This Is How Much You Could Really Save by Switching to an Electric Vehicle

Electric vehicles are the future of the car industry. But not everyone is ready to buy an EV. Many people suffer from "range anxiety," have concerns about how to find EV charging stations, and are unsure of the personal finance fundamentals of how much money they can save by buying an EV.

Because of recent federal tax credits that pay up to $7,500 toward the purchase of a new electric vehicle, many people might be shopping for EVs in 2024. But before you buy an EV, make sure you understand the big picture. EVs can save you money in some ways (gas, maintenance), but they might be more expensive in other ways (cost of car insurance).

Let's do a quick financial breakdown of how much money you can save by switching to an electric vehicle.

Electric vehicle savings: Spend $0 on gas

The biggest savings you can get from an electric vehicle is the most obvious: EVs don't use gas, so your monthly gasoline budget just became $0. However, that doesn't mean EVs are "free" to drive. You still need to pay for the costs of electricity to power your EV.

Based on research cited by Chase Auto, EV "fuel" costs are about half that for a conventional gas-powered car. And research from The Ascent found that Americans' average annual spending on gasoline is about $2,148. So if you take 50% of that number, you can expect buying an EV to save you $1,074 compared to what you used to spend on gas.

EV savings on gas: $1,074 per year

Electric vehicle savings: Spend less money on maintenance

Along with gas, another big source of savings when buying an EV is routine maintenance. That's right: EVs don't need oil changes, transmission servicing, cooling system flushes, or many other types of maintenance that an internal combustion engine requires. EV engines are simpler, with fewer moving parts.

This doesn't mean that EVs are 100% maintenance free. You'll need to be prepared to replace the tires more frequently, and get the tires rotated more often. And in case you get in a crash, EV repairs tend to be more expensive than fixing up a gas-powered car.

However, according to Chase Auto's research source, your EV's "lower-maintenance" needs will likely save you around $3,000 during the first five years of driving the car, or $600 annually.

EV savings on maintenance: $600 per year

Electric vehicle extra costs: Car insurance

Along with gas and maintenance, one of the major ongoing expenses of owning a car is car insurance. Especially after car insurance prices surged in 2023, many people might be worried about how much it costs to insure an EV.

Car insurance prices depend on a wide range of factors, from where you live to how old your car is, to how much your vehicle is worth. It tends to be more expensive to insure cars that are worth more money, or that require more costly repairs. For both of these reasons, car insurance for EVs is often going to be more expensive than a comparable gas-powered vehicle.

First, EVs tend to cost more than gas-powered cars. According to Kelley Blue Book, as of July 2023, the average sale price of an EV was $53,469, compared to $48,334 for gas-powered cars. That's a price difference of $5,135, or 10.6% higher. When EVs are priced like luxury vehicles, their car insurance costs will be pricier, too.

Another reason for higher-priced EV car insurance is that the cars are more expensive to repair in case of a crash. According to USAA, electric vehicle batteries can cost $5,000-$15,000 to repair or replace. A seemingly minor-looking accident that damages the EV battery can rack up huge repair costs, or even get your vehicle totaled.

Want to save money on EV car insurance? Consider getting a smaller, more affordable model of EV, like the Chevrolet Bolt, which starts at $26,500. And get price quotes from the best car insurance companies upfront, before you start shopping for an EV.

There's no easy way to estimate how much EV car insurance will cost. It depends on lots of different factors, including which car you buy. But for the purpose of this article, let's assume that EV car insurance will have an additional cost that's in line with the additional (10.6%) average cost of the car:

• Average annual car insurance premium: $3,017
• Average additional cost of EV (based on sale price): 10.6%
• Estimated extra EV car insurance premium: $3,017 x 0.106 = $319.80

Extra estimated EV car insurance costs: $320 per year

Electric vehicle rebates, fees, and taxes

Along with gas, car insurance, maintenance and repairs, there are a few extra "wild card" factors that affect how much you can save with an electric vehicle. Many states offer rebates or tax credits to EV buyers (in addition to the federal EV tax credit), and some local utilities give cash incentives and rebates to people who install EV chargers at home. However, some states also charge an extra vehicle registration tax or road use fee to EV buyers.

We're not going to include estimated rebate numbers here, because it all depends on where you live. Many state rebate programs also depend on which EV you buy, your household income, and other factors. To learn more, check out our guide to EV tax credits, rebates, and incentives.

Bottom line: Based on our estimates, you can save about $1,354 per year by buying an EV. EV prices are expected to get more competitive in the future, with more models coming onto the market. Buying an EV can be good for the climate, and for your bank account.