You might want to buy an electric car, but the price comes with some serious sticker shock. This leaves you wondering, “Why is the price so much higher than the price of gasoline cars?”
For example, the cheapest 2023 gas engine car model available in the US is the Nissan Versa at $15,730 plus destination. The cheapest electric car is the Chevrolet Bolt at $25,600 plus destination.
This difference in cost is quite easy to relate – it is large, expensive battery which takes the place of the internal combustion engine in an electric vehicle, or EV. A long-range lithium-ion battery can cost between $10,000 and $20,000, according to Carl Brauer, executive analyst at automotive search engine website iSeeCars.
But there are other factors driving up the price of electric cars, says Liz Najman, a climatologist and communications and research manager at Recurrent Auto, an electric car research and analytics firm that specializes in the used car market. She cites lingering supply chain issues, low inventories and the fact that electric cars require 10 times more semiconductors than gasoline cars.
Najman also notes that “there is unprecedented noise and excitement about electric cars” caused by California’s plan to gradually abandon the sale of gas cars by 2035, and increased incentives from the recently passed Inflation Reduction Act that will promote sales and use of electric vehicles.
How much better are electric cars compared to gas cars?
Looks can be deceiving when it comes to car prices, says Jesse Toprak, principal analyst at Autonomy, an electric car subscription service. Electric cars produced until now have been premium models, as “early adopters tend to be less price sensitive.” So, he says, the average price of an electric car compared to the price of a petrol car “isn’t really apples to apples”.
The average price of a new electric car is $64,249, compared to $48,281 for a new gasoline car, a difference of almost $16,000, Nyman says. This huge difference reflects the market reality that most EV models available are still higher-end vehicles.
There are many of them on the used car market “gently used” electric vehicles from 2022 and 2021, which increases the average price, Nyman notes. Data from Recurrent shows that the average price of a used electric vehicle is $37,597, about $10,000 higher than the average price of a used gas vehicle.
Incentives and maintenance costs
So far, we have focused on the purchase price of electric cars, which, admittedly, seems quite high. But when you’re shopping for an electric car, there are a number of factors that can level the playing field.
“When you look at the total cost of ownership, even over a few years, electric cars are very competitive with gas cars,” Nyman says. “And the higher the price of gas, the faster electric cars catch up.”
Here are a few factors to consider when trying to determine the impact of owning an electric car and keeping within your budget.
Tax benefits. This federal clean vehicle tax credit up to $7,500 when you buy an electric car. If you lease, you can get an indirect benefit when the dealership or leasing company passes on the credit in the form of a lower monthly payment. Starting in 2023, for the first time, used cars can qualify for a credit of up to $4,000.
Discounts. Some state and local governments offer discounts. For example, the California Air Resources Board offers a rebate of $1,000 to $7,000 to anyone who purchases or leases an electric vehicle.
Lower fuel costs. If an electric car is charged in a private home, the cost can be much cheaper than buying gas. However, commercial fast chargers can almost rival the cost of gas.
Less maintenance. With fewer moving parts, electric vehicles require fewer trips to the service bay. Electric cars never need an oil change, and brake pads last much longer than gas cars thanks to regenerative braking.
Lower cost per mile. Periodic data shows that electric vehicles cost less than 8 cents per mile to travel, compared to 9.6 cents per mile for gas-powered vehicles.
Will there be affordable electric cars?
In 2023, an influx of new foreign and domestic electric vehicles, including pickup trucks and large SUVs, is expected. More competition could lower the price of electric cars.
“We could see ‘batteries for electric vehicles that are hours, not days, ahead of what’s available today within the next decade,'” says Toprak. “Manufacturers around the world are now fully committed to the electric car revolution, and there is no going back.”
Brower was more cautious, noting that prices for lithium, a key battery component, have risen because of the war in Ukraine. It’s unpredictable, and a breakthrough in battery production could happen in five or 25 years, “making it difficult to sell electric cars to ordinary consumers in the near term because of their cost.”
Tips for buyers of electric cars
When researching which EV to choose, keep the following key points in mind:
- The sticker price is not the actual price. The advertised price will be offset by incentives, rebates, lower fuel and ownership costs and possibly your negotiation.
- Determine in advance what incentives will apply to the car you want to buy. Yes, it’s difficult, but it’s worth it to find all the ways to reduce the initial cost.
- Choose carefully between buying and leasing. Each financing method has advantages and can affect the total value of the vehicle.
- If you’re going to take advantage of the federal tax credit, remember that you won’t see those savings until you file your taxes.
- Electric cars have non-financial benefits that may allow you to justify the higher cost. Lane access, increased acceleration and handling, and a quieter ride are some of the things that are popular with electric car owners.
- Use internet search engines to cast a wide net for the best deal. You can even buy a car out of state and have it delivered to your home.
Article Why are there no cheap electric cars? originally appeared on NerdWallet.
