Post Written by Earl J. Ritchie, Lecturer, Department of Construction Management
26 November 2019, Brandenburg, Potsdam: An electric car from BMW is charged at a charging station. … [+]
dpa/picture alliance via Getty Images
There are a lot of good reasons to buy an electric vehicle (EV), but most buyers want to know whether it will save them money. This story is complicated, so let’s start with the bottom line: An electric vehicle may or may not save money, depending upon a host of factors, which will vary depending upon your location, driving habits, and choice of vehicle. The range in cost can be large, and generic comparisons will probably not match your situation. In order to estimate how much your EV purchase will save or cost you, you’ll have to do some calculations.
What we’re comparing
In this article, the examples will be battery electric vehicles (BEVs) compared to similar gasoline-powered models (ICEs). The same methods can be used to compare hybrids and plug-in hybrids (PHEVs).
It is generally agreed that EVs cost more to manufacture. Most have a higher list price than their gasoline-powered equivalents. However, we’re looking from the viewpoint of the consumer, whose purchase price may be lower due to federal and local tax credits, and who may also gain from free charging, preferential electricity rates and other benefits. Exactly which vehicles are being compared is very important.
The fuel cost savings
If you do an internet search for electric car savings, the vast majority of hits will be the savings on fuel cost. This makes sense in that you will probably pay more for the EV and expect to make it back by fuel savings. In all but a few extreme cases, fuel costs will favor EVs.
The table below compares the fuel cost difference between a Nissan Leaf EV and gasoline-powered Toyota Corolla for annual driving of 13,500 miles based on statewide average gasoline and electricity prices. The annual savings range from $288 to $948 per year. Local prices have a big effect. The ratio is about 3:1.
Annual Fuel Savings
The differences depend upon the local price of gasoline and electricity. Oregon, with high gasoline price and low electricity price, favors the EV. The EV advantage is small in Connecticut, which has cheap gasoline and expensive electricity.
The examples in the table do not capture the range of possibilities. Your fuel cost savings may be higher or lower, depending upon local prices, miles driven, choice of automobile and other factors.
Fuel cost is not the whole story
As nice as these fuel savings may be, fuel is a fairly small part of the total cost of ownership, typically between 12% and 25% for gasoline-powered cars. Let’s look at this cost comparison between a Nissan Leaf and a Honda Civic from Corporate Knights.
Total Cost of Ownership
It says for the conditions the author assumed it would be $2,205 (Canadian) cheaper over a 10-year life to own the Nissan Leaf. That’s only 3% of the total cost and that small difference is likely within the range of error of the estimate, but the EV is lower. Compare that to an estimate by the American Automobile Association that the average annual cost of an EV is 17% higher than a small gasoline-powered sedan ($8,320 vs. $7114).
How can there be such a large difference? In part, it’s because, like Oregon, gasoline is expensive in Canada, roughly 50% more than the US average. But other assumptions are also make a difference. Other differences include length of ownership (10 years vs. 5 years), depreciation (total vs. 5-year trade-in) and choice of models (specific vehicles vs. average over five models).
It’s not very helpful to think you could save 3% and lose 17%. You really need an estimate for your own circumstances.
A good total cost estimate
The Department of Energy’s Alternative Fuels Data Center (AFDC) has a very sophisticated total cost calculator. It includes electricity and gasoline costs, annual mileage, city/highway split, initial vehicle cost, cost escalation, discounting and other factors. You can use defaults or enter your own values for many of the parameters.
An example of the output is shown below. It compares the Tesla Model 3, BMW 330i, and Mazda 6, using AFDC’s default values and current nationwide average gasoline and electricity prices of $2.50 per gallon and $0.13 per kilowatt-hour, respectively.
Cumulative Cost of Ownership by Year
This example illustrates the importance of the choice of comparable. If you consider the Tesla Model 3 to be equivalent to the BMW 3 series, the cost is essentially break-even. If you consider the Tesla Model 3 equivalent to the Mazda 6, you’re way ahead with the 6. At five years of ownership, the Mazda 6 is some $26,000 cheaper than the Model 3.
Online calculators are not perfect
As with any online example or calculator, the assumptions in the AFDC calculator may not fit your circumstances. It assumes you finance the vehicle and does not include depreciation or incentives, such as tax credits. The electricity cost is set by state and not editable. It has non-editable costs for tires, maintenance, loan rates and other factors.
I have not found any comprehensive online calculator. If you want a truly accurate comparison, you will have to do it yourself.
How wonky do you want to be?
If you want to undertake the considerable task of doing your own analysis, you can start with the equations in the AFDC calculator and add factors they left out, such as trade-in value and sales tax. You’ll need input values unique to your circumstances. Your actual purchase cost will depend upon available discounts and which model and options you choose. The fuel efficiency of both EV and gasoline cars depends upon your driving style, terrain, temperature and whether you’re using the air conditioner.
The differences are significant. Discounts can be on the order of 10 to 20 percent and may vary between the EV and gasoline alternative. Individually, low temperatures, aggressive driving, hilly terrain and AC use can increase EV energy use from a few percent to 20 percent. The combined effect can almost double it. These factors also affect gasoline fuel mileage but generally have less effect.
Even if you account for all of these factors, there are still uncertainties. The prices of gasoline and electricity will change. Your driving distances may change. The best estimate is still just an estimate.
Where you can save money
If you’re an average mileage driver, your fuel savings may be anything from a couple of hundred dollars to well over a thousand dollars per year. If you’re a high-mileage driver, you will save more. This is great and allows you to smile as you drive past the gas station. However, that may not save you money on the total cost of owning a car.
If you’re not interested in doing the calculations, here are the circumstances that favor the EV:
- Little or no added cost for the EV
- High local and federal incentives
- High local gasoline cost
- Low local electricity cost
- You drive a lot
- You drive mainly in the city
- You keep the car a long time
- Moderate temperatures
- Flat terrain
Or you may just choose to enjoy the other benefits of EVs and not worry about the cost difference.
Earl J. Ritchie is a retired energy executive and teaches a course on the oil and gas industry at the University of Houston. He has 35 years’ experience in the industry. He started as a geophysicist with Mobil Oil and subsequently worked in a variety of management and technical positions with several independent exploration and production companies. He retired as Vice President and General Manager of the offshore division of EOG Resources in 2007. Prior to his experience in the oil industry, he served at the US Air Force Special Weapons Center, providing geologic and geophysical support to nuclear research activities. Ritchie holds a Bachelor of Science in Geology–Geophysics from the University of New Orleans and a Master of Science degrees in Petroleum Engineering and Construction Management from the University of Houston.
UH Energy is the University of Houston’s hub for energy education, research and technology incubation, working to shape the energy future and forge new business approaches in the energy industry.