It’s hard to believe that 12 years have passed since the first mainstream electric vehicle (EV), the Tesla Model S, was introduced to an American public that was both eager and skeptical. In 2012, you would have had to pay between $57,400 and $87,400 for a Model S, depending on the trim (about $78,428 to $119,419 in today’s dollars), which is not an insignificant amount then or today.
Buying a Used Car: The Best Age and Mileage to Get Great Value
Find out more: 4 Affordable Car Brands You Won’t Regret Buying in 2024
Depending on make and model, electric vehicles have become more affordable since 2012, primarily due to cost reductions by electric automakers (mostly Tesla) and federal tax credits on certain models. But even with the desire to go electric, electric vehicles are significantly more expensive than internal combustion engine (ICE) vehicles.
There are many reasons why you should consider replacing your gas car with a fully electric vehicle, and electric vehicles are growing in popularity like never before. But they’re not for everyone and simply aren’t wise purchases if you can’t afford to keep them on the road. Being car poor to own an electric vehicle is insane, unless you plan to live in your electric vehicle to save money on rent and utilities.
The practical way to determine if you can buy an electric vehicle is to use a percentage of the income budget limit and consider the total cost of ownership over time.
“Too often, people buy a car without having a realistic idea of what it will actually cost to own it,” wrote financial samurai Sam Dogen, on CBNC’s Make It. “As a result, they end up overspending and going over budget. »
1. Initial cost
As inventories increase and MSRPs slowly decrease, bringing them closer to non-luxury “traditional” vehicles, electric vehicles are becoming more readily available to large numbers of people who previously could not afford them. But how much do you have to earn to afford one?
Many experts have adopted the 10% rule, which essentially means that you should never spend more than 10% of your income on a car, including the monthly car payment, insurance, maintenance, and l gasoline (or electricity/charging costs). So if you make $50,000 a year, you shouldn’t spend more than $5,000 on a car, all expenses included.
Can anyone do this? Using the 10% rule, purchasing a new electric vehicle at an average price of $55,242 would require you to earn an absurd median income of $552,420. The average used vehicle listing price at the end of January 2024 was $25,328, down 4% from the previous year, but still expensive. Considering the median household income was $74,580, according to the US Census Bureau, most new and used electric vehicles are well out of the average American’s price range.
More Americans are committing to monthly car payments exceeding $1,000, according to a 2023 report from Edmunds. Using Capital One as an example, on a typical 4-year loan, an electric vehicle with a transaction price of $53,000 would cost around $1,100 per month. To pay for this you will need to earn at least $120,000.
2. Long-term savings
As competition continues to intensify and better technology and cheaper batteries and raw materials help electric vehicle manufacturers standardize MSRPs, prices will fall and eventually match those of gasoline vehicles . Regardless, right now, “every model of electric vehicle in every state is cheaper to fill than a gasoline vehicle,” according to Energy Innovation.
Current electric vehicles are 2.6 to 4.8 times more efficient at traveling a mile compared to ICE vehicles. Even with the lowest savings, the average electric SUV still costs $15 less to fill up than a Honda CR-V, according to Energy Innovation, and the average savings on filling up a truck and sedan were almost $24 and $26, respectively.
Paying less over the life of your EV will offset the initial cost of your EV. Some argue that it’s not enough to make a huge difference when you spend more to buy one, but most agree with groups like the Environmental Defense Fund, which estimates that owning an electric vehicle should save you up to ‘at $18,440 over 10 years.
3. Billing Fees
Ideally, you should have an EV charger at home, but they aren’t cheap. According to Capital One, Level 1 charging cables often come with new electric vehicles and only a common 120-volt household outlet to operate, but if you need an outlet or equipment upgrade , you could end up paying between $300 and $600. Installing a Level 2 or 3 station at home (which can charge an electric vehicle battery to 80% in four to 10 hours, or quickly charge a battery), plus labor and any upgrades level of adapter and circuitry, could cost you between $500 and $700. , and tens of thousands, respectively.
If you live in an apartment or somewhere without dedicated parking, relying on public charging stations may be more difficult and your ability to manage public charging costs should factor into your decision. The infrastructure is unreliable today and will cost you time and money when traveling. Expect to pay between $10 and $30 on average to charge an electric vehicle on a commercial charger, from almost empty to almost full.
4. Maintenance and repair costs
Although many argue that average electric car repair costs are comparable between ICE and EVs, unplanned repairs can be costly. “The frequency of repairs could decrease,” Bill Newman, head of automotive at SAP North America, told Business Insider. “But repair costs will increase.”
However, regular maintenance is cheaper with electric vehicles. According to the AAA, electric vehicles don’t require as much maintenance as gasoline vehicles since they don’t need oil changes or air filter replacements. “If maintained according to auto manufacturers’ recommendations, electric vehicles cost $330 less than a gasoline car, or a total of $949 per year,” explains AAA.
5. Insurance premiums
You would never be charged more for simply driving an electric vehicle. However, your premiums could be higher because EVs generally cost more than ICE vehicles (about $7,000 more if you compare current average KBB transaction prices) and repairs, while less frequent, may cost more expensive and require a specialist. As electric vehicles become the norm in the automotive market, costs should stabilize, but for now, it’s another financial reality of owning an electric vehicle.
More from GOBankingRates
This article originally appeared on GOBankingRates.com: 5 Reasons Why You Should Only Buy an Electric Vehicle If You Make Over $120,000 a Year
yahoo
