Do Electric Cars Save You Money?

Car owners are increasingly choosing electric cars. In addition to having less impact on the environment, electric vehicles are touted as supposedly saving money by being cheaper to operate over their lifespan. But are they really? Just what is the total cost to purchase and operate an electric car? What are the factors to consider when selecting a new vehicle?

One consideration is the charger. There are three types of chargers for a battery electric vehicle (BEV).

​Level 1​ - Level 1 is the simplest and cheapest home charging station. It operates on the standard three-prong 120-volt household current but is the slowest and takes the longest to charge. One option to reduce home charging costs is to install solar panels.

​Level 2​ - Level 2 operates on 220-volt current and typically requires an electrician to install a plug if a house is not already wired for 220 volts. Installation costs will run around ​$2,000​. Level 2 chargers will reduce the charging time by about half compared to Level 1 chargers.

​Level 3​ - Level 3 uses direct current and is the fastest type of charger, but has the highest rates. Level 3 chargers are not widely available and not all EVs have plugs that can accept a Level 3 charger cable. Tesla uses DC chargers and has a nationwide network of remote chargers that increases the popularity of the Tesla Model 3.

Here's how to calculate the cost of operating an EV with an electric motor versus a gasoline-powered vehicle. For purposes of comparison, let's suppose you drive about ​1,200​ miles per month, or ​14,400​ miles per year.

Electric vehicles get three to four miles per each kilowatt-hour, or kWh, of electricity. Nationwide, the average cost of a kilowatt-hour is ​$0.14​. To get the cost per month to charge your vehicle, you would divide the total miles driven by three miles per kilowatt-hour and multiply by the cost of each kWh.

Monthly charge cost = (​1,200 miles/ 3 miles​ per kWh) times ​$0.14​ = ​$56 per month​

Now let's compare the fuel costs of driving a gas-powered vehicle. Suppose your gas-powered car gets ​25​ miles per gallon of gasoline, and gasoline costs an average of ​$3 per gallon.​

Monthly gas cost = (​1,200 miles/ 25 miles​ per gallon) times ​$3​ per gallon = ​$144 per month​

As a result, you would save ​$88​ per month (​$144 minus $56​), or ​$1,056​ each year (​$88 times 12 months​), by driving an EV instead of a gas-powered vehicle.

Unfortunately, the cost of a gallon of gasoline and the cost per kilowatt-hour, and thus the savings, vary widely by state. For example, a kWh costs ​$0.25​ in Connecticut and Massachusetts compared to ​$0.11​ in Nebraska, North Dakota and Arkansas. Recent gasoline prices, according to GasBuddy, are ​$4.95​ per gallon in Connecticut and ​$4.81​ in Nebraska.

For Connecticut, the calculations are as follows:

Monthly charge cost = (​1,200 miles/3 miles​ per kWh) times $0.25 = ​$100 per month​

Monthly gas cost = (​1,200 miles/25 miles​ per gallon) time ​$4.95 per gallon​ = ​$237.60 per month​

Therefore, the savings per year for an EV in Connecticut would be ​$1,651.20 ($237.60 minus $100 times 12 months).​

These are the calculations for Nebraska.

Monthly charge cost = (​1,200 miles/3 miles​ per kWh) times ​$0.11​ = ​$44 per month​

Monthly gas cost = (​1,200 miles/25 miles​ per gallon) time ​$4.81 per gallon​ = ​$230.88 per month​

Because of the lower cost per kWh in Nebraska and the recent run-up in gas prices, the savings of an EV in that state are even greater. The annual savings for operating an EV in Nebraska are ​$2,242.56 ($230.88 minus $44 times 12 months).​

As you can see, the recent rapid increase in gasoline prices has tilted the savings more heavily in favor of electric vehicles. The electricity costs are more stable with smaller change increments.

With the recent drastic run-up in gasoline prices, the cost advantages of operating an electric vehicle have increased substantially.

Although electric vehicles cost an average of ​$10,000​ more to purchase compared to gas-powered vehicles, the upfront costs of purchasing an EV can be partially offset with the ​$7,500​ federal tax credit from the IRS. This tax credit gets reduced as each manufacturer sells new EVs and finally goes to zero when a car marker sells ​200,000​ units of a specific model. You can check the website of the U.S. Department of Energy to determine the amount of tax credit still available for specific makes and models.

In addition, some states offer further incentives that reduce the purchase price and lower the operating costs of electric vehicles. You can find out if a rebate is available in your specific zip code by visiting this interactive map.

If you're leasing an electric vehicle, sometimes the lessor will take advantage of the federal credit but will pass on the savings to the lessee in terms of a lower monthly payment.

The cost of ownership advantages of an EV don't stop with saving money on the cost of electricity versus gasoline.

EVs typically have lower maintenance costs than gas vehicles. With an EV, you don't have an internal combustion engine that needs regular oil changes and air filters. Plus, you don't have all the moving parts of a gas engine that can wear out, like pistons and spark plugs, and you don't have a transmission that can break down and need repair or a costly replacement.

EV owners can also appreciate that they're helping the environment by reducing carbon emissions.

The amount an electric car saves varies by a person's individual driving habits and location. You can save the most by charging an EV overnight at home with a Level 1 charger, which is the cheapest way to go.

Electric utility companies charge higher rates during the day and lower rates at night. If you have to park on the street or live in a multi-unit building, you won't be able to take advantage of lower rates by EV charging at home overnight, and you'll be forced to pay higher rates at remote, commercial public charging stations.