Don't Ignore These 5 Big Costs of Electric Vehicles

Shopping for any vehicle right now is far more expensive than just a few years ago. Labor and semiconductor shortages, supply chain problems, and inflation have caused new vehicle prices to increase by 18% over the past three years.

Electric vehicles haven't escaped the pricing surge, and there are some significant costs that buyers should be aware of. Here are five of them and how to cope with each.

1. Buying the EV

There's no way around it: EVs are more expensive than many gas-powered vehicles. The average transaction cost of a new car is $48,759, according to Kelley Blue Book. Meanwhile, the average price of an EV is $50,798.

While EV prices are down 18% from last year, that high sticker price still puts them out of reach for many buyers. But you can help reduce the cost by shopping for a vehicle that qualifies for an EV tax credit. This year, the U.S. government is giving up to $7,500 in tax credits for new hybrid and electric vehicles and up to $4,000 for some pre-owned models.

To get the full credit, the vehicle has to have its final assembly in the U.S., have critical battery materials sourced here, and have a price tag of no more than $88,000 for vans, pickup trucks, and SUVs (or $55,000 for all other vehicles). You'll also have to meet modified adjusted gross income requirements.

The easiest way to determine whether your EV qualifies for some or all of the credit is to view the list of qualifying EVs at fueleconomy.gov.

2. Installing an at-home charger

Using the charging cable that comes with most EVs and plugging it into a 120-volt wall outlet will cost you $0. But this level of charging -- called Level 1 -- will give you just five miles of range per hour.

As a result, many EV owners install a 240-volt Level 2 charger to speed up the process. But the average purchase and installation cost ranges between $1,150 to $2,750.

The charger and installation costs can be much higher if you have an older home requiring rewiring or an electrical panel upgrade to handle the 240 volts. About 20% to 30% of U.S. homes need some type of electrical upgrade, according to MotorTrend.

To help with the cost, you can claim 30% -- up to $1,000 -- of the price to purchase and install a charger through the government's Alternative Fuel Vehicle Refueling Property Credit. You can claim the credit by filing a Form 8911 with the IRS.

3. Repair costs

While EVs may need less regular maintenance than vehicles with internal combustion engines, their repair costs are often higher. Electric vehicle repair costs are pricier than their gas-powered peers because their parts are often more complex and costly.

The latest data shows that EVs cost an average of $269 more per repair than gas-powered vehicles, and some electric vehicles cost far more. Teslas, for example, cost about $1,350 more to repair than the average gas-powered vehicle.

Making matters worse for EV owners is that there are far fewer repair shops with trained technicians to repair EVs than traditional vehicles, increasing repair times and costs.

4. Insurance premiums

The high repair costs for EVs translate to higher insurance premiums as well. If an EV battery is damaged and needs replacing, it can cost up to 40% of the vehicle's original price. The high cost of replacing batteries after an accident has prompted some car insurance companies to write down EVs as a total loss rather than pay to fix them.

Car insurance companies have passed these expenses onto their customers. In some instances, the cost to insure an EV is 25% higher than its equivalent gas-powered model.

The best way to tackle high insurance costs is to shop around for rate quotes from the best auto insurance companies. Car insurance rates are up 19% over the past year, so getting a few auto insurance quotes is a good idea no matter what car you drive. Also, consider increasing your deductible to keep your monthly premiums lower, or try raising your credit score to get a better rate.

5. High electricity prices

Electricity prices rose last year at the same time that the price of gasoline and diesel fell. The result was surprising: In the first half of 2023, recharging an EV cost more on average than refueling many vehicles.

Research from the Anderson Economic Group found that entry-level, mid-priced, and diesel-powered trucks all cost less to fuel per 100 miles than their EV counterparts. For example, entry-priced EVs cost an average of $2.77 less per 100 miles to refuel than gas-powered vehicles, and diesel-powered trucks cost $9 less than their EV peers.

Of course, energy prices fluctuate, so some vehicles that are cheaper to power now will ultimately be more expensive in the long run.

Most people don't buy an EV to improve their personal finances, so the above expenses may not matter to some buyers. But if you're considering an EV because you think you'll save money, you may want to reconsider.