When President Joe Biden announced his plan for addressing gas costs Thursday, he placed heavy emphasis on the cost-saving benefits of electric vehicles, which he said will save drivers, on average, about $80 per month on gas.
“The bottom line is this: Between ramping up production in the short term and driving down demand in the long term, we can free ourselves from our dependence on imported oil from across the world,” Biden said.
But while EVs save money in the long term due to lower costs of maintenance, insurance, and taxes, they also have significantly higher upfront costs — meaning that many drivers may not be able to afford them. Here’s the basic financial math for drivers who are weighing whether to make the switch.
First, there are upfront costs: According to an estimate from Kelley Blue Book, the cost of an EV is roughly $10,000 higher than the industry average.
But that’s not the only early cost many drivers incur: As J.D. Power notes, most EVs come equipped with a Level 1 charging cable, which can conveniently be plugged into a standard three-pronged household outlet. But these only emit 120 volts of power, meaning it can take as long as 40 hours for many vehicles to recharge fully.
To help save time, many drivers opt to spring for a Level 2 charger, which can fully recharge their vehicles in eight hours. But they require exclusive charging equipment, which means professional installation and a dedicated electrical circuit — a cost that runs consumers an additional $2,000.
Taken together, that means the typical driver would need as much as a decade or more to recoup the initial outlay in an EV by saving $80 per month on gas — a figure for which the White House did not provide a citation.
Nevertheless, there are more factors at play that could sway the decision.
How much drivers can save by going electric also varies from state to state: According to an analysis by Self, a financial technology company that analyzed data using factors such as fuel prices, EV incentives, taxes, and registration fees, the average annual savings for EV owners in the United States can range anywhere from more than $1,000 in states such as New Jersey, Oregon, California, and Vermont to just a few hundred dollars in states such as Mississippi, Arkansas, and Michigan. (See a full list of estimated annual savings here.)
Overall, the national average annual cost of owning a gas vehicle in 2022 is estimated to be around $4,336, Self found, compared to $3,679 for an EV.
BIDEN CALLS FOR ‘USE IT OR LOSE IT’ PROVISION FOR DRILLERS ON FEDERAL LAND
Other incentives, such as federal and state tax credits, can also help offset the high prices: Drivers who buy a new EV made after 2010 can be eligible for a federal tax credit ranging anywhere from $2,500 to $7,500. But these only apply to the first 200,000 vehicles sold.
Still, many states — including California, Colorado, Delaware, Georgia, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, and Vermont — also offer various tax credit and rebate programs for EV drivers to help further drive down costs and incentivize consumers to make the switch. (A full list of state programs and incentives can be found here.)
There are also maintenance differences to consider: EVs have fewer parts to maintain, thus making them cheaper than most gas-fueled cars. According to Self, the annual cost of maintaining EVs in the U.S. is roughly $190 per year — roughly $321 less than a gas-powered vehicle.
The bottom line: EVs can save money, but how much and how soon consumers will see these payoffs depends largely on where they live, how much they drive, and what kind of EVs they invest in.
For example, a person who drives regularly to work or school, lives in a state that offers EV drivers tax incentives, and who has the ability either to charge their vehicle overnight (or obtain regular access to higher-voltage chargers), investing in an EV might well be worth the higher upfront cost.
For those who drive less, or use cars solely for long-distance road trips (where access to EV chargers is more infrequent and often involves a longer wait than simply refueling), analysts say it might be best to hold off — especially due to heightened demand and supply chain constraints.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
“EVs are great if you can get them (and can afford them),” Morgan Stanley analyst Adam Jonas told CNBC.
