Can You Afford an EV? Answer These 6 Questions
You glance at your car with 150,000 miles on it, wondering if it’ll reach 200,000. A thought crosses your mind — should you trade it in and buy a new one? This could be the best time. Why not make it an electric vehicle (EV) while you’re at it? It is one of the most apparent ways to lower your carbon footprint from an individual level, so electrification should be the default purchase.
No matter how many cars you’ve bought before, buying an EV is different. Consider these questions to make sure your expectations are close to reality. It will determine whether or not you can mentally and financially afford the luxury of an EV.
1. Can I Afford the Average Monthly Payment?
Everyone has varying perceptions of how much cars cost, but fewer people are tuned into the EV market. You may have had a car payment in the past, but is it comparable to the monthly bill for the average EV? Most financial advisers recommend keeping car payments at 10% or less of your monthly income to live comfortably.
Put this in context with the national median price for EV ownership. An estimated 26% of American EV buyers have a monthly payment of over $1,000, with makers like BMW, Chevrolet, Ram and GMC ranking as the priciest. Another consideration under this question is whether or not you need a truck because they are more likely to have higher monthly payments than sedans and smaller SUVs.
This statistic is a double-edged sword. Recognizing the reality and costs of top EV sellers is essential, but that monthly payment isn’t everyone’s experience. These averages may misconstrue someone’s ability to afford an EV — not all EVs are luxury brands and some are pre-owned.
A prospective buyer could see this number and deem it impossible when other opportunities exist to make payments more manageable — even though the costs tend to be around $66,000 or more. Ultimately, the question of “Can I afford it?” becomes “Am I willing to research ways to make it cost-effective?”
2. How Is Charging Infrastructure In Your Area?
Affording an EV is a financial and mental cost. Range anxiety prevents many people from committing to an EV because they’re afraid there aren’t enough chargers around them to stay fueled up. Look at charger maps to see what’s accessible in the area and determine if you’re willing to go the distance and pay the time required to use them.
Additionally, consider the financial cost of installing an at-home EV charger. This could soften the mental price of charging infrastructure because you could charge daily if necessary. The charger’s price depends on several factors, including:
- Voltage capacity
- Current home electrical capabilities
- Building permits
- Taxes
- Contractor fees
Some states offer rebates and incentives to expand charging access, which could save you money in the long run. Another similar question to this one is asking how much you drive. If you drive a lot and there are a few chargers near you, it may not be practical to rely on an EV’s range. If you only commute, you could even charge in a regular outlet depending on how many miles away work is.
3. Can You Afford to Wait?
There is also a time-associated cost to purchasing an EV. Legislation like the Inflation Reduction Act has incentivized many to buy EVs. Manufacturers are having difficulty keeping up, so some have a long waitlist. If you need a car now, you’ll need to ask yourself if you’re willing to wait a potentially uncertain amount of time to drive gas-free.
Is your take-home pay sufficient enough to meet the average monthly payment for an EV? Tools like car payment calculators consider critical metrics like trade-in value and interest rates to estimate how much of a loan you can handle.
4. Do You Know What Tax Credits Are Out There?
EVs became more affordable when federal and state tax credits became more commonplace. Buyers may receive up to $7,500 back on purchasing a new EV. You receive $3,750 if it meets mineral requirements and $3,750 if it has the right battery components. The criteria changed in 2023, so let’s pick apart the requirements for federal tax benefits:
- Needs a minimum seven-kilowatt-hour battery
- Weighs less than 14,000 pounds
- Is an approved manufacturer
- Finishes assembly in North America
- Has 60% of the battery’s value assembled in North America for 2025 and 2026
- Is a brand-new car
- Does not cost more than $80,000 for vans, SUVs and pickup trucks
- Does not cost more than $55,000 for other cars
You must be within income thresholds of $300,000 for married couples, $225,000 for heads of households, and $150,000 for everyone else.
Proposals from the Biden Administration have called to expand the scope of these tax credits, such as raising the amount to $12,500. It’s hard to tell if these will ever come to fruition.
5. What Are Ongoing Costs?
EVs need less maintenance and, therefore, expenses than internal combustion engines. The battery and motor require far less upkeep, but you must save money for typical car-related upgrades, like brakes, tires and steering peripherals. EVs need less maintenance and, therefore, expenses than internal combustion engines.
The battery and motor require far less upkeep, but you must save money for typical car-related upgrades, like brakes, tires and steering peripherals. Then there is maintaining the paint and exterior which is helped a lot by using a quality car cover. Ongoing costs may also include state-related taxes, as some require a yearly payment instead of escaping gas taxes.Ongoing costs may also include state-related taxes, as some require a yearly payment instead of escaping gas taxes.
Lastly, there is the cost of charging. This varies widely if you have a charger, what its capacity is, if you use renewable energy or if you partake in public stations. Many require a few dollars at a flat rate, and then charge per minute, which is pennies on the dollar compared to gasoline.
6. Are You OK With Used or Leasing?
Buying a used EV could be the saving grace to making these expensive cars more affordable. They require just as many questions and inspections as used ICEs. Tax incentives apply to used cars too, so you can bank on the reduced price from depreciation and federal assistance.
Older EVs have a much shorter range, so expect the battery to not charge to 100% and probably not drive it 100 or more miles without needing to charge it. If you use your car primarily for commuting, then this could be viable.
Leasing a car means spending as much money on a vehicle for as much as you drive it without the financial burden of eventual ownership. It’s a great way to gauge what life with an EV would be like if you want to experiment for two to three years. You don’t need as much of a down payment — if any — and monthly payments are almost always cheaper. Unique rules allow lessees to take advantage of tax credits, too.
Are EVs Affordable?
These are the most essential questions to ask before you own an EV. There are ways to get your purchase under national median prices if you’re willing to go a little out of the way to charge or buy used. Additionally, not all makes and models are created equal.
Getting a lower-capacity battery could save thousands compared to top-of-the-line models. EVs will be standard in the future, and their price ranges will be ever-decreasing. How long will it take you to commit?
