Electric Cars

Are Electric Vehicles Affordable? Here's How the Costs Break Down.

With inflation driving up the price of everything from cars to gas, is it time to look into budgeting for an electric vehicle?

If you had to buy a car last year like I did, you probably felt the sting of rising inflation driving out of the dealership. Couple that with gas prices hitting all-time highs this year, and the idea of getting from point A to point B in a fully electric car is looking more and more appealing. But for a lot of us, the cost of an electric vehicle is still prohibitive… or is it?

According to Kelly Blue Book, the average price of all new vehicles reached a new record high in June. Supply shortages and high demand have seen the average price of a new non-luxury car hit an all-time high of $44,000. In June, the average price for a new electric vehicle hit $66,000. But when talking EVs, the sticker price doesn’t tell the whole story. Owning an electric car requires adopting a new mindset about its costs.

First there are federal tax credits of up to $7,500 for buying an EV. Currently, there are limits on which cars are eligible, so check if your car applies before purchasing. Next there are several new electric car options right now for around $50,000, and a few will be available by next year for under $30,000 And don’t forget about gas. Charging your electric car from home is still going to be less than pulling up to the gas pump, and many EV owners I spoke with are taking advantage of the free car charging memberships they received with their new set of keys.

Alex Guberman is the creator and host of the You Tube channel “E is for Elecrtic” and has been plugging in his ride since 2012. “Saying I can’t afford an EV because I can’t afford a Tesla is kind of like saying I can’t afford an iPhone 13 because it’s $1,200, so I can’t afford a smart phone,” he explains. “Well, you know you can actually get a budget phone for $200 - $300 and it’s going to be good enough for most of us.”

Guberman argues that with all the new options coming out now coupled with technology advances like longer battery life, more charging stations and minimal maintenance, electric cars can end up being the cheaper option over time.

So why is the total number of registered EVs on the road in the U.S. only hovering around 1%? Guberman says that’s partly due to our nation’s politics. “Out of the three biggest markets — China, Europe, and North America — we’re the least friendly. For example, in China if you’re an auto manufacturer you’re required to make a certain number of fully electric vehicles just to stay in business. Also, there are tons of incentives in China for people to buy electric vehicles. Same thing in Europe, especially countries like Norway. Here, just like everything else, it’s a political issue. Whether is a unions thing, or the green energy thing, everything is politicized so there’s always half the country that hates it, and half the country loves it, so we can never get anything done.”

Speaking of getting things done. Washington’s big infrastructure bill has money set aside for things like a national electric car charging network. But we seem to have hit a snag when it comes to those EV tax credits. The new Inflation Reduction Act could make it harder to pay for your next plug-in car in the short term by restricting tax credits to only apply to cars made with batteries with at least 40% of materials coming from North America or U.S. trading partners. While that sounds great, most electric car batteries are made in China. Fewer new EVs could qualify for the credit once the President signs the bill into law.

The transition from gas to electric transportation in the U.S. will most likely continue to be slow but building out the necessary domestic infrastructure and EV supply chains should drive the cost down over time. In the meantime, it actually might be the best time to grab an electric vehicle, before the added restrictions on tax credits are put in place.