How Much Money Do You Save with an Electric Car?


The debate between fuel-powered cars and electric vehicles always comes down to which option makes the most sense financially. Many believe that the cost difference is too minuscule to consider making a switch, but that is not necessarily the case. So, how much money do you save with an electric car?

Fuel savings alone will save you anywhere from $800 to $1,000 per year on average depending on your location and how much you drive. However, aside from fuel economy, electric cars can also help you save on maintenance and taxes as well.

The amount you save with an electric vehicle is relative to your situation and how often you drive, your purpose for driving, and your ability to be a safe driver. Either way, there is a case to be made for both sides. Read on to better understand the breakdown of electric and fuel-powered cars so that you can see just how much money an electric car can save you.

Initial Buying Costs

Before getting into the details of how much you can save in the long run with an electric vehicle, it is important to start at the beginning with the initial costs of an electric vehicle and a comparable fuel-powered car. Many consumers avoid purchasing an electric vehicle because they assume that they will be paying luxury prices for a base model.

While it is true that you will likely pay a higher price for the electric version of a base model car, the initial buying costs should not deter consumers from thinking about the long-term savings they will get from purchasing an electric vehicle. When most people think of electric vehicles, they immediately think of Tesla.

The Tesla Model 3, which is a midsize luxury car, is listed at $39,490 for its 2021 model, which is around the same price as most entry-level midsize luxury cars on the market. However, Tesla is not the only maker that makes electric vehicles and many consumers tend to jump to the conclusion that Tesla is their only EV option.

Hyundai, for example, has been making a splash in the electric vehicle industry with its line of electric vehicles. The 2021 Hyundai Ioniq EV is listed at $33,245 while the hybrid fuel-powered model is listed at $23,400. This is a price difference of about $10,000 and can scare off potential EV buyers who are not looking at long-term savings.

Electric Vehicle Tax Credit

If you were deterred from purchasing a new electric vehicle due to the initial buying price compared to a standard fuel vehicle, you may not be aware that most electric vehicle owners are eligible for a tax credit. The tax credit ranges from $2,500 to $7,500 and its purpose is to incentivize more people to purchase electric vehicles.

The idea behind the tax credit is to give people more incentive to purchase electric vehicles so that, in time, the technology necessary to create an EV will be less expensive. When you subtract your tax credit from your initial buying cost, you will have the potential to save money despite the credit not applying towards your EV purchase.

You will want to keep in mind that although you may be eligible for a tax credit, that does not mean that the tax credit works as a discount on your initial buying cost for your EV. Tax credits are only available to buyers that purchase new cars. Used cars are not eligible for tax credits, but a used car typically has a lower initial asking price anyway.

  • Claim your tax credit on your federal tax return
  • Tax liability limits potential EV tax allowance
  • The tax credit is non-refundable and is not applied to your refund

The list above shows you what you need to do to claim your EV tax credit, as well as what to expect out of it. It is easy to get discouraged by the high asking price of your EV, but qualifying for this tax credit will help you keep more money in your pocket and will balance out the price you paid for your car.

In-State Incentives

Electric vehicles are better options for the environment and government officials who know that tend to work on incentives within their state to encourage residents to buy one. Incentives vary by state so you should research what benefits you can get out of yours, but typically some states will offer incentives such as:

  • Lower vehicle registration costs
  • Special loan approvals
  • Usable HOV lanes
  • More eligibility for vouchers and rebates

As you can see, there are several special perks you may be eligible for if you choose to go the route of the electric car. When you combine these incentives with the potential tax credit, you can already see where the long-term savings are coming from and this is before you factor in what you will be saving on fuel.

Fuel Savings

Fuel savings is arguably the biggest selling point for an electric vehicle aside from it being environmentally friendly. Everyone knows how much a trip to the gas station can affect their pockets and with recent gas prices going up, the benefits of an electric vehicle have only been highlighted more.

As mentioned earlier in the article, the average amount an average driver will save on fuel costs with an EV ranges from $800 to $1,000, but as gas prices continue to soar, the average savings amount will continue to go up. The amount you save will depend on how much you drive and what you use your car for.

If you are looking at the $800 to $1,000 savings but you cannot use it to justify your initial EV buying cost, consider that the average lifespan of an EV is about 15 years and if you add those savings up over a 15-year timeframe, you will have saved nearly $15,000 which is half of the price you initially bought your car for.

The savings add up in the long run, but the problem with long-term savings is that many consumers tend to focus on the short-term. Despite the initial buying costs, the short-term savings are still staggering. Let’s take a look at the gas vs EV charge monthly price comparison.

Fuel vs. Charge Comparison

Comparing the monthly spending of an EV charge with the monthly spending on gas highlights the disparity in savings. If you drive 550 miles a month in your EV, you will use a little over 180 kWh in that period. The average price of kWh in an American household is 12 cents, leaving you at $22 for a whole month of charge.

If you make frequent trips to the gas station, you know that it takes more than $22 to fill up your tank regardless of what kind of vehicle you drive. A person driving a midsize car would likely have to spend at least $50 to $70 to drive 550 miles in a month, while cars with bigger engines likely reach close to $100 a month to reach 550 miles.

So, if you take the average price of $22 a month and multiply it by 12 months, you will end up at $264 on charging costs for an entire year, while someone spending $70 will be at $840 for the year and that is assuming that gas prices stay at a steady pace throughout the year. Keep in mind that these are rough estimates.

The month-to-month savings are obvious and although average consumers tend to shy away from making big purchases, most smart shoppers can be encouraged to make such a purchase when the short-term savings are broken down for them. The more demand for fuel, the higher the cost will be going forward.

Charger Costs

If you own an EV, it is highly recommended that you invest in an at-home car charger. So, aside from the initial buying price of the EV, you will also need to factor in the cost of the charging station which will typically cost between $500 to $700 but can often exceed that price point. Installation is simple so you will not have to spend extra money on that.

The list above shows some of the most popular home charging stations on Amazon. The first two fall within the average $500 to $700 price range, while the last option is more expensive. You will want to read into each option to learn more about how each can benefit you and your charging needs.

The reason why you should invest in an at-home charger is that it will simply take too much time out of your day if you are relying solely on public charging stations. Charges can take up a lot of your time and it is wise to leave your car charging overnight at home. Make sure to factor this cost into your budget when considering an EV.

Maintenance and Repairs

You would think that because fuel-powered cars are more common than electric cars that it would require more work to maintain an EV. In reality, EVs require less maintenance over their lifespan. A recent study showed that EV owners can expect to save upwards of $4,600 on car maintenance over the life of their vehicle.

The savings come from several directions and when you start to add up even the most routine maintenance costs, you will start to see the obvious short-term savings along with the long-term as well. Look at some of the maintenance costs EV owners should expect to save big on going forward.

EV owners save big on tire wear-out issues as an EV’s average tire maintenance cost is around $900 while fuel-powered car tire repair can cost up to $1,200. EVs do not need oil changes and most EV batteries last eight to 10 years before needing a replacement or tune-up. You also save on minor maintenance issues like coolant and tire rotations.

  • Cabin air filters
  • Brake pads
  • Tires
  • Suspension components

These are the parts of an EV that will typically need occasional maintenance, but the reality is that EVs rely on fewer components than fuel-powered cars thus making maintenance more affordable. With the proper self-maintenance, EVs will typically cost around $300 less a year to maintain compared to their fuel-powered counterparts.

Depreciation Value

One of the few aspects that may deter someone from purchasing an EV is its depreciation pace. Within the first four years after purchase, an EV will likely depreciate close to 50 percent of its value compared to an average of 30 to 40 percent for standard fuel models. A lot of this has to do with battery life.

Although the battery life of an EV lasts nine to 10 years, a replacement battery will cost around $5,500 which is not far off of an engine replacement, but the difference is that nine to 10 years is already two-quarters of the way to the end of an average EV’s lifespan. Educated used-car shoppers who know this, will use it in negotiation.

Now, depreciation value only matters if you tend to sell or turn in your EV in the future, but as with any investment you make, you are still hoping for the best long-term return on interest you could get. However, the caveat to all of this is that despite the rapid depreciation in most EVs, Teslas keep their value over long periods.

A Tesla Model 3 will only depreciate about 11 percent after three years, which is a staggeringly low number especially compared to most midsize luxury cars. So, if you intend on buying an EV for the short term, your best bet is to buy a Tesla so that you can get the most return on investment when you are looking to sell or turn it in.

Variable Factors

In most cases, you should see a lot of savings with an electric vehicle over a fuel-powered car, but how much you save also depends on a few variable factors. In this article, you have seen how the combination of tax credits, incentives, maintenance costs, and fuel costs can add up to a lot of savings, but keep these things in mind:

  • Location
  • Amount of driving
  • Time and convenience

Your location is a major area of concern due to there not being as many charging stations as there are gas stations in most areas. Most major cities have charging ports, but if you live in rural areas, it may take you some time to get your car to a charging port, which brings us to the time and convenience variable, time and convenience.

Although you may be saving a lot of money, owning an electric vehicle requires discipline and patience. With a fuel-powered car, you can drive to a gas station and fill up your tank in less than five minutes, but charging your car at a charging port can take 30 minutes to a few hours depending on the distance you need to travel.

For EV owners that do a lot of driving, charging your car outside of your home can turn into a hassle and can be a real inconvenience for long drives and road trips. These factors often deter buyers from committing to EVs, but if with the proper discipline and time management skills, these factors may be obsolete to you.

Does Having an Electric Car Save You Money?

Yes, having an electric car can save you money as you have seen so far. However, despite all of the potential savings benefits over the long term, it is up to the consumer to decide whether or not the steep initial cost differential is justifiable by the potential long-term savings.

If you are a car owner that does not intend on using the car a lot, some of the long-term and short-term savings for that matter will be harder to feel in your finances. These savings may take years to see if you have a short commute and do not drive a lot. At that point, the biggest EV selling point for you may be that it is eco-friendly.

Make sure to do the proper amount of research before making your decision so that you can optimize your initial potential savings and decide whether the investment is right for you. If you are on a budget and only need a car for emergencies or short commutes, a fuel-powered car is likely your best choice. It is all situational.

Conclusion

There is no shortage of ways you can save in the long run by investing in an electric vehicle. Sure, the initial cost may be higher than its fuel-powered competitors, but applying for an EV tax credit and researching EV incentives such as initial rebates can help you get back some of the money you are initially spending.

Savings tend to show their impact when you look at how much you can save on fuel, maintenance, and in some cases, depreciation value. Make sure to do your research and decide on whether these long-term savings justify your purchase because a few years down the road, you will be staggered at how much you saved with an EV.

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