With gas prices surging, is it time to buy an electric vehicle?

With gas prices surging, is it time to buy an electric vehicle?

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With gas prices at an all-time high, you can find no shortage of people advocating for the purchase of electric vehicles. You can find articles here, here, and here, along with about 5,000 more. Now don’t take this as gospel, because everyone has their own motives, especially the media.

What these people never seem to do, is crunch the numbers for you. Well, search no more. We’re going to crunch the numbers on a prospective EV purchase to see how it shakes out. After all, the only reason we’re writing about this is because we care about the numbers.

For this piece, I’m only going to compare highly-efficient vehicles. For our goals, we’re not looking to buy a sub-35 MPG vehicle, so this rules out a lot of your non-PHEV or EV small SUVs.

My personal story

The best part of this article is that I’m going to be talking you through the real time information I’ve gathered to analyze my own vehicle purchase. My wife and I will be in the market for a new SUV in the spring/summer of 2023, and will be comparing several SUVs. This is your chance to hopefully learn something from my hours of research!

Cost of owning a gas/diesel vehicle

Well, it’s no secret that gas/diesel-powered vehicles have their fair share of ownership costs. I’ve owned about a dozen of them myself, so you could say I’m fairly familiar. Common costs to think about are:

  • Periodic maintenance (oil changes, brakes, battery, tires, etc.)
  • Major maintenance (transmission, engine, cooling, etc.)
  • Fuel costs

These aren’t all inclusive, and vary greatly by vehicle type and make/model. For instance, a Ferrari will have much higher maintenance costs than a Toyota, due to the intricacy of systems and quality of parts. Nothing against Ferrari, they just tend to be expensive to maintain.

Cost of owning an electric vehicle

The biggest cost of owning an electric vehicle is the associated electricity used to charge. This can vary greatly by state, as the power rates differ. The most common costs associated with EV ownership are below.

  • Periodic maintenance (brakes, tires)
  • Major maintenance (battery replacement)
  • Charging costs
  • Home charger purchase and installation

This isn’t all inclusive, but it’s probably where most of the cost comes from. Keep in mind the federal government still offers tax credits for purchasing electric vehicles (click here to learn what a tax credit is and how it impacts your taxes). The amount of these credits are based on battery size and whether or not the manufacturer has exceeded 200,000 units sold.

Comparing purchase price; electric vehicle vs. gas

This isn’t an exact science unless your comparison uses very similar vehicles in the same class. For the sake of this exercise, I’m going to use the Toyota RAV4 Hybrid, Volkswagen ID.4, and Hyundai Tuscon Plug-In Hybrid.

RAV4 Hybrid: A mid to upper-tier RAV4 Hybrid can be had for about $36,879. The RAV4 is an extremely popular smaller-sized SUV. This is a proven platform that is very efficient, getting an average EPA-rating of 40 MPG combined.

Volkswagen ID.4: Can be had for around $43,105 after the $7,500 federal tax credit (YAY, tax credit). This is a new-comer to the electric vehicle space, but receives rave reviews for VWs German engineering. It gets a pretty solid 101 MPGe.

Hyundai Tuscon Plug-In Hybrid: This SUV comes in around $29,501 after a tax credit of nearly $7k. This is a great value for what you’re getting. Now, finding one of these is quite difficult compared to the first two listed. If you do manage to find one, you’ll enjoy around 38 MPG combined driving.

The 10-year cost cost comparison on electric vs. gas

Overall, these are very comparable models. One is a true EV (ID.4), one is a traditional hybrid that doesn’t plug-in (RAV4 Hybrid), and one is a Plug-In Hybrid (Tuscon) that combines the first two technologies. Below, you can see the full comparison.

As you can see, the three options end up pretty close, as there is less than a $7k difference in 10-year ownership costs between the 1st and 3rd place vehicle.

Keep in mind that some of these figures are hard to estimate. I used $3.50 as the average price of fuel. This clearly isn’t the case in 2022, but the inflated prices are not sustainable long-term (I think?). I used the AAA estimates for maintenance on all three vehicles. These are from 2019, so likely haven’t experienced the greater than 20% inflation since that time.

It is also worth noting that these comparisons will largely depend on your local market. Electricity rates, gas prices, and new vehicle prices vary greatly based on location. Keep this in mind as you’re looking for your next vehicle.

The winner of the vehicle comparison

The longer I spend researching and writing this article, I’m not sure a clear winner has presented itself. You can make a strong financial case for purchasing any of these vehicles. You can probably also make a strong case for purchasing a small car that gets 50 MPG and not getting an SUV at all, but for us, that’s just not an option.

Our personal criteria looks something like this:

  • Economically feasible
  • Long-term sustainability (low maintenance, reliable, etc.)
  • Fuel efficiency
  • Space for 2 kids
  • Ability to travel 200 miles without stopping

If you are going to run a vehicle comparison for yourself, I recommend identifying your purchase criteria before doing any research. Do you need a third row? Is 4-wheel drive necessary? All of these questions make a huge difference in vehicle lineup and price.

So should I buy an electric vehicle?

Heck, I don’t know. You can, I suppose. But you don’t have to.

It’s also worth stating that EV technologies are leaping forward at a pretty rapid pace. The technology could be greatly improved in the next couple of years, making your hard decision and easier one.

For us, we’re going to test drive the ID.4 this weekend. It jumps out as being a great EV option for a cost-conscious buyer. Hopefully it’s everything we think it is.

Author

  • D.C. joined the Marine Corps right out of high school. When he left active duty after 5 years of service, he quickly earned a bachelors degree and an MBA. He got his first private sector job at a modest salary and quickly worked his way up through promotions. Once he started making decent money ($38k at the time), he quickly realized he needed to learn how to save for his future. After nearly ten years of research and application, he wants to share his knowledge and financial best practices so more people can become Wealthy Idiots!