The short version
- EVs may be $6,000 to $10,000 cheaper to own over a lifetime than internal combustion (ICE) cars, but there are still some hidden costs involved that you’ll want to prepare for.
- Some examples include the expiring federal tax credit, higher registration fees and insurance premiums, the cost of a Level 2 home charger, steep depreciation, and the high cost of replacing a battery out of warranty.
- Still, you can avoid steep depreciation and an out-of-warranty battery swap by owning an EV inside the “goldilocks zone” of three to seven years of age.
11 Hidden costs of owning an electric car
1. Higher purchase price
Right upfront, EVs are more expensive to buy than their gas-powered counterparts. According to Kelley Blue Book, the average sale price of a new EV was $10,000 higher than the industry average in 2021.
Now, you might think that the discrepancy comes from a disproportionate amount of EVs being sold by luxury carmakers (Tesla, Porsche, etc.). But consider this: A gas-powered Hyundai Kona crossover starts at $21,300 while the Kona Electric starts at $34,000.
A Tesla Model S now starts at $104,990 — nearly twice the base price of a Mercedes E-Class.
There’s a litany of reasons why EVs are still so expensive in 2023. These include, but certainly aren’t limited to:
- Cost of design
- Cost of battery manufacturing and rare earth minerals (cobalt, etc.)
- Demand outstripping supply
- Limited production numbers = no economies of scale yet
- A possible “prestige tax” associated with EVs and EV brands
That being said, there are rare exceptions. The electrified Porsche Taycan, for example, starts at “just” $86,700 while the similar, four-door Panamera starts at $92,400. Chevy Bolts are just $25,600 starting, but they do have a tendency to explode.
So even in 2022, it’s pretty clear that EVs are still significantly more expensive than their gas-powered counterparts.
Now, in previous years that high upfront cost could be greatly offset by the $7,500 Federal Tax Credit.
But I’ve got some bad news on that front.
2. No more tax credits (on most models)
On August 16th, 2022, President Biden signed the Inflation Reduction Act which — among many things — increased restrictions on which EVs would qualify for the $7,500 tax credit.
In order to qualify, an EV must be assembled in North America. By 2024, it must not have battery components made in “foreign entities of concern” (including China), and by 2025 the EVs can’t have a trace of raw minerals mined in those countries.
The bottom line is this: Just 21 out of 72 EVs on sale today now qualify for the tax credit, and the list doesn’t include a single Tesla, Porsche, Kia, Mazda, or the new Toyota bZ4X.
For used cars to qualify for a $4,000 credit, the car must be at least two years old, the sale price under $25,000, and the buyer’s income under $75,000 (or $150,000 for couples).
3. Higher registration fees
Given the big incentive from Uncle Sam, you might be surprised to learn that your state might actually charge you extra for buying an EV.
That’s because states generate tax revenue from the sale of gas, and much of that gas tax goes to maintaining infrastructure. So if you buy an EV and skip the pump, your state might feel like you’re not paying your fair share to maintain the roads you’re driving on.
As a result, 19 states (CA, CO, GA, ID, IL, IN, MI, MN, MS, MO, NE, NC, OR, SC, TN, UT, VA, WA, and WI) have an annual fee on EVs, Plug-In Hybrid Electric Vehicles (PHEVs), or both ranging from $50 to $200. You can see the full list of states and their fees here.
4. Higher insurance premiums
While EVs don’t require any special type of insurance, regular ole insurance becomes more expensive.
According to Progressive, they have to charge more for coverage since EVs are much more expensive to repair and replace. Plus, there just aren’t that many authorized shops with the right tools and training to fix EVs. As a result, “qualified facilities may charge more for repairs.”
All in, EVs are roughly 5% to 20% more expensive to insure than their direct, gas-powered counterparts.
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5. Public charging
Public charging company Bluedot charges a flat fee of $0.30 per kWh to charge at one of their public stations.
Considering each kWh delivers around three miles of range, you’re looking at around $30 to “fill up” and purchase 300 miles of range.
For comparison, the AAA puts the national average for a gallon of gas at $3.88. So to fill up a 13-gallon tank, you’ll spend around $51.
That’s why 90% of EV charging is done at home, says analyst John Voelcker, so let’s analyze that cost now.
6. Home charging
In Georgia the average cost of a kWh at home is just $0.12. So to “fill up” would cost just $12, versus roughly $30 at a public charger.
However, on a Level 1 charger (aka your basic, 120-volt wall outlet), charging your EV at home could take up to three days. That’s why many EV owners opt to install a Level 2 charger at home for around $2,500. Pricey, sure, but a Level 2 can easily recharge an EV overnight.
As for longevity, early estimates predict that home chargers will last around ten years.
7. Battery replacements
For starters, EV makers typically warranty the battery for eight years or 100,000 miles, whichever comes first.
But what if your battery fails outside of the warranty period?
Well, data is still somewhat limited on that front. The vast majority of EVs have been sold within the last five years. At the risk of sounding cynical, most batteries haven’t had the chance to fail yet.
But those that have aren’t cheap to replace. A meta analysis by Recurrent Auto found that so far, the average cost of a battery replacement (parts and labor) can range anywhere from around $12,000 on a Nissan Leaf to $22,000 on a Tesla Model S.
The staggering cost of a battery replacement lends to the next hidden cost of EV ownership: Depreciation.
7. Depreciation
On average, vehicles lose about 35% of their value within three years according to LendingTree. For EVs, however, it’s 52%.
Some EVs depreciate even faster. AutoWeek reported on some alleged documents sent from Ford to dealers warning them to brace for 60% depreciation on the new Mach-E after three-year leases expire.
That means that after just three years of ownership, your $60K Mach-E will be worth $18,000.
But why? Mach-Es are selling over the manufacturer’s suggested retail price today due to insane demand, as are many EVs.
Why does nobody want a used one?
Demand for gently pre-owned EVs is lower than internal combustion engine (ICE) cars for three main reasons:
- The $7,500 tax credit has already been spent on the first owner
- EVs lose up to 20% of their maximum range after five years
- The battery warranty is running out
That puts EV shoppers in a tough spot. If you like to own cars for 10+ years, a battery replacement is almost inevitable, either due to range loss or overall failure. But if you like flipping cars every three years, you’ll pay more upfront and lose more in the back end when you sell it.
9. Range loss
As hinted above, EVs have less range a) over time, and b) in cold climates.
Both are as a result of the battery becoming less efficient and powerful. So you’ll pay the same amount to fully charge your battery, but it’ll take you less distance. In effect, your MPGe lowers over time.
Different models react to winter differently. Thanks to sophisticated engineering, Teslas tend to retain 94% or more of their EPA-estimated range in the cold — as do Hyundais and Jaguars. But the Chevy Bolt and Ford Mustang Mach-E lose over 30% of their EPA range in the cold.
It’s worth noting that cold temperatures don’t permanently degrade EV batteries; if you drive your Model S from Chicago to Atlanta, your range will go back up.
The natural passing of time, however, will degrade your battery by around 2 to 5% a year.
10. Repair bills
EVs are pricier to insure due in large part to the high repair bills.
So how much higher are those repair bills?
J.D. Power We Predict found that on average, repairs for EVs were 1.6 to 2.3 times higher than the equivalent ICE car due to the high cost of parts, labor, and the extended time required to diagnose problems. So despite the higher premiums, you might want to consider treating yourself to full coverage.
Now, while EVs may be pricier to repair, their low cost of maintenance closes the gap (more on that in a bit).
11. Emissions
Finally, and this isn’t a cost per se, but I thought it was worth mentioning to the ESG investors out there: EVs may not be as super green as commonly believed.
At least, not upfront.
According to the EPA, EVs are generally worse for the environment than ICE cars when they’re a) manufactured and b) recycled or disposed of. This is mostly due to the resource-intensive process of producing and recycling a giant battery.
Furthermore, while EVs themselves don’t produce any tailpipe emissions, the manufacturing of their charging sources do create carbon pollution. The actual amount differs depending on the local power sources where the batteries are produced but it’s safe to say that sourcing and producing lithium-ion batteries for EVs isn’t exactly a zero emission industry.
“Zero emissions” and other myths>>What is the meaning of greenwashing?
That all being said, the lifetime greenhouse gasses emitted by an EV are still much lower than that of a gas car.
Not only are the GHGs lower, but the lifetime ownership costs of an EV are thousands of dollars lower than ICE vehicles’ cost.
Here’s why EVs are still cheaper overall than gas cars
Despite all the “hidden costs” above, EVs are still $6,000 to $10,000 cheaper to own over the car’s lifetime compared to the equivalent ICE car.
Here are some of the main reasons why:
Maintenance
Yes, EVs are generally more expensive to fix and repair than gas cars due to the higher cost of parts and labor. But routine maintenance is way cheaper.
With so few moving parts, EVs don’t need oil changes, timing belts, air filters, or any of the other regular demands of an ICE engine. Heck, many EVs can go 100,000 miles without a brake job if you mostly rely on the regenerative brakes instead.
As a net result, AAA estimates that EV owners save $949 on maintenance annually.
“Fuel”
EV owners who mostly charge at home can expect to save an average of $800 to $1,000 a year simply by not having to fill up at the pump. That means your Level 2 charger can pay for itself within two years.
Buying used
Finally, EV shoppers who don’t mind a little battery degradation and a shorter warranty window can save more than 50% buying used.
All in, getting the right EV at the right price — and charging it at home — can save you thousands overall compared to the equivalent old fashioned gas-sipper.
The bottom line: is owning an EV in 2023 worth it?
EVs are the most expensive at 0 miles and at 100,000 miles. Therefore, the ideal age to own an EV is when it’s between three and seven years old — after peak depreciation, but before the battery warranty expires.
Then, if you have a place to charge and can afford the hiked insurance rates, owning an EV is worth it.
For info on investing in EVs, check out our guide on how to invest in the EV industry.
