Is Owning an EV More Expensive?
There are many myths and misconceptions around electric vehicles (EV) today. One of the primary ones is that many people think EVs are more expensive than an internal combustion engine (ICE) vehicles. While it is true that many EVs today can be a bit more expensive to purchase than their gasoline counterparts, look past the initial purchase price, and you’ll find that EVs can offer massive savings over time. In fact, when you do the math and look past the initial purchase price of an EV, the savings can be significant enough to more than offset the higher sticker price.
When comparing the total cost of ownership (TCO), you’ll likely find that EVs are much less expensive than their gasoline counterparts. Here’s a guide to understanding the ownership costs between an EV and an ICE vehicle.
What Is Total Cost of Ownership (TCO)?
Total cost of ownership refers to the purchase price – plus all the additional costs to run and operate a vehicle while you own it. Think about all the costs that you’ve incurred after purchasing your current vehicle, such as:
- Fuel (ICE vehicles), electricity (EVs)
- Non-warranty maintenance and repairs
- Finance charges (e.g. interest rates, monthly loan or lease payments)
- Depreciation
- Insurance
- Fees and taxes
Calculating your own TCO is relatively straightforward. However, it varies from one individual to the next:
- Purchase incentives and dealer discounts can vary
- Interest rates on loans and leases can be different between models, manufacturers, financial institutions, and individual qualifications
- Gas prices can vary from state to state – as well as the fuel grade needed for different vehicles
- Electricity rates can vary widely by state, plus there can be different rates for time of use
- Maintenance and repairs can vary between models and manufacturers
- Insurance premiums depend on the state, city, model, and driver’s history
- Different models can have different depreciation rates and also vary by vehicle condition, trim, and mileage
EV vs. ICE Ownership Costs: The Fundamentals
So, what is it about an EV that results in lower ownership costs? Let’s look at the fundamental differences between an EV and an ICE vehicle.
First, EVs have fewer moving parts. Typically, EVs have around 20 or fewer major moving parts since they use a simple electric motor(s) instead of a complex internal combustion engine. In contrast, ICE vehicles can have nearly 2,000 moving parts, depending on the engine and drivetrain. The engine itself can have hundreds of moving parts, such as various valves, cams, shafts, and pistons.
Then there are other moving parts that help manage the engine and bring power to the wheels, such as the transmission, driveshafts, pumps, pulleys, and turbos. Each moving part is a potential failure point that can lead to a repair and require preventative maintenance.
Unlike ICE vehicles, EVs don’t require oil changes, radiators, spark plugs, exhaust systems, and other components that require regular maintenance. Additionally, EVs use regenerative braking that activates the electric motor to help slow or stop the vehicle. This reduces the wear and tear on the conventional friction brakes, thereby prolonging the replacement period.
Second, EVs are more efficient overall. According to the U.S. Department of Energy, EVs deliver over 77 percent of the electric energy from the battery to the vehicle’s wheels. In some estimates, EVs can be up to 85 to 90 percent efficient.
By comparison, ICE vehicles only use about 12 to 30 percent of the gasoline’s energy to move the vehicle. Most of the energy from gasoline is turned into waste heat. This means that you’re using less energy to get from point A to B in an EV.
Depending on your state, the cost of fueling your car with electricity can be cheaper – or a lot cheaper – than fueling it with gasoline. In fact, a recent study by the Argonne National Laboratory showed that in over 99 percent of American zip codes, electric driving cost drivers thousands less than using gas.
Do EVs have Lower Ownership Costs?
J.D. Power recently did a study based on data from the first quarter of 2024. It looked at EV and ICE costs over five years of ownership within each U.S. state.
Although the average transaction cost of an EV was $57,584 (excluding the federal EV tax credit), around $13,000 more than the average transaction price of an ICE vehicle, EVs cost less to own over five years. Their research found the long-term savings of owning an EV outweighed the initial higher purchase price.
EV owners in New Jersey saved the most, at more than $10,000 over five years, thanks to the state’s generous EV sales tax exemption. Consumers who leased an EV over three years in Mississippi saved over $3,000. Of the 50 U.S. states, only Maine and West Virginia were slightly more favorable to ICE vehicles – largely due to the higher costs of electricity in those areas. In West Virginia, it only cost $1,800 more over five years to own an EV, or about $360 per year. In Maine, it was $1,619, or $324 per year, more to own an EV.
The biggest savings that you’ll likely see by switching to an EV are in gas savings. CNET recently looked at the costs of EV charging versus filling up with gasoline. They used the U.S. average prices for electricity and gasoline as well as data from the EPA, Bureau of Transportation Statistics, the Department of Energy, and the U.S. Energy Information Administration.
A gas vehicle driving an average of 1,250 miles in one month would consume about 50 gallons of fuel. At $3.65 per gallon, the current US average, that gas vehicle would cost $182.50 in fuel each month. An EV driving the same distance would consume 416 kWh of energy at $0.16 per kWh (the household average cost of electricity) for a total of $66.56. In one year, that equates to $2,190 to fuel an ICE vehicle, but only $798.72 to charge an EV. That’s an annual savings of about $1,391. Over five years of ownership, that’s almost $7,000 in fuel savings.
Case Study: Chevrolet Bolt vs. Hyundai Kona
Steve Lapp, a retired professor and engineer in Ontario, Canada, has been a long-time owner and advocate for electric vehicles. He developed a detailed spreadsheet that tracked all of his individual ownership costs. Steve did this for two EVs over the last 10 years and tracked how much he saved versus equivalent gas vehicles.
In his spreadsheet, he tracked the costs for gasoline, electricity, taxes, inflation on fuel and electricity, general inflation, maintenance, insurance, and depreciation. He also tracked his mileage and even how many kilograms of CO2 his car emitted.
“I’ve owned two EVs over the years and my EV always come out costing less than an equivalent gas car,” says Steve. “I usually take a conservative approach with my spreadsheet as to not overestimate the cost savings. In reality, it usually turns out better than my spreadsheet forecasts.”
He recently compared his 2019 Chevrolet Bolt, which he purchased new for $42,478 CAD before the Canadian federal $5,000 EV incentive, with a 2019 Hyundai Kona FWD gasoline model that had an average MSRP of $25,000. After taxes and the rebate, his Bolt was $14,750 more to purchase than the gasoline Kona.
At about five years and 25,000km (15,534 miles) per year, the total cost of his insurance, maintenance, and electricity was about $12,400 – about half of the Kona’s $24,900 calculated costs.
Steve attributes a lot of the savings to his Bolt’s lower maintenance and the lower cost of electricity versus gasoline. With 117,000km (72,700 miles) currently on the odometer, Steve has only had one warranty repair done on the Bolt. He hasn’t had any out-of-pocket maintenance costs, and just cleans the brake pads and lubricates the caliper sliders himself once a year (at a dealer, this would cost a few hundred dollars a year.) He hasn’t even had to replace the brakes yet thanks to the Bolt’s regenerative brakes.
With a Level 2 home charger, Steve mostly charges at home. On the occasional road trip, he’ll use both Level 2 and Level 3 DC fast charging when needed. Even if he trades in his Bolt after 5 years – and accounting for depreciation – he calculates that he’ll be about $3,200 ahead versus the gasoline Kona. Within 10 years, Steve estimates that he’ll save about $28,000 versus the Kona’s $57,000 in insurance, maintenance, and fueling.
Best of all, over 10 years of ownership, Steve’s Bolt will only emit 1.69 metric tonnes of greenhouse gases (GHG), compared to the Kona’s 32.2 tonnes.
Case Study: Ford Mustang Mach-E vs. Ford Escape (Gas)
David Kuhnke, a former engineer with an electrical utility company, was one of the first owners of the Ford Mustang Mach-E in Canada. Being one of the lucky few to place a pre-order after the car’s global reveal, David took delivery of his 2021 Mach-E First Edition AWD Extended Range 13 months later, in his hometown of Cobourg, Ontario.
David also tracks his operating costs. With 40,000km (24,855 miles) currently on his odometer, he only drives about 11,400 km (7,084 miles) per year, mostly around town and the occasional highway trip. Over the last few years of ownership, David only spent an average of $189 (Canadian) in out-of-pocket maintenance each year for winter and summer tire changes and one time for a rear wiper blade. According to CarEdge, a 2022 gas powered Ford Escape would cost about $1,800 ($1,330 USD) each year in maintenance over 3.5 years. That’s a savings of over $1,600 in annual maintenance by driving his Mach-E.
“About 98% of my charging is done at home and I always try to take advantage of the lower off-peak electricity rates,” says David. “Charging an EV at home, if you can, is often the most cost-effective way to recharge.”
David spent an average of $198 each year in electricity while charging at home. By comparison, a Ford Escape AWD would consume about 969 liters (256 gallons) of fuel to go the same annual distance and cost about $1,550 in gasoline at $1.60 per liter. That’s an annual savings of $1,352 just in gas alone. Over five years, David would save about $7,000 in fuel.
How to Calculate Total Cost of Ownership
If you don’t already track your vehicle costs, you’ll find it’s a worthwhile effort. It’s not only good practice for your overall budgeting, but also an eye-opener to understand your true vehicle operating costs. You’ll be surprised how much you actually spend on operating a vehicle – and even more surprised about how much you can save by owning an EV.
Start with understanding the price for the vehicle that you paid. Don’t forget to account for discounts, incentives, taxes, interest, and fees. Create a basic spreadsheet that tracks your monthly costs for fuel, electricity, insurance, monthly payments, maintenance, and repairs. Remember to include interest, taxes and fees. One way that you can account for depreciation is by calculating the trade in value of your vehicle each year.
Include all your costs to get an accurate picture. Even small expenses add up during the duration of your ownership. Add up everything each year and see where your biggest expenses are. If you’re calculating for EV charging, look the EPA’s energy efficiency and consumption, then use your utility company’s electricity rate per kWh.
Conclusion: Price Is Only Part of the Story
When comparing the costs of an EV to that of an ICE vehicle, it’s important to look past the initial purchase price. Your costs don’t stop at the purchase price. That only tells part of the story. While initially purchasing an EV can be more expensive, you’re likely to see that owning an EV over a number of years results in a significant cost savings compared to owning an equivalent gasoline vehicle. The longer you own an EV, the more you’ll likely save. Only by calculating the total ownership costs does the true cost advantage of EVs become realized.
