Which car costs less in the long run: Gas, Hybrid, or EV?
With the purchasing power of the dollar eroding right before our eyes, it’s important to make financially responsible decisions. And since a vehicle is the second largest investment that most people will make, it makes sense to start there. But is an ultra-thrifty hybrid / EV really worth it in the long run? Let’s find out…
Electric Vehicle – Initial Price & ROI
In the last several years, the price premium of a hybrid has dropped considerably. This is mostly due to a reduced manufacturing cost as hybrid components become more readily available and some and government subsidies. Electric Vehicles, or EVs, have yet to benefit from such a price reduction, as EV technology and manufacturing are still in their infancy.
The current average hybrid premium is between $2,500 and $4,000 over the price of a comparably equipped gas-powered car. The price gap for an EV is considerably more, and can reach $20,000+ in some cases (or even more for luxury EVs like the 2013 Tesla Model S). Granted, the fuel costs for an EV/hybrid are much less than they would be for a conventional ‘gasser’. But you’re going to need every penny of that savings, if you’re going to recover your initial investment.
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The math works like this; Figure out the fuel cost of your current vehicle by dividing your yearly mileage, by your average fuel economy. The answer is the number of gas-gallons that you buy in a year. Now multiply that number by the current price of gas, and you’ll arrive at the yearly fuel cost of your current vehicle.
Example: 2006 Toyota Camry 4-cyl, driven 12,000mi, 25 average mpg, $3.50 gal = $1,680 yr
Now make the same calculations for the hybrid…
Example: 2012 Toyota Camry Hybrid, driven 12,000mi, 41 average mpg, $3.50 gal = $1,024 yr
Next, figure out the price difference between the hybrid that you want, and the closest gas-powered equivalent.
Example: 2012 Toyota Camry Hybrid LE = MSRP $25,990 –
2012 Toyota Camry LE = MSRP $22,600 – $3,390 Hybrid Premium
Now divide the price difference, by your annual fuel savings, to determine the number of years that it will take to recover your initial hybrid investment.
For our example; It would take 5.16 years to recover our initial investment @ $3.50 gal. While that is acceptable, hybrid premiums vary from car to car. So you’re going to need to spend some quality time with your calculator, if you want to find the most economically feasible hybrid.
Now let’s look at an EV. Start by taking your average mileage, and dividing it by the realistic range of the electric vehicle that you want. The answer will be the number of times that you have to recharge the car. Next, multiply the answer by the number of kilowatt hours (kWh) that it takes to charge the EV. Finally, multiply that number by the price of a kWh from your local power company (remember, off-peak hours will be cheaper), and you’ll arrive at the yearly cost to fuel your EV.
Example: 2012 Nissan Leaf – @ 70 mi realistic range / $0.10 kWh = $411 per year.
If we use the fuel cost for the 06’ Camry above, you’ll save $1,269 per year on gas. But when we divide the $21,047 price difference between the Leaf, and the comparably sized/equipped 2012 Nissan Versa Hatchback ($14,153), things get a little scary.
In order to recover your initial EV investment, you’ll have to drive that Leaf for 16.5…years! The batteries are only warrantied for 8 years / 80,000 miles, and they’ll cost $2-3k to replace out-of-warranty. So from a financial standpoint, the EV doesn’t make ‘cents’.
Electric Vehicle – Maintenance & Repairs
For most gasoline cars, the most expensive repair that you’re likely to face will be a $2,000 transmission. You’ll also see a $300 sensor here, and a $600 repair there. But that’s about it. A hybrid/EV repair bill on the other hand, is likely to read like your kid’s college expenses. $4,000 for a transmission, $3,000 for a battery pack (expect 50-100k miles of service from hybrid/EV batteries), $450 for an inverter pump, $300 for tattoo removal, and the list goes on.
Hybrids and EVs become more costly to operate as the miles rack up. Sort of like an old Porsche, but not as much fun. So do the math wisely, and you’ll discover whether or not a hybrid / EV makes financial sense for you.