Are Hybrids Actually More Affordable Than EVs?

Electric vehicles (EVs) are in the news a lot these days, and are widely described as the future of transportation. The federal government is investing billions of dollars to build EV charging stations nationwide, and is also offering thousands of dollars of EV tax credits for qualifying buyers of new (and used) EVs.

But if you're looking to buy a car in 2024, are EVs really the best deal for you? Fully electric vehicles (those that run on 100% battery power) are not your only option to save money on gas and reduce carbon emissions to fight climate change. Another slightly "older" type of eco-friendly car, hybrid vehicles, can often be more affordable than EVs.

Let's look at the big picture of what makes hybrids more affordable than EVs, and which type of car could be the best choice for your driving style.

Hybrids have a lower MSRP sale price than EVs

The first number to think about when shopping for a hybrid vs. EV is the actual sale price of the car at the dealership. According to Kelley Blue Book research, as of December 2023, the average EV costs $50,798. A popular hybrid, the 2024 Toyota Prius, started at $28,745. That's a price difference of over $22,000!

Of course, not all hybrids cost $28,745. If you buy a hybrid SUV, truck, or minivan, the cost could be closer to that average EV selling price. And new EVs can qualify for up to $7,500 of federal EV tax credits, while hybrid cars do not -- but even with that full $7,500 discount, hybrids are likely to be cheaper to drive off the dealership lot.

Advantage: Hybrids

Hybrid car insurance can be cheaper than EVs

The cost of auto insurance has skyrocketed in the past few years, to the point that some Americans have had to cut back on groceries to afford car insurance. Unfortunately, EVs are not cheap to insure.

Because of their higher average sale price, expensive lithium-ion batteries, and costly specialized repairs, EVs tend to have higher car insurance costs than gas-powered cars. But how does EV car insurance compare to the cost of hybrid car insurance?

Exact figures for the cost of auto insurance are based on where you live, the odometer mileage and value of your vehicle, your age and driving record, and more. But according to a study from Kelley Blue Book on the five-year cost of ownership of a 2023 Kia Niro EV vs. a Kia Niro Hybrid, EV car insurance is projected to cost $292 more over five years (about $58.40 more per year).

The cost of EV car insurance is probably not a dealbreaker for most car buyers -- after all, even the cost of standard car insurance seems to be higher than ever. But if you want cheaper auto insurance, choosing a hybrid instead of an EV could help. Lemonade, a digital insurance company, offers discounts on EV and hybrid car insurance.

Advantage: Hybrids

Charging EVs is not "free" (even at home)

The best financial reason to buy an EV over a hybrid is to save money on gas. Hybrid vehicles are still fueled entirely by gas (although they get better mileage than standard gas-powered cars). With a fully-electric vehicle, you never have to buy gas or pay for oil changes again.

But here's the catch: unless you have solar panels at home and can charge your EV exclusively at home with free energy from the sun, fueling your EV is not "free." You have to pay for the cost of electricity to charge your EV at home, or pay to use public charging stations. Some public EV charging stations are free, but you can't count on getting a spot there every time you need to charge -- check plugshare.com to find free EV charging near you.

Still, EVs can save money compared to gas-powered cars. The average driver might save about $1,074 per year on gas (and another $600 per year on maintenance) by driving an EV. This figure is based on an estimate of EV "fuel" costing half as much as the average American spends on gas per year -- $2,148.) But the challenge is knowing how long it takes to pay off the higher cost of an EV. It might take a few years of spending zero money on gas to recoup the higher cost of purchasing an EV, compared to a lower-priced, gas-burning hybrid car.

If the cost of EVs gets cheaper, or the cost of gasoline increases, EVs might soon become a better deal than hybrid cars -- the money you save on gas might quickly make up for the higher costs of EV car insurance. But in the meantime, budget-conscious car shoppers might want to choose a hybrid car instead of an EV.

Advantage: Hybrids (for now)

Bottom line

Buying an electric vehicle (EV) can be a great way to fight climate change while saving money on gas and maintenance. No more oil changes! But as of May 2024, you can probably save more money by buying a hybrid vehicle that burns (less) gas. Check out the U.S. Department of Energy's Vehicle Cost Calculator to see which vehicles fit your driving style -- and estimate your cost of car ownership.