make owning an EV as much or more expensive?
The answer is, no, not in the long run. A study commissioned by the Natural Resources Defense Council analyzed total cost of ownership on several EVs along with comparable gasoline vehicles.
It found that for every major class of vehicle, the EV was cheaper to own over a seven-year period — less than the average reported time people keep a new vehicle.
The price they calculated included purchase price (with the expected value after 7 years deducted) as well as: propellant (electricity or gasoline), maintenance, repairs, insurance, taxes, and fees.
However, that does not mean there won’t be costs that are, relatively, completely different, with the potential to surprise buyers. Those costs are not a logistical objection to owning an EV – in the big picture it should still be better financially – but knowing what to expect along the way will still ensure you are more satisfied with your ownership experience, and prepare you for budgeting for example, hopefully, for your next car.
What Are The Hidden Costs of Owning an Electric Car?
Hidden costs of owning an electric vehicle are defined as costs you need to plan for monthly or yearly throughout your ownership of an electric vehicle.
We really care about hidden costs when we talk about any costs associated with owning an electric vehicle that are directly tied to the electric vehicle’s propulsion system. If you thought about everything involved with owning an electric vehicle, your list would likely be longer than if you own an ICE vehicle.
Accordingly, we are describing costs of transitioning from an ICE vehicle to an EV or costs many folks may not realize they should consider when calculating a ownership cost. Surprises about expenses are usually your budget’s enemy every time.
We hope to uncover as many EV cost surprises as possible so you can create and maintain a reasonable budget when deciding to purchase an EV.
PRO TIP: I’ve spent countless hours in researching and reading about EVs as well as time behind the wheel of various electric vehicles. Here is one fact I noticed: An electric vehicle will cost less than a gasoline-powered vehicle the longer you own the electric vehicle, at least on the surface.
The different costs of a transaction mean less when spread over a greater amount of time; this also applies to other electric-vehicle cost advantages such as lower maintenance and energy costs piling up in the positive category of owning an electric vehicle.
The one major drawback that is difficult to overcome for EVs is the unexpected cost of accelerated depreciation.
#1. Purchase Costs: Electric vs. Gas.
Electric vehicles generally have a higher initial cost compared to gasoline or hybrid vehicles. However, the price gap has come down due to worldwide price declines, especially for the best-selling EV automaker Tesla.
Still, most EVs on the market are still priced as premium models. The average listing price for new electric vehicles in April was $62,927 compared to $49,111 total average for all new vehicles based on Cars.com data.
Federal tax credits may help to close the price gap should you and the vehicle qualify as well as some potential state or local subsidies in some places to further help close that price gap.
However, there’s also a government incentive on EVs that you must consider. The maximum tax incentive is $7,500, but not every car will qualify.
If your car is eligible, you could deduct that amount from the purchase price in your estimations, even though you are paying it upfront.
#2. Higher Insurance Premiums.
At present, insuring an EV may cost more than a gasoline vehicle, due to their higher average prices, and potentially higher repair costs. According to Forbes Advisor, the average annual insurance cost for an EV is $3,546 compared to $2,567 for an average gasoline vehicle.
Keep in mind, averages can vary greatly depending the state and city, and miles driven annually, as well as the driver’s age and record. Some companies will offset premium prices with “green car” discounts for EVs.
#3. Scheduled Maintenance and Repair Costs
Electric vehicles (EVs) generally have lower maintenance costs due to fewer mechanical parts, and the reduced maintenance needs of an internal combustion engine (ICE) vehicle, including an oil change.
The regenerative braking system of EVs also lessens the maintenance burden on conventional friction brakes.
However, according to a reliability survey conducted by Consumer Reports, owners of electric vehicles reported, on average, 79% more problems than gasoline vehicles; likewise, repair costs can be the same or significantly more, particularly those due to collision damage.
Such problems and cost disparity can stem in part from the higher cost of electric vehicles and more technologically advanced electronics. Additionally, repairs may require more parts supplied by the manufacturer, higher skill labor, or some combination of both.
#4. Charging Costs.
You don’t pay for gas with an EV, but you have to pay for electricity to run the vehicle. You might pay $0.25-$0.65 kWh charging the battery at a public charging station.
While you can find some public charging stations that are free, you might find others, particularly in desirable locations, to cost more and provide less than desirable charging rates.
Keep in mind that you have to account for the time to publically charge the car, if you are at a gas station you will fill up in five minutes, it might take thirty minutes or longer to completely recharge your EV at a public charging station.
Charging at home is significantly less expensive than at a public station, however you’ll need to have the right equipment installed to charge the EV.
Cost ultimately depends on the type of charger you have installed and any modifications that need to be done for your equipment.
The cost of level 1 charging and installation runs between $250-$750, while a Level 2 costs $500-$2000 plus installation.
Once you have the home charger installed, consider the cost of charge per kilowatt/hour of consumption. The average nationwide cost is around $.15 kWh, and this will differ depending on location.
Charging every night at home will most likely increase your electric bill between $40-$75 during the month which is significantly less than the average cost of gas.
#5. Depreciation.
Your EV will experience quick declines in resale value compared to how gas vehicles depreciate. An example of that comes from a study about EVs and gas vehicles. EVs can have a resale value of less than 40% efficiency of its original value; gas vehicles can have a resale value of over 50% up to 70% efficiency.
These depreciation values depend on the EV battery. Customers are aware that with mileage, actual time, and age, the EV battery needs to be replaced.
We talked about that replacement cost before and at the time this replacement cost doesness’t bounce back your financial savings. Also, the reason for the difference in values is the demand in the used car market. The EV used car market simply lacks demand relative gas vehicles.
#6. Battery Replacement & Degradation.
Replacing an EV battery is often mentioned as a significant concern for not buying an electric vehicle. This is certainly a justified concern.
Replacement
Replacing the battery is historically an expensive process. A recent J.D. Power report mentions that the cost of replacing the battery in a Tesla Model S, Model X, or Model 3 is no less than $13,000.
In comparison, you can buy a 2023 Model 3 for around $40,240, meaning that the battery costs around 30% of the Model 3’s purchase price. In fact, the battery is an important component for the price of an electric vehicle, not just a few models.
However, there is good news. Recurrent, a company that tracks such things, reports that most battery replacements occur under warranty. The federal government requires electric vehicle battery warranties to be at least for eight years or 100,000 miles.
In fact, some warranties are longer. Along these lines, beginning in the 2026 model year, California will require the battery in an EV to hold at least 70% of its range for a period of 10 years or 150,000 miles. In fact, 2030 models and later are required to hold at least 80% of its range for that same amount of time.
More states are likely to follow California Air Resource Board’s (CARB’s) lead, as many have in the past. Not all warranties will be the same. Some warranties will only replace a battery if the battery completely fails and others will replace it if the battery has lost a certain percentage of its charge capacity. Additionally, many experts believe that an electric vehicle battery can last for 20 years.
According to GeoTab, a Toronto company that tracks battery health for fleets. Reports indicate the average EV battery was found to have around 2.3% degradation on an annual basis.
TIP: Make sure to read the fine print in the EV battery warranty to confirm that a certain percentage of battery capacity is considered cause for complete replacement for the battery during the warranty coverage. Cadillac, for example, has an EV battery warranty that states they will consider the battery for replacement if it is less than 75% of the original charge capacity.
Degradation
With time, batteries will begin to lose some charging capacity. So instead of charging to 100% full charge, the battery may only charge to 90% or even 80%. More recharging also means more money, as well as more time.
Retry time is also influenced by temperature, as both hot and cold temperatures reduce an electric vehicle’s range. A study by AAA tested various EVs in very cold (20 degrees) and very hot (95 degrees) temperatures and the vehicles had reduced range capacity compared to the 75-degree baseline.
In fact, in all of those cases that cold batteries considerably increased retry times. In other words, the colder the battery is, the longer it takes to charge the battery.
Another battery “enemy” is DC fast chargers. A DC fast charger forces more electricity into the battery than is normally considered ideal. Forcing electricity into the battery at elevated volume will have an adverse battery consequence.
After multiple times at a DC fast charger, the battery will likely not charge to 100%. In fact, events that fully fill the battery to 100% will hasten battery capacity degradation and car manufacturers recommend charging the battery to only 80% capacity at fast chargers.
#7. Home Charger Installation
Having a charger at home can significantly impact the cost of using your EV and improve convenience — especially in areas with limited available public chargers.
Generally, home rates for juice are not expensive and will be much cheaper than the cost at public chargers (more so for DC fast chargers), and in some cases, you can benefit from cheaper time-of-day rates.
The costs of having a charger installed can range from a few hundred bucks to more than that, we believe you should choose a home EV charger, either way. Once installed, a charger is a one-off cost and can always add value to your home.
#8. Electricity Rates Increasing
Electricity rates have been on the rise and are expected to rise for a variety of reasons that include the need for more electricity generation as well as upgrading distribution lines — although, the need for more electricity is due more to the growth of large data centers than electric vehicles.
Electricity rates, time-of-day and meter charges vary from area and state – but thankfully, an analysis by The Washington Post has shown that it is still cheaper to fill up with electrons (in all 50 states) than it is to fill up a gas tank – although some areas are much cheaper than others!
#9. Increased Tire Wear
Most people know that EV tires last about 20% shorter than comparable gasoline vehicles – though tire wear will vary by EV and is often even worse for EVs with softer performance tires.
Overall, the higher weight of the battery will usually make an EV tire last shorter than its gasoline counterpart, especially considering the immediate torque available upon acceleration.
#10. State Fees for Electric Cars
Most states impose an tax on every gallon of gasoline that is pumped, meaning you pay a tax on every gallon of gasoline based on the gasoline you consume. Electric Vehicles (EVs) do not pay a gasoline tax because they do not use gasoline as fuel.
Because of this, many states impose an extra annual fee to EV owners to help make up for the gas tax revenue lost to drivers with EVs.
A few states that charge fees to EV owners include California, Colorado, Illinois, Michigan, and several more. Fees can be as high as $200 per year in states like Texas. Consult with your state fees to determine the real cost of registration fees for your electric vehicle.
Do You Save Money With an Electric Car?
If you’re considering an EV because you think you can save money, you may be surprised to see all of the costs that you didn’t consider.
Whether you didn’t think of the higher insurance premiums or the electric cost, there will be bills along the way that you didn’t plan for.
On the other hand, the higher cost to get in an EV can catch people off guard- sometimes it is several thousand more than a gas vehicle that has no comparison.
So, if people claim to save money driving an electric vehicle, how is that possible you might be wondering? The reality is that there are numerous ways to save money that come with driving an electric vehicle.
First and foremost, your vehicle will not require a stop to refuel with gas, which is great when gas prices are increasing.
In addition, there will be far less maintenance involved than with a gasoline engine. And if you are getting extra manufacturer rebates or tax credits you can significantly lower that purchase price.
With all of this involved, there is money saved by driving an EV for sure. However, the ultimate savings won’t happen until you’ve owned it for several months, if not, years. This means you will not want to plan on owning an EV for the short term.
The only way to see those payoffs is generally, you would want to own the vehicle for a minimum of a few years. You also can know that you are doing something good for the environment- which is ultimately the real reason to drive an EV to begin with.