Consumer Reports has found that EVs tend to be cheaper than their gas-powered cousins over the lifetime of electric vehicles and traditional cars. But it is also true that electric cars can be more expensive in advance. These include potentially higher insurance premiums, more expensive parts/repairs and higher government approvals. If you are considering buying an electric car, it is important to consider how much an electric car will really cost you.
Here, The Manual examines the hidden costs of electric vehicles for consumers to answer the question: how much do electric cars cost, Yes, really?
Electric vehicles cost more and prices are rising
An August comparison by car shopping database iSeeCars found that electric vehicle prices are rising – fast. According to research, electric vehicle prices increased by 54% from 2021 to 2022, while gas-powered cars increased by just 10%. To assess this increase, iSeeCars analyzed over 13.8 million used car prices, comparing cars sold between January and July 2021 and cars purchased between January and June 2022.
Several factors drive sticker prices up. A global chip shortage has caused huge production bottlenecks across the industry and pushed up retail costs. Higher gas prices have led to increased demand for electric vehicles, which Econ 101 says is driving prices higher.
Cox Automotive, parent company of Kelley Blue Book, put the “average transaction price” for electric cars in September 2022 at $65,291. At the same time, gas-powered vehicles have an average transaction price of around $48,100. While the cost may decrease over time, it’s a large upfront investment to achieve those savings.
Higher insurance premiums
MoneyGeek’s analysis of auto insurance premiums for 17 current electric car models showed that electric vehicles cost 15% more to insure than internal combustion engine (ICE) vehicles. Comparing corresponding EV and gas car types, this research revealed a cost increase of 6% to 40%. Additionally, 15 out of 17 EV model insurance rates were above a comparable national average.
Why electric vehicles have higher insurance rates than internal combustion engine cars depends on the technology. Electric vehicles contain more high-tech parts – sensors, expensive computers and power elements. As we just saw, EVs also cost more up front than their gasoline ones. Crashing or otherwise damaging the finish or interior of electric rides simply makes them more expensive to repair and therefore more expensive to insure (per MoneyGeek).
Higher Registration Fees
State gas taxes are levied to fund road repairs and infrastructure problems due to constant road use. However, all-electric vehicles do not require fossil fuels to operate, allowing EV owners to avoid these critical taxes.
As a result, some states have introduced additional EV registration fees to make up for lost revenue. According to the National Council of State Legislatures, 31 states charge a special registration fee for plug-in electric vehicles, and 18 states also charge additional fees for plug-in hybrid vehicles. Registration fees range from just $50 per year in Colorado, South Dakota and Hawaii to $225 more for electric vehicles in Washington. The purpose of this tax is not only to keep the roads running, but also to serve as an investment in future EV infrastructure. Washington uses $75 of its fee estimates to build its charging network; Alabama uses $50 of its $200 annual fee (per NCSL).
This additional spending is expected to increase over time. Several states have mandated that registration fees rise along with inflation-related metrics to offset the falling purchasing power of gas taxes.
Opportunity cost of loading time
While super-fast EV battery charging isn’t too far off, it still takes an average of 15 to 30 minutes to charge EVs in the fastest clip. That’s a lot longer than a typical trip to the pump. EV owners charging from a Level 1 port (such as a typical household outlet) may have to wait six to 12 hours for the batteries to reach desired power levels.
Drivers planning to use electric vehicles for long journeys could lose valuable hours waiting for the cars to charge. At the very least, owning an electric vehicle requires time to plan how and when to use cars. This mental and temporal space costs money and time that could be used for something more lucrative and/or productive. This is a consideration that should not be neglected when making a large investment in an electric vehicle.
home charging stations
One solution to long charging waits is to install a home battery charger. Level 2 chargers are 10% more efficient than Level 1 models, covering about four times more kilometers per charging hour. Level 2 home chargers not only take less time to charge, they also reduce electricity bills by using fewer units of electricity. While this is a great way to get a quick juice up, high-speed chargers don’t come cheap. They range from $350 to $950 on Amazon. Subsequent home setup is also expensive, typically costing homeowners at least $1,000 for a certified installation.
Expensive battery changes will soon creep in
Per car-week, every EV purchased in this country comes with a battery warranty “that extends to a minimum of eight years or 100,000 miles.” Driving 10,000 to 12,000 miles per year means new electric vehicle owners won’t have to worry about battery degradation for eight to 10 years. If they do, however, EV drivers face a hefty bill — between $5,000 and $10,000, according to Consumer Reports.
The nonprofit consumer advocate website explains that electric batteries degrade over time and lose capacity (just like cell phone or laptop batteries). Today, electric vehicles lose about 2% of their range each year. This becomes noticeable after five to ten years. While mechanics can service EV batteries, at some point the entire battery pack will likely need to be replaced.
As the federal government continues to incentivize domestic EV production, the EV market is expected to continue growing. One solution is to wait out expensive gas prices and supply shortages. The hidden EV costs outlined above should not necessarily deter EV buyers, but rather inform such an expensive, long-term investment.