Here's What Happens When You Switch to an EV: A Financial Perspective

Many people are curious about buying an EV because they think it will help them save money on gas while saving the planet from climate change. But the full picture of an EV's effects on your personal finances can be complicated. If you want to buy an EV, there's some good news and bad news for your bank account.  

Let's start with the bad news first -- and show you a few examples of how buying an EV can help save money on the total costs of car ownership. 

Bad news: EVs are more expensive than regular cars 

EV prices have been coming down in recent months, but they're still more expensive than "regular" gas-powered cars. Survey data from Kelley Blue Book shows that, as of July 2023, electric vehicles had an average sale price of $53,469, or $5,135 more than the average price of a gas-powered vehicle ($48,334). This makes the average price of an electric vehicle about 10.6% more expensive than a gas-burning car. 

But you can make up for that extra sticker price in no time, by saving big bucks on gasoline, right? 

Good news: You'll save money on gas and maintenance  

It's true: EVs really do save you a lot of money on gas. According to data from Chase Auto, it costs about half as much to power an EV (by plugging it into your home outlet in your garage, or paying for public charging stations) as it does to pay for gas in a conventional car. And Americans spend an average of $2,148 per year on gasoline (according to The Ascent's research). This means an EV can save you $1,074 per year on gas (take the average annual gas spending of $2,148 x 0.50 = $1,074).

After five years of owning an EV, you'd save $5,370 compared to what you used to spend on gas. These fuel savings alone can help you more than recoup the average price difference between an EV and a gas car ($5,135). 

Electric vehicles can also help you save money on car maintenance. EV engines have fewer moving parts that can break and leak and ooze. Chase Auto estimates that the average EV's lower-cost maintenance will save you another $3,000 in the first five years (about $600 per year). 

Bad news: Insuring an EV might be more expensive 

Because EVs are more expensive (on average) than gas-powered cars, they're also more expensive to repair -- and more costly to insure. Exact car insurance prices for EVs are hard to estimate. Your EV car insurance price will depend on where you live, which model you own, your driving record, and other factors. But be prepared to pay extra to a car insurance company. Shop around for car insurance quotes before you get your heart set on shopping for a new EV. 

Good news: You can get state tax credits and utility rebates  

Want to take some of the sting out of those car insurance prices? One last bit of good news: Depending on where you live, you can get some sweet state tax credits and local utility rebates for buying an EV. (These state and local tax credits and rebates are in addition to the federal EV tax credit of up to $7,500 for buying a new EV, or up to $4,000 for buying a used EV.) 

For example, if you live in Colorado, you can get a state tax credit of $2,000 for buying a light-duty EV. Xcel Energy customers with qualifying incomes can get a rebate of $5,500 for buying or leasing a new EV, or $3,000 for buying or leasing a used EV. There are also incentives from utility companies for installing EV chargers at your home, such as Xcel Energy's rebate of $500 (or more, for customers with lower incomes). 

RELATED READING: Complete Guide to Electric Vehicle Tax Credits, Rebates, and EV Charger Incentives

Bottom line: Even with more expensive EV car insurance premiums, buying an EV can help you save thousands of dollars on gas and maintenance over the life of the vehicle. EV prices are likely to get more cost-effective in the near future, as battery prices get cheaper, and more car companies launch new mass-market models of EVs in the U.S. EV car insurance prices might get more cost-competitive, too -- as EV parts get cheaper and EV repairs become more widely available.