How Much Can You Actually Save With a Hybrid or Fully Electric Car?
Is an electric car right for you? Is a hybrid car worth it? Buckle up as we break it all down.
January 7, 2022
Hybrid and electric vehicles are growing in popularity. In fact, at the end of 2020, they made up 6.7% of new vehicle financing, up from 4.3% the year before.
When it comes to the amount of fuel they need to operate, hybrid and fully electric vehicles promise to be gentler on the environment and on your wallet. However, the price you pay at the pump isn’t the only cost to consider.
If you’re thinking about an electric car vs. gas car, purchase price and cost of repairs can also come into play. It’s important to understand all these factors to determine whether an electric car vs. gas vehicle is cheaper in the present and the future.
Electric car vs. gas car: which costs more?
When you buy a new car, the cost will vary depending on the make and model, but is gas or electric cheaper?
As far as monthly payments go, gas-powered vehicles come in at $524 per month on average, compared to $529 per month for hybrid vehicles. There isn’t a huge difference there, but if you choose an electric vehicle, expect an average monthly payment of $689, or $160 more than the average hybrid vehicle.
Remember: these figures are averages, and cost can vary widely depending on the vehicle you choose. For example, Tesla tends to be at the top of the electric car market, and your monthly payments could run more than $725 per month. However, there are electric options that will cost you about $400 a month, such as the Chevrolet Bolt EV.
What are the costs of electricity vs. fuel?
In general, electric cars cost less to drive annually than their gasoline-powered counterparts.
A University of Michigan study found that electric vehicles cost $485 per year on average compared to $1,117 for gas vehicles, but costs can vary by state. For example, in Hawaii, the average cost of gas per mile is high, energy prices are steep and it costs $1,106 to drive an electric vehicle compared to $1,509 for a gas-powered car.
A Consumer Reports study found that electric vehicle owners that did most of their charging at home could expect to save $800 to $1,000 on fueling costs.
What are the costs of repairs and maintenance?
When it comes to the cost of repairs and maintenance, an electric car vs. gas vehicle literally has fewer moving parts.
One of Tesla’s selling points is that there are only 17 moving parts in its drivetrain compared with the 200 moving parts found in the drivetrains of conventional vehicles. As a result, electric vehicle and hybrid owners can expect to pay less in maintenance over the lifespan of a car.
In fact, electric car and hybrid drivers may spend half as much on maintenance as gas-powered vehicle owners on average.
Here’s a breakdown of maintenance and repair costs for each:
Battery electric vehicle cost per mile: $0.03/mile
Plug-in hybrid electric car cost per mile: $0.03/mile
Internal combustion engine cost per mile: $0.06/mile
The average savings on maintenance and repairs over the life of the vehicle is about $4,600.
What are the costs of insurance?
While gas and maintenance will likely be cheaper if you own an electric or hybrid vehicle, you might have to pay more for insurance.
The average cost to insure a gas car is $1,232, while the average cost to insure an electric car is $1,674. That’s a difference of $442.
That said, the cost of insurance will vary depending on where you live. In North Carolina, the cheapest state to insure an electric vehicle, the cost will be about $1,000 on average. Whereas in Michigan, the most expensive place to insure an electric vehicle, insurance costs can run over $3,000.
How do I factor in depreciation?
Depreciation is the rate at which your car loses value after you buy it. Sadly, your car’s value drops as soon as you drive it off the lot. Still, some cars hold their value better than others, so you may want to keep this in mind as you shop around.
If you ever want to sell your vehicle, cars that hold their value will fetch a better price. A long-range electric car vs. gas vehicle holds its value better, because you can drive it 200 miles on a single charge. Again, this is a general rule of thumb. Manufacturer reputation, make, model and features will all have an impact on depreciation.
What about tax breaks?
The federal government and state governments offer tax breaks for all-electric or plug-in hybrid cars purchased during or after 2010. From the federal government, you may be eligible for an income tax credit of up to $7,500 dollars. The amount of the credit will depend on the capacity of your car’s battery.
Whether or not the credit is available will also depend on what type of vehicle you decide on. The federal government phases out the credit after a car manufacturer sells 200,000 qualified vehicles. The idea is that, as a manufacturer sells more cars, they’ll be able to offer them cheaper to customers and a tax credit won’t be necessary to incentivize a sale.
States also offer incentives, including exemptions from fees and inspections. In California, for example, residents can get a $2,000 cash rebate for buying or leasing an electric car, while plug-in hybrids are eligible for a $1,000 rebate.
How do you decide which car is right for you?
Which type of vehicle you decide to purchase—whether an electric car vs. a gas vehicle—will depend on several factors.
First, how will you use your vehicle? If you need to drive very long distances or you’re embarking on an epic road trip, a fully electric vehicle might not make as much sense as it would for a short commute in the city. Similarly, if you do a lot of driving on rough roads or in harsh weather, electric vehicles may not be a match.
The upfront costs of an electric vehicle can be greater than gas-powered cars. While you can finance your vehicle and spread the cost out over many years, your down payment will go further with a gas-powered car. That said, operating costs over the life of the vehicle are lower, which can offset these upfront costs.
The bottom line
Is an electric car right for you? Is a hybrid car worth it? At the end of the day, the average electric or hybrid vehicle owner will save quite a bit of money over their gas-powered-car-owning peers. Fuel savings alone could be $4,700 in the first seven years of ownership. Over the life of most electric vehicles, owners can expect to save between $6,000 and $10,000. Coupled with government tax incentives for some vehicles, total savings can be substantial — as much as $17,500.
The money you save by driving a hybrid or electric car can further your other financial goals, including paying down high-interest credit card debt. If you’re unable to pay off your credit card in full each month, these high interest rates can drag you into an even greater debt cycle.
Paying off your debt can break this cycle and get you back on firm financial ground. Tally† can help you organize your credit card debt in one place to potentially pay it off faster.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.