Do you really save money with electric cars? I’ve been wondering this myself for quite a while now. Sure, I get the fact that it costs less to power the car with electricity vs. gas, but what about all the other hidden costs of owning an electric car? Seems like it’s a toss up whether it actually pays off in the end or not. I finally want to close the loop on the debate: “How much money does an electric car save?”
And, while we’re at it, I also want to be sure it’s the right environmental decision. Everyone touts that it is, but how many old batteries are already in the landfill, unable to be used ever again? Is that better than emitting gas fumes into the air? Honestly, I don’t know. So let’s find that out together too! “Is an electric car really better for the environment than a gas powered car?”
What Is An Electric Car?
What exactly is an electric car? In general, an electric car is one that runs on battery power as opposed to gasoline.
Do you know when the electric car was first produced?
(No, it didn’t start with Tesla!)
Soooo, why does the electric car seem so new to us today? Basically, once gasoline powered cars hit the market in the late 1800s, they proved to be much more practical than the electric car.
After all, gas vehicles…
- were faster,
- they could travel longer distances,
- and, you could “re-charge them” much more quickly than battery powered cars
And so, gas vehicles took the world by storm for over a century.
Only just recently are electric vehicles hitting the market again. Today, electric cars are fast, they can travel much longer distances than in the past, and charging is getting much faster. Plus, they’re touted to be more environmentally friendly (which is important to many people today).
How Does An Electric Car Save You Money?
Continuing on with the basics here…but still important to clarify for everyone. The premise of saving money with an EV is pretty simple. Electricity is cheaper than gas.
- To travel 200 miles with an electric car, you’d need to put $9 worth of charge into your car
- To travel 200 miles with your gas powered car, you’d need to put about 10 gallons of gas into your car, which would cost you roughly $30.
So how much money do you save with an electric car? Based on the above information, for every 200 miles you drive, you’re saving yourself $21 with that electric car.
There, simple right? Time to switch over to electric, right?
Mmmm, not so fast.
It’s time to look at the downside of electric cars. That’s right, there are downsides, and plenty of them!
To get a clear answer to the question, “How much money does an electric car save?”, we’ve got to first understand all the costs…and there are actually quite a few.
Could Electric Cars Actually Cost You More Money?
Thinking about buying a new Tesla? Man, they sure look sweet (I’m even interested in the new truck that’s coming out!). But, will EV’s really save you money? What if they actually cost you money in the end?
That ‘costing you money in the end’ part. It’s entirely possible. But let’s not get too far ahead of ourselves here.
See the list below for items that will likely cost you more money with an electric car vs. a gas car.
Hidden costs of owning an electric car
Let’s hit the full list quickly here and then dive into each cost individually.
What are the hidden costs of owning an EV?
- Electric cars cost more up front
- Electric cars don’t last as long as gas powered cars
- You’re forced to rent cars for long trips since an electric car can only go short distances
- The cost of insurance is higher
- And of course, electric cars increase your electric bill
Yikes! That’s quite the list! Let’s break it down and see how much each of these hidden costs actually amount to!
Electric Cars Cost More Up Front
How much does an electric car cost on average?
According to Car and Driver, the average cost of an new electric vehicle is is $55,600. The average cost of a new gas-powered car is $36,600.
So, right off the bat, you’re paying $19,000 more for a new vehicle when you buy electric. This is NOT a good start for the supposed savings of driving an electric car!
Electric Cars Don’t Last as Long as Fuel Cars
Do electric cars last as long as gas cars? How long do car engines last?
These are the questions we need to ask ourselves to see if we’d need to replace our car more often if we bought an EV instead of a gas powered vehicle.
First off, the electric car engine – this is actually less complex than the gas powered engine due to fewer parts. So in theory, the EV engine should last longer.
However (and this is a BIG however), the battery is another story.
Most batteries in electric vehicles will only last 65,000 miles. Most gas powered cars can last up to 200,000 miles and beyond!
And how much does a new battery cost on electric cars?
This isn’t pretty. It can cost upwards of $5,500 for a new EV battery. Yikes!
Ummm…I thought the electric car was supposed to save people money!! This is a terrible start!
An Electric Car Is Only For Short Distances (Causing you to rent a car for long trips)
On average, the electric vehicle today can travel about 260 miles. This performance is certainly better than it used to be (and it’s getting better with each passing year), but it’s still a far cry taking it for a cross country trip.
So, if you’re heading out of state for a vacation, chances are you’re not going to get behind the wheel of your trust electric vehicle. Instead, you’ll be renting a car, which costs a minimum of $150 a week – and that’s for a small car. A minivan will cost you upwards of $450.
So for average’s sake, let’s say a car rental is roughly $300 a week, and you might do this twice a year, which means an additional cost of $600 each year.
It’s not hair-raisingly shocking, but it’s still enough to note here since a car rental is highly likely from time to time.
This one often surprises people. They ask the question, “How much money does an electric car save?”, and then they forget to look at the additional costs – one of which is the cost of insurance!
Remember earlier in this post where we discovered that electric cars were (on average) $19,000 more expensive than regular gas powered cars? Well…what if you crash that car? Insurance is going to have to pay for the damages to bring your car back to normal. And that’s going to cost more! Which of course means that your insurance costs will be more each month.
How much is insurance for electric cars vs. gas cars?
So…how much more is insurance for EV vehicles vs. gas powered cars? A lot more?
Insurance for electric cars is roughly 21% more than gas cars.
In an example given by myev.com, the insurance cost for a Kia Soul EV was $1,663 a year vs. the gas powered Kia Soul that was just $1,442 a year.
So, that electric car is costing you up front, but it’s also costing you an extra $220 a year for insurance!
Electric Cars Increase Your Electric Bill
This one is pretty obvious, but we’ve got to note it since it is a cost of operating an electric vehicle.
How much will it cost you in electricity per year to operate an electric car? How much will all those charges increase your electric bill?
Based on our example above, it costs roughly $9 in electric costs to charge a car up to a 200 mile capacity.
- The average person drives 15,000 miles a year. That’s 41 miles a day.
- Based on the 200 mile capacity for $9. The cost for you to drive each mile is 4.5 cents.
- 15,000 miles x $0.045 = $675 for the entire year.
When you drive an electric car, your electric bill will go up $675 a year, or roughly $56 a month.
Not too bad. You notice the electric bill going up a bit with your new EV car, but you’ll CERTAINLY notice the amount you’re NOT spending in gas!
I can see why people fall in love with electric cars when looking at their monthly bills.
Related: How Much Do I Need To Retire At 55?
How Much Money Does An Electric Car Save?
Electric cars are becoming popular. They’re thought of a environmentally friendly AND they’ll save you money! That’s a pretty good sales-pitch. We’ll talk about the environmental part later in this post, but what about the savings? How much money does an electric car REALLY save you?
After my research, I’ve discovered that electric cars will save you money via two avenues:
- An electric car will save you money in fuel (duh), and
- Electric cars actually cost less to maintain each year
Now let’s find out HOW MUCH an electric car will save you via these two avenues. And will the fuel savings of an EV be enough to offset the added cost of buying electric vs. gas? (Not to mention all the other costs we noted in the above section).
Maintenance Costs Less For Electric Cars vs Fuel Cars
On average, it costs less to maintain an electric car than a gas powered car because it’s a simpler machine. There are fewer moving parts and less complications.
According to Consumer Reports, the average cost of maintenance for an electric car is $900 per year. On average, a gas powered car will need $1,200 per year in maintenance.
When we explored how much your electric bill would increase due to your continued car charging, we discovered that it would cost $0.045 per mile to drive your electric vehicle – or roughly $675 for 15,000 miles of driving each year.
How much would it cost in gas to drive 15,000 miles?
In contrast, it would cost roughly $3 per gallon of gas, which will likely move your car about 20 miles down the road. This is a cost of $0.15 per mile (more than 3x more than charging a car with electricity!).
Over the course of the year, it would cost you $2,250 to drive your gas powered vehicle 15,000 miles.
So for this example, driving an electric vehicle would save you $1,575 a year in fuel costs.
How Much Money Does An Electric Car Save Per Year?
If your car gets an average of 20 miles per gallon and you drive 15,000 miles per year, then an EV will save you $1,575 a year.
If you don’t fit this exact model, it’s probably easiest to estimate how much you spend in gas a year, then take 2/3rds of that number — that’s how much you’ll save in fuel costs each year (since electricity will power an EV at 1/3rd the cost).
In other words…
- Let’s say you spend roughly $300 in gas every month
- That’s $3,600 a year.
- Your savings is $3,600 * 2/3 = $2,400.
You’ll save $2,400 a year.
Or, if you want to get super mathy (and simplify your calc), your yearly savings is your monthly gas costs times 8.
- If your monthly gas cost is $300. Take that times 8 and you’ll get your yearly savings if you switch to EV.
- $300 * 8 = $2,400, your yearly savings.
Sorry if that just utterly confused you. If it did, just forget I said anything! 😉 If you loved it, then you’re welcome! 🙂
How Much Money Does An Electric Car Save Each Month?
As we stated above, electric cars operate at about 1/3rd the cost of gas powered vehicles. So, whatever you spend in gas each month, you’ll save 2/3rds of that in fuel costs.
If you spend $300 a month in gas, you’ll save $200 a month by switching to an electric vehicle.
Do Electric Cars Really Save You Money?
Electric cars cost you more up front to buy, the battery life is short, they cost more to insure, and you’ll have to rent a gas powered car from time to time. How much does all this cost you? And do you really save money with an electric car in the end?
It’s time to do the math.
The Expenses of Owning an Electric Car
- An electric car costs $19,000 more when you buy it new vs. a gas powered car
- Batteries don’t last very long and need to be replaced every 5 years or so. That cost is $5,500.
- The cost of insurance is $220 more each year
- A rental car will cost you $600 for those two vacations you take a year
To recap, an EV costs $19,000 up front, and then an additional $1,920 a year in expenses.
How Much Do Electric Cars Save You in Fuel and Maintenance Costs Per Year ?
- If you drive 15,000 miles a year, you’ll save approximately $1,575 a year
- And, you’ll pay fewer maintenance costs each year which will save you roughly $300 a year.
An electric car will save you $1,875 in fuel and maintenance costs each year.
As far as I can tell, electric cars cost you more up front, they cost you an extra $1,920 a year to own, and they save you $1,875 a year in fuel and maintenance costs.
So an electric car costs $19,000 more to buy up front, and then an extra $45 a year to own vs. a standard gas powered vehicle.
Based on these numbers, you’ll NEVER save money with an electric car.
Maybe we could shift the numbers a bit by purchasing a slightly used car, or by getting one with an exceptional battery…oh, and maybe you don’t really need a rental car for vacations. Then the numbers could start working in your favor, but it will still likely take quite some time to break even on this investment!
Is An Electric Car Really Better For the Environment?
We’ve just discovered that a brand new electric car makes absolutely no sense to buy. It costs way more up front and it really doesn’t save you any money per year either.
But what about the environmental story? Is an electric car far better for the environment?
Are we doing Mother Earth a service by driving around in our EV car vs. our gas emitting vehicle?
I won’t write a whole other post on this (in fact, this post from ‘You Matter’ does an amazing job spelling out the facts – I’d recommend the read), but I’ll fill you in on the basics and the likely answer.
To figure out if an electric car is better for the environment, you need to dive into three main areas:
- How the car is made
- How your powerplant operates
- Where the car batteries go when they die
How much energy is used to produce an electric car vs. a gas powered car
As it turns out, the battery of the electric car takes quite a lot of energy to produce…and it’s not clean energy. To extract lithium, nickel, cobalt, and graphite from the ground, it takes big gas-powered machinery and a whole lot of effort, which is actually emitting more CO2 into the air vs. the production of a gas-powered vehicle. According to the data though, the clean-emitting vehicle makes up for these early emissions after about one year of driving. So that’s good!
Another factor to understand is with your power plant. How do they produce their power?
If your powerplant burns up coal and oil to produce energy, then your electric charge is still doing harm to the planet. However, electric cars do run more efficiently, so you are likely hurting the planet less than if you were bumbling around in a gas powered vehicle.
Electric car batteries end up in the landfill…that can’t be good.
After 65,000 miles, electric car batteries wear out. Unfortunately, about 95% of them end up in the landfill, never to be used again. In the landfill, they’re polluting the air and ground water, which can ultimately cause cancer in humans.
There are many efforts in place to recycle these lithium car batteries, and I hope the solution comes quickly.
Is the electric car truly a zero emissions vehicle?
But is it better than our CO2 producing gas vehicles?
I believe so. And, it’s getting better every day as we’re becoming more conscious about the impact of production on the environment.
You have to remember that even the best-laid plans aren’t perfect from the get-go. It takes trial and understanding to improve a process. Right now, we’re on a journey with the electric car. It’s not perfect, but it’s a good route that’s constantly improving.
Many Ask, “Why Are Electric Cars Better?”
If you came here with the question of, “Why are electric cars better than gas cars?”, put simply…they’re not…yet.
- They cost more up front
- There’s not much for savings each month
- And, they’re not dramatically better for the environment yet
But, will electric cars be better?
They’ll be produced more efficiently, they’ll soon come down in price dramatically, and we’ll see many more recycling efforts on those batteries so they stop ending up in our landfills.
Electric cars are the way of the future. They’re coming full steam ahead, and I’m excited for what lies ahead.
What Are The Best Electric Cars?
Getting excited about EVs? What are the best electric vehicles in the market right now?
According to Edmunds, the top electric cars are:
- Tesla 3 – base price at $39,900
- Kia Niro EV – base price at $39,090
- Volkswagon ID.4 – base price at $39,995
Tesla is sleek and sporty and ranks out the best in reliability with a rating of 8.4 out of 10. With so much demand, you’ll likely need to get on the waiting list for this vehicle, but I’ve been in one…it’s worth the wait!
Related: How to Invest 1 Million Dollars
How Much Money Does An Electric Car Save Each Year? In Summary…
So…do electric cars save energy? Do electric cars save money?
Electric cars cost (on average) $19,000 more than regular gas vehicles. They save roughly $1,600 in fuel costs each year (by using electricity instead of gas), but they cost more in insurance, the batteries are costly to replace, and you’ll likely need a rental car from time to time.
All in all, you’ll save very little per year with an electric car (if anything at all), but the technology is getting better.
As for the environment, the electric car hurts the environment more initially to produce, but uses far less energy during operation. Then the toss-up is with the battery once it’s no longer useful – if it heads to the landfill or if it’s recycled for further use.
In both cases – both the environment and saving money – the electric car isn’t dramatically better than the gas car. BUT, it IS improving! And I believe it soon will be far better in the near future.
What do you think? Will you be investing in an electric car any time soon?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.