Electric vehicles have been gaining popularity in the U.S. In 2024, full-year EV sales reached 1.3 million, an increase of 7.3% from the upwardly revised total in 2023. If you’re getting ready to buy a car, you may be wondering if you should get in on the action or stick with a tried-and-true gas-powered vehicle.
Cutting out fuel costs is appealing, but are electric vehicles, or EVs, cheaper to operate and maintain overall? Adding up the dollars and cents is not as cut and dry as it sounds. In this article from Andrews Federal Credit Union, we’ll show you how to weigh the price of owning an electric vehicle versus a gas-powered vehicle so you can make an informed decision when you buy your next set of wheels in Maryland, Virginia, Washington, D.C., New Jersey, and beyond.
Create a Vehicle Budget
To compare costs, you’ll want to make a budget for each type of vehicle. Since buying a car is a big investment, you’ll probably want to include an auto loan in your budget no matter which car you decide to buy. Take note that car loan interest rates and terms can vary depending on your credit history, the time of year you purchase the vehicle, and other factors. You’ll also want to account for maintenance, insurance, and other expenses for each type of car. All these items will have an impact on the final ownership costs.
Use our Budget Calculator and Auto Loan Calculator to help add everything up.
Vehicle Purchase Price
Buying an EV typically comes with a heftier price tag than a traditional gas-powered car. However, the gap between gas and EV purchase prices has started to close in recent years. According to Cox Automotive, the parent company of Kelley Blue Book, the average price of an EV was $55,544 in December 2024 vs. gas-powered vehicles at $49,740.
Tax Credits and Incentives on Electric Vehicles
To promote the purchase of EVs, the federal government offers a tax credit of up to $7,500 for new EVs and is now also paying out a $4,000 credit for used EVs. Soon the U.S. Department of the Treasury will allow EV auto dealers to deliver the tax credit directly to the buyer at the time of sale, so you may not even have to wait until tax time to get your rebate.
Many states also offer electric car incentives like rebates for purchasing or leasing an electric vehicle or for purchasing a charging station. For example:
- Maryland residents who purchase a qualified electric vehicle or fuel cell electric vehicle can receive an excise tax credit of up to $3,000. The vehicle’s purchase price cannot exceed $50,000 and cannot be modified from the original manufacturer’s specifications.
- New Jersey provides a sale and use tax exemption for new and leased zero-emission vehicles, including electric and plug-in electric cars.
- Dominion Energy gives Virginia residents an annual $40 payment for enrolling in the Demand Response program. They will also install and maintain Level 2 residential charging stations for a fixed monthly rate.
- In Washington, D.C., a tax credit applies for 50% of the costs of installing a residential charging station. The maximum credit is $1,000. Additional incentives apply to other alternative fuel vehicles, up to $19,000 per vehicle.
Maintenance and Insurance Costs
Since routine engine maintenance and oil changes aren’t needed on an EV, they’re cheaper to own in that respect. However, other repairs can be a different story.
Certain EV parts are much more expensive than parts for a gas-powered vehicle, so when repairs are required, they often cost more. For example, replacing the battery on a gas vehicle is typically around $100-200, while EV batteries start around $5,000 and, depending on the make and model of your car, can reach a staggering $20,000. Another thing to consider is locating an EV repair shop in your area with specially trained technicians. These mechanics can be harder to find depending on where you live and may charge higher fees. So, how reliable the EV you buy proves to be can become a major factor in your ownership costs.
The higher costs to repair and replace an EV are the major contributors to higher insurance rates as well.
You may want to consult AAA’s Your Driving Cost fact sheet to get a better idea of how much you might pay in maintenance per mile to drive different types of vehicles.
The Cost of Fueling Up vs Plugging In
Charging an EV could be more attractive than fueling up a vehicle if you’re looking for more stability in your car expenses. Driving a gas-powered vehicle puts you at the mercy of historically unpredictable fuel prices that rise and fall depending on the economic climate and sometimes cause serious pain at the pump. For example, the national average per gallon went from $2.14 in 2016 to $3.95 in 2022 with lots of other ups and downs over the last 20 years. So, while high fuel costs may not be stressing your budget now, that could change anytime.
On the other side of the coin, when investing in an EV, you’ll likely need to pay to install a charger at your home unless you’re living in an apartment community that has this feature. A standard 120-volt outlet typically offers about 32 miles of range. If you want to be prepared for longer trips, you can get a Level 2, 240-volt outlet that can add 250 miles of range. The average EV charger installation cost is between $800-$2,000, but some states and local utility companies offer incentives to reduce the cost.
Car and Electric Vehicle Financing
How the numbers add up around your unique circumstances will help you see whether a gas-powered car or EV is right for you. When you’re ready to hit the road, Andrews Federal Credit Union is ready to help you get into the right auto loan at competitive interest rates. Contact us online or visit one of our conveniently located branches in Maryland, Virginia, Washington, D.C., New Jersey, and beyond.