Is It Time to Go Electric? An Overview of Electric Vehicles
We have all felt the sting at the pump over the past few years and as technology continues to advance, more people are seeking alternatives to traditional gas-powered vehicles. With so many options available, let's break down what an electric vehicle (EV) is to help you decide whether gas or electric is better for your needs.
What is an EV?
In its simplest form, an EV is a vehicle powered by an electric motor drawing electricity from a battery capable of being charged from an external source. The three types of EVs are hybrid, plug-in hybrid, and fully electric.
Hybrid: Vehicle that is powered by both an electric motor and an internal combustion engine (ICE). You reap the benefits of a traditional vehicle's strength and improved fuel economy. The engine charges the battery, so there is no need for external charging.
Plug-in: A hybrid that you have to plug in to charge. The battery pack inside the vehicle is charged through an external cable. Like the hybrid, they also use gasoline to power the ICE.
Fully Electric: Completely powered by an electric motor with no additional fuel source. Their battery packs are charged like the plug-in by an external cable. A full charge provides on average from 200 - 250 miles of travel. Total mileage is constantly improving as technology changes and will depend on the type of EV you purchase. They do not require the general maintenance that a gas-powered car does.
How much is the cost of ownership?
While EVs may have a higher initial sticker price, over a multi-year ownership period, they offer a total savings of $6,000 to $10,000 over the vehicle's life (around 200,000 miles). There are federal tax credits up to $7,500 available with restrictions if you buy a new plug-in EV or fuel cell electric vehicle (FCV) that qualifies for the credit. More information about the tax credit is available through the IRS. Due to the higher cost of replacement parts, EV insurance can typically be slightly higher than it would be for a gas-powered vehicle. There are three options in deciding how to charge your EV. Each of these options will increase your electricity bill as a trade off of not using gasoline.
Level 1: The slowest option provides around 2-5 miles of charge per hour on the same 120-volt charger you use to charge your phone. These are standard and do not require any special installation as they are provided with purchase.
Level 2: This charger would have to be installed, usually in the garage, and uses a similar amount of power to a washing machine. It provides 10-20 miles of charge per hour. They start around $500 for the equipment. There may be an extra charge for installation.
Level 3: “DC” charging is available in public settings and are by far the quickest option providing an 80% charge in around 20 minutes. Home installation can cost up to $50,000. It’s quite rare for someone to have this installed in their home due to the hefty price tag. Most drivers go with a level 1 or 2 option.
The price of an EV depends on the style and features you are looking for in a vehicle. For comparison, the price range on a new EV can go from around $27,495 (2023 Chevy Bolt base model) to upwards of $106,000 (2022 Tesla Model S). Generally, a well-equipped electric vehicle will cost around the same price, if not lower, than a luxury gas-powered vehicle.
As mentioned, replacement parts are higher than in a traditional gas-powered vehicle. For example, the ever-popular Tesla battery can cost between $20,000 and $35,000 to replace, and the average to replace the battery in other EVs ranges from $5,000 to $20,000. The pack, size, and manufacturer of the battery determines the price. A typical manufacturer warranty will cover the battery for eight years or 100,000 miles at no cost. The likelihood of needing a replacement battery is still so low that the current replacement rate is only 1.5%.
"I absolutely love my fully electric vehicle. While it was more expensive, the savings have outweighed the expense when factoring in the credits, as well as not having to purchase gasoline."
- Misty, EV owner and AllSouth Regional Manager
Buy or Lease?
Choosing between buying or leasing a vehicle can often be a hard choice as both have advantages and disadvantages. While EVs are expensive to lease because of the high battery cost, leasing is still very popular due to the constant introduction of newer models with better technology. Newer models often go farther on a single charge than their predecessors. Leasing will allow you to upgrade to a new model and get the latest technology at the end of your contract. Some leasing companies will roll your eligible tax credit into your lease cost and save you money on your monthly payment, but they are not required to do so. Many will lease to take advantage of the tax credit. Remember that there is a cap on the number of miles you can put on a leased vehicle regardless of it being electric or gas powered.
Having equity in a vehicle sounds like a strange concept, but could prove to be a reality if you choose to buy an EV over leasing one. Buying could save you money in the long run. Generally speaking, two back-to-back leases will cost thousands more compared to buying whether you pay cash or finance. Along with a limit on the number of miles you can drive in a year, you can also get fined for any damages to the leased vehicle. EVs are built to hold more of their value over time and are constantly being updated using over-the-air software updates. Keep in mind, significant down payments are usually required if you decide to purchase an EV.
Whether you decide to buy or lease, new and old EVs remain in high demand since there is less depreciation compared to a gas-powered vehicle.
What is the environmental impact?
EVs have a smaller carbon footprint than gas-powered vehicles. Electricity comes from power grids created by a wide range of sources. The grids vary by state, meaning the footprint varies as well. The manufacturing process produces more global warming emissions compared to the average gas-powered vehicles. For example, large lithium-ion batteries use a lot of materials and energy to build. Once an EV hits the road; however, it offsets the manufacturing emissions within 18 months. Minimal emissions are still created while charging. There are a few states that have committed to banning sales of ICE cars by 2035. By 2032, the White House estimates that 67% of new vehicles sold in the US will be electric.
"It's important to consider what you value the most when deciding between an EV and an ICE. Do your research so you can figure out what works best for you."
- Tracy, AllSouth Centralized Lending Manager
Before making the switch to an EV, remember this:
Your lifestyle is the most significant consideration when choosing between an EV and an ICE. Knowing the distance of your daily commutes, where chargers are in your area, the average temperature where you live, and how you plan to use your vehicle are all important factors to consider. “Range Anxiety” is the fear that you will not have enough charge to reach your destination. Extreme heat and cold can be vital to your battery life and charging times. Where you live should also be weighed since rural areas are less likely to have charging stations, unlike heavily populated metropolitan areas. Apartment living might not be ideal for EV ownership since at-home charging may not be an option. How do you plan to use your vehicle? EVs have towing capability, but not as much as gas-powered vehicles. Towing will significantly reduce the battery charge with the extra weight. For daily commutes and long trips, most EV owners say an electric vehicle is a much more enjoyable driving experience because of the instant acceleration and quiet, smooth ride.
Whether you’re ready to hit the road in an electric of gas-powered vehicle, our lending experts are always here to help get you in the car of your dreams. Have more questions about buying a new or used vehicle? Check out this blog with answers from Tracy, our Centralized Lending Manager, to common car buying questions.