Is Now the Right Time to Invest in an EV?

As it came time for me to renew my vehicle registration, I was required by the state of Colorado to do my first-ever emissions test—which came as a shock to me, as my vehicle is a registered plug-in hybrid EV (PHEV), and it never occurred to me that I would need an emissions test. The check engine light on my 9-year-old PHEV came on shortly before I went to a testing center, prompting my vehicle to fail and requiring a trip to a local mechanic. Unfortunately, the estimate was about twice the price I was willing to pay to fix my PHEV, and so it became time for me to buy a new car. The first question I asked myself was, “Is now the right time to buy another EV?”

This blog aims to shed light on that question for US consumers by exploring considerations such as EV prices and incentives, charging infrastructure, state mandates for zero emissions vehicles (ZEVs), and more. To learn more about light duty EVs in the US and Canada, check out the Guidehouse Insights report Market Data: EV Geographic Forecast – North America.

Prices and Incentives for 2023

It’s no secret that EVs tend to be more expensive—the first contemporary mass-produced EV, GM’s EV1, was priced at $33,995 in 1996 (which translates to more than $65,000 today)—but prices have been coming down with higher adoption rates, improved and expanded infrastructure, and manufacturer competition. Among 2023 models, there are plenty of battery EVs (BEVs) priced under $40,000 in the US—which is reasonable considering the average new car price in January 2023 was $49,500 and the average used car price was $33,582. But since the average American spends about 75% of their annual earnings on living expenses, budgeting for a $40,000 car isn’t always realistic. Although some BEVs are priced under $30,000, only six new models in this price range are on the market for 2023 so far, which is an extremely limited number considering the several dozen non-EV options selling for less.

However, MSRP isn’t necessarily representative of the price of an EV today. To date, six states and the District of Columbia offer some form of EV incentive, with an additional three incentives available at the federal level: the EV and Fuel Cell EV Tax Credit, with a maximum of $7,500 for a new vehicle; the Pre-Owned EV and Fuel Cell EV Tax Credit, with a maximum of $4,000 for a used vehicle; and the Alternative Fuel Infrastructure Tax Credit, which is aimed at refueling and charging equipment, not vehicles. Colorado offers the best state EV tax credit, which knocks $2,000 off the price of a light duty EV meeting the battery size requirements, for a maximum tax credit of $9,500 when combined with federal incentives. This drops the price of a new EV significantly and could make some EV models more competitive than similar gas or diesel models. It is also worth mentioning that there are currently 144 EV rebate programs across the country that could further decrease the final price of a qualified EV, which are searchable by state on the U.S. Department of Energy’s Alternative Fuels Data Center website.

Infrastructure Improvements and Expansions

With sensible EV prices, the most common halting point when considering switching to an all-electric vehicle isn’t purchase cost but range anxiety—the fear of getting stranded with an empty battery and nowhere to recharge it. While this is a valid concern, especially in states with lower population density and longer distances between cities, such as Montana or South Dakota, significantly more public stations exist now than just a few years ago. In fact, since the beginning of 2021, the number of public charging ports in the US has increased by 40% to more than 130,000 public chargers. With faster charge times and heavy focus on adequate coverage across fuel corridors, easy access to EV charging continues to expand, diminishing range anxiety.

At-home charging is another benefit of going electric. According to Kelley Blue Book, the average American drives about 12,700 miles annually, or 1,058 miles monthly, which means an EV would consume around 353 kWh monthly, at a cost of $55 per month for at-home charging (based on the April 2023 average US household energy cost of 15.47 cents per kWh). For the same mileage, with an average fuel economy of 25.4 mpg—meaning approximately 42 gallons per month—and a national average gasoline price of $3.60 per gallon for April 2023, fueling a gas vehicle would be around $150 per month, nearly triple the cost of at-home EV charging. In addition, some EV charging stations are still free to use, and the average cost of charging at a commercial port ranges from $10 and $30 for a full charge, versus around $54 to fill up a 15-gallon tank with gas. Adjusting for range—around 413 miles for a gas vehicle versus 250 for an EV—this translates to $33 in gas costs for the EV range, which is still more than EV charging averages. Certainly, if a longer range is more important, an EV might not cut it at a reasonable price, but for shorter-range trips, EVs tend to be easier on the wallet.

Additional Cost Considerations

In addition to vehicle price, tax credits and rebates, station availability, and refueling prices, there are a few other factors to consider when deciding whether to go fully electric. The first is vehicle lifespan. While there may always be someone rolling down the street in their 1908 Model T complete with flame decals and no engine hood, most cars won’t be on the road for 115 years. Thanks to battery improvements, EVs now have a 15-to-20-year lifespan, which is longer than the average vehicle lifespan of 12 years. However, an issue with the battery can come out to a hefty mechanic bill, and there is no guarantee the battery will last the 100,000 to 200,000 miles that it’s projected to.

Second, some EV limitations still haven’t been fully solved at a decent price. In addition to limited range, this can include power expenditure going up at higher elevation or higher speeds, and cold weather putting some EVs into “turtle mode” (when the battery isn’t warm enough to start the car). And third, it’s worth considering the cost to insure and register an EV. EVs are typically more expensive to insure due to repair costs and starting MSRPs—though that additional cost is likely offset by money saved on gas. Some states may also have an additional base fee to register an EV, which could include annual fees running as high as a couple hundred bucks.

State ZEV Mandates and Emissions Testing

A final consideration is state mandates for eliminating fossil-fuel-powered vehicles. California has the most aggressive mandate, requiring 100% of new light and medium duty vehicles sold in the state to be ZEVs by 2035. To date, 13 states have embraced ZEV programs to varying degrees, which may trigger changes to state incentive programs as well. As more state governments team up with manufacturers to make ZEV programs a reality, the cost to own and maintain an EV is expected to become more competitive in many states.

In addition to ZEV mandates, 34 states require emissions testing to register vehicles. Driving all-electric (rather than hybrid) means that there will be no emissions testing requirement, so no more failed tests prompting trips to the mechanic.

So for now, does an EV make sense? Depending on where you live, an EV could be a cost-effective investment that ultimately saves you money while improving air quality and helping us all make the transition to a more sustainable future. As my car salesman would tell you, “It’s all about what you want in a vehicle,” so if an EV doesn’t cut it just yet, by the time your new car is on its last legs, it probably will.