EVs can be cheaper on a monthly basis than gas-powered cars

New research shows electric vehicles are at least as affordable as gas cars in terms of monthly costs — if federal tax credits remain available.

Two men stand in a car dealership lot looking at electric vehicles
(Ezequiel Becerra/AFP via Getty Images)
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Here’s a question for discerning car shoppers — what’s more important, the sticker price or the monthly payments?

For the 85 percent of Americans who finance their purchases of new cars, it’s how their monthly costs add up that really matters. And if you’re focusing on your monthly loan payments, why not also consider how much it costs to fuel and maintain your car every month, and bundle that into your calculations? 

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Robbie Orvis, senior director of energy policy design at think tank Energy Innovation, believes that making this math transparent to car buyers will be key to boosting sales of electric vehicles. That’s why his team compiled the data and wrote a new report that compares the monthly costs of financing and operating a set of EV models against their gasoline-fueled equivalents across all 50 states.

The results of that analysis provide more granular detail to similar findings from EV analysts and consumer advocates over the past few years. The consensus of these studies is that while EVs are more expensive upfront compared to their internal-combustion-engine counterparts, they are significantly cheaper to refuel and repair over the long haul.

The broader narrative is that, even though the upfront prices are higher, when you consider how people actually finance it, [EVs are] cheaper in a lot of states — and it’s pretty close in a lot more states,” he said. 

Just how those long-term benefits translate into all-in monthly costs depends on a host of factors, however. Those include the spread between electricity and gasoline prices where customers live, the different financing terms offered by automakers and dealers, and federal tax credits and state-by-state incentives. 

Lots of studies talk about how the operating costs — fuel and maintenance costs — are lower,” Orvis said. But I feel like that’s engineering-speak for most people. When they go to buy an EV, they want to know, how much will it cost me?” 

The breakdown on monthly costs

Energy Innovation analyzed six EVs and similar gasoline-powered models. Here are the cars it looked at.

Chart of six models of vehicles comparing costs between EV and gasoline-fueled alternatives
(Energy Innovation)

It then ran a monthly financing comparison using average down payments and annual financing charges for a six-year loan term. It factored in federal tax credits, along with state-specific factors including state rebates and special fees assessed on EV sales. In general, EVs’ higher upfront prices translated into slightly higher monthly payments, although some automakers do offer far more attractive financing rates for EVs, he noted. Nissan, for example, offers 0.9 percent financing for its Leaf EV compared to 3.39 percent financing for the comparable gas-powered Versa.

But bundling in operating costs shifts the balance back to EVs, Orvis said. Energy Innovation used Department of Energy data on maintenance costs, EPA fuel-economy data, state-by-state gasoline price data from AAA, and average residential electricity rate data from DOE to compare EVs to gas-fueled cars on these measures. It also factored in insurance costs and additional fees.

The state-by-state results for monthly ownership costs are laid out in the chart below, with green indicating where EVs are cheaper than gas-fueled cars, yellow where EVs are less than $15 per month more expensive, and red where EVs are more than $15 higher.

Chart of monthly financing and operation costs of EV and gas-fueled vehicles in 50 states
See a larger version of this chart. (Energy Innovation)

Some standouts emerge from the data, Orvis said. For example, EV models of the Ford F-150 pickup truck and Hyundai Kona SEL SUV are cheaper to finance and own in every state, largely due to the higher fuel consumption of their gas-powered equivalents. The comparative savings add up to nearly $800 a year for the Hyundai Electric SEL and nearly $1,400 a year for the Ford F-150 Lightning Pro. 

Conversely, the monthly costs for the Kia Niro EV didn’t compare nearly as favorably to the hybrid version of the small SUV, which gets good gas mileage. The other models fell somewhere in the middle. 

Once the loans are paid off, however, savings for EVs expand dramatically, putting them in the green in all states. On average, EVs can save their owners about $6,000 over their lifetimes — a significant boost that new-car shoppers might want to take into account, Orvis said. 

The importance of federal tax credits

Federal tax credits are the biggest wild card in these cost calculations, according to Orvis. Today’s $7,500 tax credit for EVs only applies to vehicles from automakers that have sold fewer than 200,000 EVs across the entire U.S. General Motors and Tesla have already exceeded that cap, so their vehicles are no longer eligible for the credit. Nissan, Ford and Toyota are expected to breach that cap late this year or early next year. 

Without the federal tax credit, only the Ford F-150 Lighting EV remains less costly on a monthly basis in a majority of states, while the rest of the EV models analyzed become more costly in almost all states. But if the federal tax credit were to be raised to $10,000, the EVs that could receive it would be cheaper to own during their financing terms in almost every state.

The Build Back Better legislative package promoted by Democrats in Congress would have raised the federal EV tax credit to $12,500. But Senator Joe Manchin, the West Virginia Democrat who has stymied his party’s attempts to pass the bill, has repeatedly expressed skepticism about extending the federal EV tax credit, calling the idea ludicrous” in a Senate hearing last month. 

If the federal tax credit remains unchanged and more automakers breach the cap and become ineligible for it, the economic outlook for EV buyers looks less rosy. That’s why Energy Innovation’s report makes the case for not only extending and expanding the existing tax credit, but also making it more readily available to car buyers through a direct-pay provision, Orvis said. 

This analysis shows that if you don’t have the tax credits, it’s a much harder sell,” he said.

Jeff St. John is director of news and special projects at Canary Media.