Electric car companies swear that they can save you money, but are they telling the truth? I'll break down the true cost of electric car ownership.

Ten years ago, the prospect of owning an electric car wasn’t quite as appealing. Unless you could afford a $60,000 base Tesla Model S, your options were limited to a dismal array of plasticky sedans with under 100 miles of range.

Nowadays, however, the big automakers have had plenty of time to nip at Elon’s heels. Hyundai, Chevrolet, and others have all released award-winning EVs: there’s even an electric Mustang with the car industry’s coolest mustache:

The True Cost Of Owning An Electric Car - 2021 Ford Mustang Mach-E

May I present the 2021 Ford Fu Manchu (credit: Ford.com)

In total, there are 10 electric cars you can buy today for well under $50,000:

  • Volkswagen ID.4.
  • Ford Mustang Mach-E.
  • Mini Electric.
  • Nissan Leaf.
  • Tesla Model 3.

  • Kia Niro EV.
  • BMW i3.
  • Chevy Bolt EV.
  • Hyundai Kona Electric.
  • Hyundai Ioniq Electric.

This begs the question: should you buy an electric car? Does it make financial sense to own an electric car in this day and age? And what is the true cost of electric vehicle ownership anyway?

Without further ado, let’s investigate the true cost of owning an electric car.

Will savings on gas offset the higher MSRP?

It should come as no surprise that driving an electric car on a daily basis is much cheaper than driving a gas-powered car.

According to the Idaho National Laboratory, in terms of “fuel” alone, it costs roughly 3.3 cents per mile to drive an EV compared to a whopping 15.9 cents per mile for a gas-powered car averaging 22 MPG.

So, if you multiply that by 100,000 miles of driving, that’s either $3,300 in KWh or $15,900 in gas.

Right off the line, the EV pulls ahead with an impressive $12,600 in fuel savings over its ICE equivalent.

Of course, the gap narrows if you’re choosing between an electric car and a hybrid – for example, the Kia Niro EV and the Niro Hybrid. You’ll get at least 44 MPG in the hybrid – double compared to the gas-powered example above – meaning you’ll only spend $15,900 / 2 = $7,950 in gas over 100,000 miles.

That brings the fuel savings between electric and hybrid down to “just” $4,650. 

 ElectricHybrid (44 MPG)Gas (22 MPG)
Energy costs per mile$0.033$0.0795$0.159
Cost to drive 100,000 miles$3,300$7,950$15,900
Cost savings versus gas-only$12,600$7,950N/A

Electric cars are still more expensive, but the $7,500 credit helps

Due to the high costs of R&D and manufacturing, electric cars are still much more expensive to buy. Let’s look at a direct MSRP comparison between some EVs and their direct fuel-sipping counterparts.

In some cases, I included the EV’s rough equivalent in the manufacturer’s lineup. I know the Mustang GT and Mach-E have different body styles, but Ford says they’re both Mustangs and markets them to the same buyers, so a comparison makes some sense.

 Gas vehicle MSRPEV MSRPEV premium
Mini Cooper 2-door hardtop vs.
Mini Cooper Electric
$22,900$29,900$7,000
Hyundai Kona vs.
Hyundai Kona EV
$20,950$37,390$16,440
Ford Mustang GT vs.
Ford Mustang Mach-E
$27,205$42,895$15,690
Nissan Altima vs.
Nissan Leaf
$24,450$31,670$7,220

In total, the price difference between EVs and their gas counterparts hovers around $7,000 to $16,000. That’s quite a premium – and it also means that you wouldn’t break even on your fuel savings until between 50,000 and 100,000 miles.

Thankfully the $7,500 federal tax credit on EVs greatly narrows (and in some cases even closes) this gap. Keep in mind, however, that the tax credit doesn’t apply to used EVs, and if you lease the car, you won’t receive it as a lump sum; since the dealership technically owns leased cars, they get the credit. In most cases, they pass it back to you via discounted monthly rates, but not always.

Electric cars aren’t more or less reliable

In theory, electric cars should be significantly more reliable than gas-powered cars simply because they have fewer moving parts. If you open the hood of an old gas-sipping Miata like mine, you’ll see a whole tiny world of clockwork and vibration – i.e. things that break every 40,000 miles.

But an electric car is like an armored laptop. Aside from your tires, brakes, and your volume button (if you have one), nothing moves, jostles, or creates friction leading to breakage.

In reality, however, electric car reliability is all over the place – just like with gas cars. Even the universally exalted Model 3 is prone to rust, touchscreen failure, and puddles ripping the rear bumper off. Bolts are generally well bolted together, experiencing very few problems until they spontaneously combust.

Exasperated by the shockingly erratic reliability of new EVs, Consumer Reports reached a logical conclusion: “All-new cars and new technology are prone to growing pains.”

Luckily, most of the issues with new EVs tend to be covered under manufacturer warranty, so consumers aren’t paying out the wazoo for new, unexploded batteries (more on that later).

…but EVs are on their way to beating their counterparts

It’s worth remembering that automakers have only been making EVs for roughly 10 years – and in that time, the cars they’ve made have already met the standards for reliability set by cars they’ve been making for 100 years.

So, are EVs more reliable than gas cars? No. But they will be very soon.

Electric cars are much cheaper to maintain

Here’s some more good news for prospective electric car buyers – you’ll save on maintenance as well as fuel.

The difference between reliability and maintenance is that maintenance is planned. For example, a Porsche is reliable but expensive to maintain. It won’t randomly break down on you, but routine maintenance (tires, battery, checkups) cost an arm and a leg.

By contrast, a Fiat is unreliable but cheap to maintain. With a small engine, tiny tires, and brakes the size of tapas plates, routine maintenance is cheap – but it’ll break down constantly regardless because it’s poorly designed and badly made.

How do EVs fare in maintenance?

Well, electric cars simply don’t need most of the routine maintenance that a gas-powered car does – for example:

  • Engine tune-ups.
  • Oil changes.
  • Air filter replacements.
  • Transmission fluid/coolant flushes.
  • Routine replacement of moving parts (timing belts, clutch services, etc.).

In fact, all that electric cars really need, aside from free, over-the-air, software updates, are new tires and brakes. You may also have to change out the cabin air filter, headlight bulbs, and wipers on occasion, but by and large, they don’t take much.

Even your brakes won’t need servicing as often on an EV thanks to regenerative braking technology, which lets you brake way less often, thus preserving your rotors.

All things considered, AAA estimates that EVs cost an average of $949 less annually to maintain than their equivalent gas-powered car. The gap narrows greatly if you can do most of the maintenance yourself, but if you’re not the type of person who likes oil on their fingers, you’ll save tons of time and money in the shop by owning an EV.

Brace for a little bad news, however:

EVs are more expensive to insure

If you’re planning to swap from a gas-powered car to an EV, expect to pay around 20% more for insurance, says Car and Driver.

Controlling for the value of the car, the simple reason EVs are more expensive to insure than identical gas-powered cars is that they:

  1. Suffer damage more easily.
  2. Are more expensive to repair.

Teslas, for example, have an aluminum frame to offset the weight of the batteries. Lightweight aluminum is excellent for performance but bends easily in an accident. Then, not only are the replacement parts more expensive, the labor to apply them is more expensive as well.

The same rings true of EVs from other manufacturers, as well. For better or worse, EVs tend to be covered in sensitive electronics like 360-degree cameras and regenerative brakes – these lend convenience and safety to the driver but cost a kidney to replace after an accident.

Remember that 20% is only an average

20% remains an average – and as with all insurance rates, your experience may vary. Many thousands of tiny factors influence your personal insurance premiums, from your zip code to the horsepower in your car to your internet search history. For that reason, it’s entirely possible that your EV insurance will be cheaper when you switch.

But as my pop always says, “hope for the best – plan for the worst.” It’s a safe bet to budget a little extra for EV insurance.

Let’s recap what we’ve learned so far. Compared to its gas-powered equivalent, an electrified car will be:

  • MORE expensive to buy.
  • MORE expensive to insure.
  • EQUALLY as reliable.
  • LESS expensive to “fill up.”
  • LESS expensive to maintain.

For the ultimate tie-breaker, let’s look at long-term ownership prospects – where gas-powered cars might have a surprise leg up.

After 10 years, a new battery could cost $10,000+

If you’re thinking of holding onto your next car for a while – thinking of it as a long-term investment – you’re not alone.

For countless reasons, ranging from increased vehicle reliability to the skyrocketing new car prices, Americans are holding on to their old cars for longer than ever before.

According to Car and Driver, the average age of a car on American roads is now over 12 years old – meaning 2011 models haven’t even hit their midlife crisis yet.

Why are people holding on to their cars?

To be clear, the inability to afford a new car isn’t the only reason Americans, especially young ones like us, aren’t heading for the nearest dealership. For many, it’s simply because our old cars work just fine.

I myself have two cars – a 2001 Miata and a 2008 Lexus sedan – with a combined 270,000 miles on the odometer. But thanks to simple routine maintenance, both cars drive like they rolled out of the factory in Japan yesterday.

Do EVs have the same longevity?

If you’re about to spend $35,000+ on a new EV to get the full federal grant, you may be hoping to hang onto it for a while – 5, 10, maybe even 15 years.

If so, you should know that electric cars have quite the midlife crisis.

Like the batteries in your smartphone, the batteries in your EV will start wearing out from year one. According to TrueCar Adviser, EVs tend to lose 2.3% of their total charge every year until needing a complete replacement around year 10.

As for how much a total battery swap costs, we don’t have a ton of data on that simply because most EVs are under a decade old. Early signs are looking grim: according to Green Car Reports, to replace the battery in a 2011- to 2014-generation Nissan Leaf you can expect to spend $5,500.

Is $5,500 enough?

Some have used $5,500 as a benchmark, but “that doesn’t even come close to telling the full story,” writes Current Automotive.

Their investigation found that a battery change in a Tesla Model 3 cost nearly $16,000. Find My Electric conducted (hehe) a similar investigation to discover that the cost of replacing a battery in a Model S can reach $20,000.

Tesla and other EV manufacturers warranty their batteries for eight years or 100,000 miles, whichever comes first. Rather concerningly, this falls just shy of most batteries’ expected lifespan.

Elon Musk claimed in a 2019 Tweet that Model 3 batteries “should last 300k to 500k miles,” but even as a fan of his, I have to admit that his Tweets aren’t the most reliable.

He seems to agree since five days later, he confessed that his Twitter “is pretty much complete nonsense at this point,” and four months later, well, this:

The True Cost Of Owning An Electric Car - Elon Musk tweet

To be fair, gas-powered cars aren’t cheap to maintain past 100,000 miles, either. But the inevitability of an impending $10,000+ battery replacement may be enough to dissuade used EV buyers, or even new EV buyers intending to drive them well into the 2030s.

Summary

In summary, the true cost of owning an electric car follows a steep, U-shaped curve. They’re expensive at 0 miles, expensive at 100,000 miles, and cheap for all those miles in between.

Since electric cars (especially Teslas) tend to depreciate pretty slowly, you can “hack” EV ownership by securing the federal grant upfront and selling before the battery warrant expires. Combined, these two moves could save you tens of thousands.

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About the author

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Chris helps people under 30 prosper - both financially and emotionally. In addition to publishing personal finance advice, Chris speaks on the topics of positive psychology and leadership. For speaking inquiries, check out his CAMPUSPEAK page, connect with him on Instagram, or watch his TEDx talk.