Do Electric Cars Save You Money? The Real Cost of Going Green

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Although a clear trend towards greener and more sustainable lifestyles is undeniable, you may be surprised at just how low electric vehicle, or EV, sales are in the U.S. According to a 2019 Edison Electric Institute (EEI) report, there were more than 1.18 million electric cars on the road as of March 31, 2019. While this figure may seem like a lot, electric vehicle sales still constitute only a small percentage of new car sales, but reports show that the tide seems to be turning. However, before you run out and get a brand new Tesla to help reduce your carbon footprint or save money on rising fuel costs, you first need to determine if an electric car is right for you.

Who’s Going Green?

If you’ve made the decision to go green (or at least greener), you certainly aren’t alone. Market research company, GlobalWebIndex, conducted a recent study which shows that half of digital consumers cite environmental or sustainability concerns as being defining factors in their product choices. This UK and American study places millennials, aka the "Green Generation," firmly at the helm of an eco-conscious pack willing to pay more for sustainable products.

According to GlobalWebIndex, 61 percent of millennials have no problem paying more for sustainability, followed closely by Gen Z at 58 percent. Not far behind at 55 percent are the Gen Xers, while only 46 percent of Baby Boomers feel as though green products are worth the additional cost. Although Gen Z and millennials are at the forefront of eco-conscious consumerism, electric vehicles have largely stayed out of their price range until relatively recently.

Between 2010 and 2016, the average cost of EV batteries dropped by 70 percent, and along with it, the price of purchasing an electric car. As more and more moderate-priced car manufacturers like Nissan, Ford, Volkswagen and Kia toss their hats into the EV arena, consumers should see the cost difference between electric vehicles and their gas-powered counterparts decrease even further, making them more accessible to millennials and other eco-minded consumers who want them.

Choosing an Electric Vehicle

When it comes to electric vehicles, there are three main types classified by the car’s primary source of energy: battery electric vehicles (BEVs), hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs). The type of EV you choose not only determines how it’s powered, but also plays a role in its emissions, purchase price as well as maintenance costs, fuel savings and operation.

  • Battery Electric Vehicles are completely electric vehicles which require no gas to power their engines. BEVs are fully chargeable using high-capacity battery packs recharged by an external power source. Examples of this type of EV are the Tesla Model 3, Nissan LEAF, Kia Soul and the Volkswagen e-Golf.
  • Hybrid Electric Vehicles rely on both gas and electricity for power via a process known as regenerative braking. HEVs use the heat and energy caused by the typical braking process to charge the battery. Initially, the vehicles start off using the electric motor, then switch to the gasoline engine when either the load or the speed of the vehicle increases. The motors are controlled by a computer to determine the most effective use of energy (gas or electric) for current driving circumstances. Examples of HEVs are the Toyota Prius Hybrid, Toyota Camry Hybrid and Honda Civic Hybrid.
  • Plug-In Hybrid Electric Vehicles are powered by both regenerative braking and external power sources. Standard HEVs are somewhat limited in how far they can go before the vehicle taps into the gasoline engine (approximately 1-2 miles), whereas PHEVs can generally go from 10-40 miles on electrical power before requiring power from their gas engines. Examples of PHEVs include Chevy Volt, Mini Cooper SE Countryman, Audi A3 E-Tron and BMW 330e.

Why eGallons Matter

Saving the planet is certainly noble, however, many people who choose electric vehicles do so for the savings in fuel costs. The cost of fuel can put a dent in your budget, and the thought of simply plugging your car in versus having to fill up at a pump is too alluring not to consider. But, because the cost of fuel isn’t directly comparable to the cost of powering an electric vehicle, the Department of Energy has developed the eGallon as a way to help consumers understand the costs associated with owning and operating an EV.

According to the Department of Energy's website, an "eGallon represents the cost of fueling a vehicle with electricity compared to a similar vehicle that runs on gasoline. For example, if gasoline costs $3.60 a gallon in your state and the eGallon price for your state is $1.20, that means that for $1.20 worth of electricity you can drive the same distance as you would for $3.60 worth of gasoline." So, a few factors determine if you’ll save money. The question of whether or not electric cars save money may not be such an easy one to answer if you live in a state where gas is cheap, but electricity is expensive.

Fuel is tied to fluctuating global oil prices, whereas electricity is generally stable and governed by state utility commissions or local markets. How much you can save on an EV as compared to a gas-powered vehicle depends on the cost of fuel in your state as well as what it will cost you to charge your car. If you have a BEV, the cost of electricity is a more crucial factor than if you owned an HEV that doesn’t require external charging, but does require gasoline. For more in-depth information on the eGallon and why it’s important or how it’s calculated, visit the Department of Energy’s website at Energy.gov and search for eGallon.

Incentives and Federal Tax Credits

There are no shortages of state and local or federal incentives for going green, especially as it pertains to electric vehicles, and you can find them at the Department of Energy's website. Every state, and the District of Columbia, have incentives available for those looking to purchase an electric car. California tops the list as the state with the most EV perks including rebates, parking incentives and utilities rate reductions. For example, California’s Bay Area Air Quality Management District has a Clean Cars for All program that provides grants of up to $9,500 for eligible residents to replace an old vehicle (15 years or older than the current year) for a plug-in electric vehicle or a hybrid electric vehicle.

New Jersey's Board of Public Utilities offers residents of the state a rebate of $25 per mile of electric-only range. This rebate of up to $5,000 goes towards the lease or purchase of a new plug-in electric vehicle with a manufacturer's suggested retail price of $55,000 or less. There are also federal tax credit and incentives to entice consumers to opt for more eco-friendly vehicle options. The Plug-In Electric Drive Vehicle Credit (Internal Revenue Code Section 30D) allows for a credit of up to $7,500 for qualified passenger vehicles and light trucks. It is subject to phaseout, so be sure to refer to the IRS’ website, IRS.gov, and search for Electric Vehicle Tax Credits for more information on this and other EV incentives.

References

About the Author

Tara Thomas is a Los Angeles-based writer and avid world traveler. Her articles appear in various online publications, including Sapling, PocketSense, Zacks, Livestrong, Modern Mom and SF Gate. Thomas has a Bachelor of Science in marine biology from California State University, Long Beach and spent 10 years as a mortgage consultant.