The Cost of an Electric Car vs. Gas Car

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Aug 4, 2021

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What You Should Know

  • Electric cars are becoming more popular as consumers are demanding green cars
  • Insurance rates are typically higher for an electric car
  • Electric vehicles cost more than gas-powered cars, but owners will save on fuel and maintenance costs

Over the course of 2018, electric vehicle ownership went up 64% worldwide.1 Whether you’re drawn to the lure of an environmentally friendly ride, or you’re sick of fluctuating costs at the gas pump, you may be wondering if an electric car is the right move for you. 

And cost is often the first consideration.

There are clear potential savings in buying an electric car—the most obvious being money spent on gas. A fully electric car needs no gas whatsoever. A hybrid vehicle, meanwhile, will have significantly better gas mileage than a fully gasoline-powered car. 

But beyond the fuel cost, many factors go into your overall spending, including upfront cost, repair costs, and insurance premiums. So, are electric cars ultimately cheaper than gas-powered cars? Keep reading to find out.

Electric and Gas Cars: A History Lesson

Many people assume that electric cars are a contemporary invention. New technology is often more expensive (and less reliable). But, interestingly, electric cars are not new at all.

Electric cars outpaced their gas counterparts in popularity a hundred years ago, and it’s totally possible that they will again.

  • Electric cars first became popular around 1910 but were largely forgotten as gas-powered vehicles became cheaper and more efficient.
  • Postal services in some countries, like the United Kingdom, even used electric cars to deliver mail. 
  • At the time, only a small percentage of homes relied on electricity, so it was difficult for most of the public to purchase and maintain an electric vehicle.2

Like with many trends, the rise in popularity of electric vehicles is a throwback. The main difference between the interest in electric vehicles now when compared to the 1910s is the popular desire to “go green.”

Hybrid cars became common at the beginning of the 21st century. The Toyota Prius, one of the most popular hybrid cars, was first released in 2001. If you drove a gas vehicle in 2012, you may have considered switching to a hybrid or electric car. The average cost of gasoline shot up to $3.64 that year, causing a noticeable rise in hybrid purchases.3 Even though you will save on the fuel cost by driving a hybrid vehicle, many consumers wonder, “Are hybrids more expensive to insure?” The answer is typically yes, but that doesn’t necessarily mean you’ll pay more. 

The growing demand for green cars pushed automakers toward making “greener” cars. Consumers care more about sustainability now and have begun seriously considering, “Are electric vehicles better for the environment?” Since the environmental benefits are clear, customers are interested in buying a green vehicle. A decade ago, EV plug-ins were a rare sight. Now, finding public plug-ins for an electric vehicle is relatively easy. In California, electric vehicles accounted for more than 10% of the year’s sales in 2019.

Electric vehicles are expected to continue their rise in the coming years, given their constant growth in popularity.4

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The Costs of the Cars Themselves

So, how much can you expect to pay to buy into the eco-friendly vehicle trend?

On average, the price of an electric car is around $19,000 higher than the average gas-powered, conventional car. But this price difference has gotten smaller each year as the technology that goes into electric vehicles becomes more efficient. Competition between automakers has also driven the price down.

There is a wider variety of electric vehicles on the market now than there has ever been.

A new electric vehicle costs around $36,000, but models are available for as low as $20,000.

Driving up the average price are Tesla’s electric vehicles, which are more expensive than the electric cars developed by other automakers.5 

  • Combined, the Tesla Model 3 and Model Y account for 450,000 sales. Each of these cars costs around $40,000.
  • Tesla’s Model X and Model S, which cost about $85,000, is another popular model, with 57,000 units sold.6

The popularity of these models is somewhat of an outlier. While there are luxury gas-powered cars, like those made by Ferrari or Lamborghini, their sales are a much smaller percentage of overall sales than Tesla’s models within the electric vehicle space.

If you’re looking for a budget electric car, it is still certainly possible to find one. Many car companies offer an electric or hybrid version of popular gas-powered models. These versions typically cost a few thousand more, but the difference may be covered by the federal tax credit offered to low emission vehicle owners.

Federal Incentive

The US offers tax credits to most electric and plug-in hybrid vehicles. This tax credit ranges from $2,500 to $7,500 and is dependent on the strength of the vehicle’s battery. Fully electric cars receive more tax credit than plug-in hybrid cars, while gas-powered vehicles receive none.7

Electric cars tend to cost more when first purchased, but the federal tax credit is a great help in offsetting this initial higher cost.

The Cost of Electricity vs. Gas

An electric vehicle’s lack of reliance on gas can add up over the course of its 15-year battery life.  In fact, an electric vehicle can save up to $14,000 in fuel. 

However, keep in mind that gas prices vary quite a bit based on your geography. On the West Coast, gas has been up to 46% higher than in areas closer to the Gulf of Mexico. 

In Hawaii, for example, the cost of owning an electric vehicle could be $2,500 higher than owning a gas car.8

The gas price is not the only price to consider when calculating overall fuel costs. Fully electric vehicles require a plug-in, and each plug-in adds to your total electricity cost. Still, on average, you save around $800 per year on fuel costs by switching to an electric car.

Depending on the city you live in, a public charging station can be as low as $0.10 per kWh.9

But keep in mind that lower fuel costs come with some tradeoffs, based on how electric cars function. So, how do electric cars work?

  • You’ll need a charging station – Although electric cars depend mostly on the cost of electricity, which changes much less than gas prices do, gas stations are significantly more common than charging stations across the US.
  • It takes time to charge – While some cars can charge in as quickly as 30 minutes, most often, a driver will need close to 40 hours to fully recharge a depleted electric car.10
  • You have a limited range per charge – A full charge doesn’t get you as far as a full tank. A road trip across multiple state lines can be impossible for an electric-powered car if there aren’t ample charging stations along the way. 

The Cost of Maintenance

What costs more to maintain—a gas or electric vehicle?

In this case, the winner is clear. Electric vehicles cost less to maintain.

  • Fully electric cars do not need to undergo regular oil changes. 
  • A battery-electric vehicle can cost as little as $4,600 to repair throughout its life.11
  • That means a driver can save anywhere between $6,000 and $10,000 as compared to the same model with a gas-powered engine. 

Reduced maintenance costs are one of the major selling points for electric vehicles. Between savings on gas and reduced repair frequency, electric vehicles are an attractive option for buyers looking for a long-term purchase.

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Is Insurance More Expensive For Electric Cars?

On average, electric vehicles cost 21% more to insure. However, it’s important to note that insurance costs are complicated. 

Driver history, car model, and region all affect the cost of your insurance. And while the car model is important, it is one of many factors involved in calculating an insurance premium. Safe driving and even your credit can have a greater impact on the price of your insurance than the car you own.

  • The variety of coverage plans to choose from makes the price of insurance change quite a bit from person to person. 
  • As we’ve already discussed, the popularity of high-end Teslas within the electric car sector can skew “average” statistics.
  • The insurance cost for a Tesla Model S with full coverage will be much higher than the cost for minimum coverage on a Hyundai Accent. However, comparing the cost for these cases does not represent the difference in insurance costs for an electric car owner.

Insurance companies do not feel that electric cars are at any greater risk for liability than gas-powered cars. 

But electric cars tend to be more expensive than gas-powered cars. A higher car cost means a higher cost for replacement parts. And because the market for electric cars has grown so rapidly, the aftermarket is practically non-existent compared to the aftermarket for gas-powered car parts.12

Some insurance companies offer incentives for driving electric vehicles, but overall the cost of insuring an electric vehicle is still higher than the cost of insuring a gas-powered vehicle. The discount offered by insurance companies ranges from 5% to 10%, which does not fully cover the difference in cost.13

Before discounting electric vehicles based on potential insurance premiums, though, check your rates for the make and model you’re interested in buying. You may be surprised at how closely they hew to your current costs.

Is an Electric Car Cheaper Than a Gas-Powered Vehicle?

Although electric vehicles tend to cost more up-front than gas-powered vehicles, the long-term benefits can result in yearly and lifetime savings.

Electric vehicles certainly have their faults, including a reduced driving range and higher insurance costs. But between the savings on gas and maintenance, electric vehicles can result in an overall net financial benefit, especially when compared to gas-powered vehicles in the same price range.

  • You’ll see the most savings if you drive the car for a while. Electric vehicles depreciate more quickly than gas-powered cars, meaning you will lose money on the car if you choose to resell it quickly. 
  • If you hang onto the car, the long-term benefits offered by an electric vehicle can save you tens of thousands.14
  • Make sure to cover your car with adequate insurance so that you recoup your costs in cases of damage or theft.

Lower Your Electric Car Costs with 4AutoInsuranceQuote

Is an electric car cheaper than gas? As you now know, the high up-front cost is eventually offset by savings on fuel and maintenance. 

But without an adequate insurance policy, an accident could significantly impact your wallet. While it’s more expensive to insure electric cars, comprehensive protection is an essential way to protect your long-term financial health.

If you’re ready to make the leap and say “so long” to the gas pump, the next step is finding an affordable insurance policy. Luckily 4AutoInsuranceQuote makes it easy to compare rates. We can help you find the best rate for your region and set you up to find a great premium quickly.

Enter your ZIP code, and find the right rate for you. There’s no need to shop around or make countless calls. We’ll match you with cheap rates and great coverage based on your vehicle and driving history.

References:

  1. Policy Advice. Electric Car Statistics and Facts 2021. https://policyadvice.net/insurance/insights/electric-car-statistics/
  2. Huffington Post. In 1910, Electric Cars Were the Best Vehicles on the Road. https://www.huffpost.com/entry/in-1910-electric-cars-wer_b_8962634
  3. CreditDonkey. Gas Price History: List of Prices by Year. https://www.creditdonkey.com/gas-price-history.html
  4.  IOPScience. The Rise of Electric Vehicles. https://iopscience.iop.org/article/10.1088/2516-1083/abe0ad/pdf
  5. CarandDriver. How Much is an Electric Car? https://www.caranddriver.com/research/a31544842/how-much-is-an-electric-car/
  6. Kelley Blue Book. 10 Most Popular Electric Cars. https://www.kbb.com/best-cars/most-popular-electric-cars/
  7. Fuel Economy. Federal Tax Credits for All-Electric and Plug-in Hybrid Cars. https://www.fueleconomy.gov/feg/taxevb.shtml
  8.  4AutoInsuranceQuote. 10 Best Cities to Own an Electric Vehicle. https://www.4autoinsurancequote.com/best-cities-electric-vehicles/
  9.  Kelley Blue Book. How Long Does It Take to Charge an Electric Car? https://www.kbb.com/car-advice/how-long-does-take-charge-electric-car/
  10. NRDC. Electric vs. Gas: Is It Cheaper to Drive an EV? https://www.nrdc.org/stories/electric-vs-gas-it-cheaper-drive-ev
  11. BetterEnergy. Consumer Reports Study Finds Electric Vehicle Maintenance Costs …. https://www.betterenergy.org/blog/consumer-reports-study-finds-electric-vehicle-maintenance-costs-are-50-less-than-gas-powered-cars/
  12. Kelley Blue Book. Does it Cost More for Electric Car Insurance? https://www.kbb.com/car-advice/is-there-any-difference-in-electric-car-insurance/
  13. NerdWallet. Why Car Insurance for Electric Vehicles Costs More. https://www.nerdwallet.com/article/insurance/car-insurance-quotes-electric-cars
  14. Hotcars. This Is Why Electric Cars Depreciate Faster Than Gasoline Cars. https://www.hotcars.com/this-is-why-electric-cars-depreciate-faster-than-gasoline-cars/

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