Is Buying an EV Really Better for the Environment? Or Your Wallet?

Electric vehicles have become a popular choice among car buyers lately, with sales of EVs climbing nearly 50% over the past year, according to Kelley Blue Book.

Some car buyers opt for EVs because they want to own a car that's better for the environment than gas-powered vehicles are. Meanwhile, others are considering an EV purchase thanks to expanded and updated tax credits.

Let's take a quick look at the impact on the environment and your personal finances that buying an EV may have.

Yes, EVs are better for the environment

This may not be much of a shock, but the latest research does show that EVs cause much less emissions than gas-powered vehicles do. Of course, the EVs themselves don't put out any pollution, but there are sometimes carbon emissions coming from the electricity generated to charge EVs.

The U.S. uses a mix of coal-powered and renewable energy power plants, which means that some EV charging will have an environmental impact. According to a recent article in The New York Times, in most cases, EVs contribute far less carbon emissions than gas-powered vehicles do.

But it depends on where you live and what vehicle you have. For example, some EVs that are charged every night in an area of the country that relies heavily on coal-powered power plants could actually cause more carbon emissions than owning a gas-powered or hybrid vehicle, the article said. In short, the cleaner the electric grid, the cleaner the EV.

And there's also the issue of EV raw materials, such as lithium and cobalt. The mining and smelting processes for the materials can result in hazardous material, and some of the production occurs in areas of the world where there is little regulation.

Finally, while some EV batteries are recyclable, there isn't a great system for doing so. Currently, an estimated 5% of all lithium-ion batteries (including for tech gadgets) are currently recycled.

But while all of these factors need to be improved, electric vehicles are still better for the environment nearly every time, according to the Environmental Protection Agency.

EVs aren't great for your wallet, but there are some incentives

If you're in the market for a new car, chances are you can get a gas-powered vehicle for cheaper than its EV counterpart. The average transaction price for a new gas-powered vehicle in September was $47,889, while the average EV price was $50,683, according to Kelley Blue Book.

But there are some significant EV incentives right now that can help with the cost. Here's what you need to know:

• Tax credits: You could receive up to $7,500 for a new EV and up to $4,000 for a pre-owned EV in 2023. You can use this IRS form to apply for the credit.
• 2024 incentives may be easier to get: The U.S. Treasury Department has proposed allowing EV buyers to get the tax credit as a point-of-sale discount at dealerships, potentially making it easier to receive the credit next year.
• Low- and middle-income EV buyers may want to wait: Next year, people with lower tax liabilities could receive the full credit amount, compared to an adjusted amount this year. The change could make an EV more affordable for more buyers in 2024.
• Not all EVs qualify for the credit: There are certain manufacturing restrictions placed on EVs in order to qualify for the credit. You can view a complete list of qualifying vehicles in The Ascent's EV tax credit guide.

With the current incentives, now could be an excellent time to buy an EV, whether you do it for the environment, are looking to save money on gas, or just think they're cool (a perfectly respectable choice, I might add).