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Is it cheaper to own an EV? Ask yourself these 4 questions to find out, auto expert says

"You can't go in with that mindset that you're going to start saving money right off the bat."

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Car company executives think more than half of their sales will be electric vehicles by the year 2030, according to a recent survey by the accounting and consulting firm KPMG, which polled more than 1,100 global automotive executives. That's in line with President Joe Biden's electric vehicle sales goal, which the White House unveiled in August.

Americans are warming up to the idea of owning electric vehicles, too. About 23% would consider buying a new or used EV as their next car, according to a recent YouGov poll for Forbes Wheels of more than 33,000 licensed U.S. drivers. The top reasons for the switch: to protect the environment, and for lower fuel costs.

"I don't want to discourage people from getting electric cars because I still think there's a lot of value to them," says Ronald Montoya, senior consumer advice editor at Edmunds. "But you can't go in with that mindset that you're going to start saving money right off the bat."

Ask yourself these four questions to figure out if buying an EV will save you money, Montoya says.

1. Does this electric vehicle qualify for a tax credit?

The maximum federal income tax credit you can get for purchasing an electric vehicle is $7,500. Some states offer tax incentives, too. But not every electric vehicle purchase entitles the buyer to one.

"The size of the tax credit depends on the size of the battery," Montoya says. "Most electric vehicles should qualify for the full amount, but when it comes to plug-in hybrids, which are the ones that operate on some electricity and some on a gasoline engine, those are where you run into issues of partial credit."

If you're leasing an electric vehicle, you may not be entitled to the tax credit at all, depending on the automaker. "When you lease an electric vehicle, the tax credit goes to the automaker, and if they choose to, they'll fold it into the lease payment, which would reduce the lease payment," he says.

That credit runs out on leases after the automaker has sold 200,000 vehicles, "so in some cases with some well-established companies that have been selling EVs for a long time, like Tesla and Chevrolet, they no longer have those credits to give out," Montoya says.

If you're shopping online for an EV, make sure you're aware of how the price of the car is being calculated. "Oftentimes websites show it as if it's a discount on the vehicle," instead of a tax credit, which will reduce the amount of taxes you owe come filing season, if it qualifies, he says.

2. How much will you save on gas?

Before considering how much you'll save on gas, you have to realize that EVs are usually more expensive cars, Montoya says. "What a lot of people don't realize is you have to take into account the price that you're paying for the vehicle itself. That's where it gets a little bit tricky because it depends on what you're comparing it to," he says.

Montoya took the price of the least expensive electric vehicle you can get right now, which is a Nissan Leaf, and compared it with its fuel equivalent, "or the closest thing you can get within the same brand," which would be a Nissan Sentra.

A gasoline-powered Nissan Sentra's sticker price is roughly $8,000 less than the electric Nissan Leaf. On the website fueleconomy.gov, there's a fuel savings calculator to estimate the amount of money you'd save. "In this scenario, the gas vehicle is going to save you $432 a year," he says.

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You only really see the savings in this scenario if you hold on to the Nissan Leaf for 10 years, at which point you'd be saving $1,100 per month in estimated fuel costs. "But most people aren't going to hold their cars that long," Montoya says.

You may save money on maintenance costs on electric vehicles, since they don't need an oil change, for example. "It is less expensive from a maintenance standpoint as well, but I think the overall higher costs of electric vehicles is what kind of prevents it from being the automatic savings that you're going to start realizing off the top," he says.

3. Are you leasing or buying an electric vehicle?

Aside from a potential tax credit, there's another reason why leasing an electric vehicle may make more sense, Montoya says.

"I would recommend to most people looking for an electric car is to lease it," he says. "Not only do you get a lower monthly payment because you're not financing the entire vehicle, but also, the technology changes so much with electric cars that within three years, you're going to get something that's going to have substantially more miles to drive [without a charge] than what you could find now."

Plus, with the exception of Tesla, most electric cars lose "a ton of value" once they are used, Montoya says. "The reason for that is, most used car shoppers aren't really looking for electric vehicles. ... I've seen cars that we've had in our fleet where close to 50% of its value within a couple of years is lost."

Currently, there's not enough demand for used EVs, "so it's not going to hold its value well," he says. "That's something to consider if you were going to purchase it and then maybe four years you wanted to sell it and were counting on that money as a trade-in. You have to lower your expectation of how much you're going to get back."

4. How will you charge your electric vehicle?

If you ignore the price of the electric vehicle, "then yes, from a year-to-year value, you're going to save money on the electric car because electricity is far less expensive than gasoline, and it's not as volatile, it doesn't go up and down depending on what happens in the world," he says.

Before you buy an EV, make sure your home is equipped to charge one. Montoya suggests hiring an electrician to inspect your house to make sure your home can accommodate the power needed for an EV.

The overall higher costs of electric vehicles is what kind of prevents it from being the automatic savings that you're going to start realizing off the top.
Ronald Montoya
senior consumer advice editor, Edmunds

"You might need to do some modifications to the home, and that can cost roughly $1,000 to $2,000, and in that situation the inspector would cost money, too," he says. "It's going to vary. In some situations, your house might be ready to go and you can just plug it in."

You can use public charging stations to power up. There are about 46,000 EV charging stations in the U.S., according to the Department of Energy. Around 5,600 are fast charging stations that can get an EV battery to 80% charged in under an hour. That compares with the 150,000 gas stations across the U.S., according to the American Petroleum Institute. However, the Biden Administration has invested $15 billion to build a national network of 500,000 charging stations.

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