If you’re looking for a new vehicle, you may be thinking about an electric car. Depending on what you’re looking for in a vehicle, and your finances, there is both good news and bad when it comes to electric vehicles (EVs).
EV Prices Are Surging
Buying an electric car or SUV in 2022 will cost you more than similar-sized gas-burning vehicles. Over the past ten years, reports Quartz, the average cost of an EV rose more than 80 percent. EV prices have risen dramatically in the short term as well. Business Insider reports that costs for EVs have risen 22 percent over the last year.
Tesla, Ford, GM, Rivian, and Lucid have all raised prices in the past few months. In June, GM tacked $6,250 onto the price of certain Hummer EV pickup truck models. The trucks now range from $85,000 to $105,000.
In part, the higher costs are due to a push to develop luxury models over more affordable EVs.
However, the rising cost of materials is a huge factor. Prices for lithium, cobalt, and nickel—key components in EV batteries—have doubled since the pandemic began and have been further impacted by Russia’s invasion of Ukraine, a major source of materials for EV batteries.
In April, Elon Musk said during Tesla’s quarterly conference call that the company is trying to anticipate and stay ahead of rising materials costs. Some suppliers were asking for increases of up to 30 percent for parts, he said.
Despite Higher Prices, “Robust” Demand
Ford Motor Company CEO Jim Farley said in an April earnings call, “The demand for EVs right now is extremely robust at Ford. So we have the opportunity, we believe, for pricing.” Some new EVs have racked up tens of thousands of reservations, with waiting lists that are years long: a sign of continued strong demand.
Relief in Sight?
Despite the current cost of EVs, relief may be in sight.
Low-end electric vehicles have seen a drop in prices this year, says Consumer Reports, with Chevrolet, Hyundai, and Nissan lowering prices on models like the Hyundai Kona and the Nissan Leaf. The lower prices may be an attempt to increase the appeal of non-luxury electric vehicles.
Some price drops coincide with the end of federal tax credits for carmakers like GM, which subsequently reduced the price of its Chevrolet Bolt by $5,900. GM also lowered the price of its larger electric vehicle, the Bolt EUV, by $6,300.
In addition, Chevrolet announced that it will partially reimburse certain buyers who purchased 2020-23 Bolt EVs and EUVs before the latest discount. Buyers may qualify to get up to $6,000 back, in an unusual case of retroactive discounting.
Some vehicle buyers still qualify for the federal tax credit of up to $7,500.
Other rebates may also be offered by your state, by auto dealers, and possibly even from your electric company. Illinois, for instance, will give a rebate of $4,000 for EV purchases made between July 1, 2022 through June 30, 2026. Look for a list of rebates by state on the Department of Energy’s website.
Overall Prices May Fall
Overall EV prices could fall over the next few years, according to some predictions. Goldman Sachs predicted in May that battery metal prices could crash over the next two years, leading to a glut of materials and driving EV prices down.
And in recent comments, Ford CEO Farley said he believes the price of some EVs will drop below $25,000 in the near future. New, streamlined manufacturing models to be implemented over the next few years should cut the cost of production. This will be reflected in lower prices for buyers. Farley said he believes the ability to produce EVs more cheaply will lead to huge price wars.
So, Should You Buy an EV?
When you buy an EV, there is more to consider than what you’ll pay to drive your car off the lot.
You need to think about how you will use the car and how far you need to go on a single charge. The farthest an EV can go today is about 520 miles on one charge—and that is for the Lucid Air Dream Edition R, retailing at up to $170,000. The maximum range of lower-priced EVs is generally around 100 miles, according to EVBox.
Along with this, you’ll want to factor in the cost of a home charging system.
These systems are available on three different levels. Carvana reports that Level 1 operates on a 120-volt current, and it will charge your EV at a rate of 5 miles per hour. It will cost between $1,300 to $2,300 to buy and install.
Level 2 is a 240-volt system that will charge your EV at a rate of 60 miles per hour, costing between $1,700 and $2,700.
A Level 3 charging system will charge much faster—about 249 miles per hour (around 80 percent of a full charge), but it will also be much more expensive. A level 3 system operates on a 480-volt system, which may demand a rewiring of your house—costing between $20,000 to $50,000 for parts and possibly more than $50,000 to install.
In addition, some cars, such as Teslas, have their own unique charging systems.
Maintenance and Repair
Electric vehicles have an advantage because they have fewer moving parts and do not require as much maintenance. However, repair costs may be more expensive than those of gas-powered cars. Nonetheless, reduced maintenance means that EVs still come out ahead in terms of overall maintenance an repair costs, according to cnet.
The cost of maintenance and repair for a hybrid is only slightly less expensive than that of a gas-powered car– a difference of about 1 cent per mile, according to an April 2021 Department of Energy report. (pdf)
An electric car is cheaper to fuel than a gas-powered car, although electric rates vary across the country and depending on the time of day. Fueling costs also depend on what kind of charging system you use. Kelley Blue Book says that if you travel about 1,183 miles per month, you will use about 394 kilowatt/hours—which will cost about $55 per month. Typically, California prices are more expensive: averaging 25 cents a kilowatt-hour (compared to the national average of about 14 cents per kilowatt-hour), you will pay about $98 per month.
Many people don’t think of the hidden costs associated with EVs.
When it comes to fueling, fees added by commercial fueling stations can double or even triple the cost of charging, according to a study from Anderson Economic Group.
In addition, EV owners face higher insurance rates because of the higher cost of repair and replacement should they be in an accident.
And some states are charging electric vehicle owners extra registration fees, to offset the money they are losing in taxes at the gas pump.
If you’re expecting to save a tremendous amount of money over the life of the vehicle, you might be surprised to find that you can expect relatively modest savings instead. The Wall Street Journal reported in March that “Over 15 years, EV owners will see savings in the $6,000 to $10,000 range, which accounts for purchase price, federal tax credits (when applicable), financing, fuel, and maintenance. The calculation doesn’t include insurance.”
If you’re thinking of buying an EV for its reduced impact on the environment, you may want to consider the environmental cost of mining for metals like nickel, cobalt and lithium. In addition, there may be a human cost. China is poised to become the dominant supplier of batteries and associated materials for EV production. As a recent Wall Street Journal editorial points out, “The technologies that underpin these climate-change commitments depend on Chinese forced and child labor.”
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