Electric vs. gas vehicles: Which is better?

Half of Americans now consider purchasing an electric vehicle or hybrid, according to Kelley Blue Book (KBB). And buying electric — or any alternative fuel vehicle — can be worthwhile for your wallet and the climate. But before setting out to the dealership, it is wise to explore electric vehicle options and understand the difference in cost of ownership.

Types of electric cars

EVs have been exploding in popularity over recent years, especially as the awareness of climate issues continues to evolve. This, combined with fluctuating gas prices and high vehicle repair costs, more drivers are looking to save money by buying electric.

Unlike the typical gas-powered vehicles lining highways and parking lots, EVs have a motor that is powered by a battery. There are three types of electric vehicles.

Hybrid electric vehicles (HEVs)

Powered by both an electric motor and an internal combustion engine, HEVs boast the strength of a traditional gas-powered vehicle with the benefit of improved fuel economy. You do not charge an HEV like some of its EV counterparts. Rather, the battery is charged through the engine.

A wide variety of makes and models of HEVs are available on the market. According to KBB, some highly rated options include the Honda Accord Hybrid, which has an MSRP of $33,990, the Toyota RAV4 Hybrid, which has an MSRP of $33,075 and the Hyundai Elantra Hybrid, which has a lower MSRP of $27,400.

Plug-in hybrid electric vehicles (PHEVs)

A plug-in hybrid is exactly as it sounds, a hybrid vehicle that you plug in to charge. It is powered through a battery pack inside the vehicle that is charged through an external cable. PHEVs also use another fuel, usually gasoline, to power the internal combustion engine (ICE).

This type of vehicle uses the electric charge until it is spent and then taps into the ICE capabilities. Options for PHEVs are a bit slimmer, but KBB’s standout options are the Ford Escape Plug-in Hybrid, which has an MSRP of $39,895, the Hyundai Tucson Plug-in Hybrid, which has an MSRP of $40,775, and the Kia Niro Plug-in Hybrid, which has an MSRP of $34,290.

Fully electric vehicles (EVs)

A fully electric vehicle ups the ante and is powered completely by an electric motor — no ICE or additional fuel source involved. These have battery packs that power the vehicle and are charged in a similar way to a PHEV.

EVs are charged through a specialized outlet. While charging stations can be found locally, it is important to remember the added cost of a charging station if considering a full EV. KBB’s favorite fully EV options include the Hyundai IONIQ 5 at $41,800, the Nissan Leaf at $29,280 and the Ford Mustang Mach-E priced at $43,500.

How much are electric cars

Before diving headfirst into the world of electric and hybrid cars, it is important to understand the price differentiation between gas and electric. While it is true that driving an EV can come with lower overall costs, the upfront price tag can still serve as a roadblock for many.

Despite prices leveling out, buying a new vehicle is expensive no matter what the power source. June 2024 saw high average transaction prices for new vehicles of over $48,644, according to KBB. But the average price for an EV is still higher than a gas-powered option. The KBB estimate for an EV is over $56,000. However, EV prices are currently coming down, with a 2.5 percent decrease between June 2023 and June 2024.

More than that, it is forecasted that the EV market could reach 30 to 42 million light-duty vehicles on the road by 2030, according to the National Renewable Energy Laboratory. This estimation is supported by more vehicles hitting the market. And fortunately, this increase in EV availability serves as a potential equalizer. As more drivers consider buying electric cars, the average cost will go down.

This growth is already clear in the number of new options that are entering the market. In the first quarter of 2024, 2.7 percent of vehicles on the road were electric, down from 9.3 percent in 2023, according to Experian’s report on automotive market trends. Hybrid vehicles, however, were up and made up for 9.3 percent of road-registered vehicles.

Cost to own electric vs. gas cars

While the upfront cost of your next vehicle is important, you must also understand the cost of maintaining and owning the vehicle over the lifetime of ownership. Consider the five-year cost-to-own comparison for two popular sedans, according to KBB.

The first, a 2024 Nissan Leaf, comes in between $29,255 to $37,305 MSRP depending on the model and has comfortable seats, competitive pricing and is pleasant to drive. The second, a 2024 Mazda 3, is a popular gas-powered option with a lower MSRP of $25,335 that offers a premium interior, a smooth ride and a turbocharged engine.

Consider how the following costs accrued over five years of vehicle ownership influence which vehicle you would prefer. Fuel and other costs will vary based on location.

Fuel

On the most basic level, driving a fully electric vehicle will mean no more trips to fill up at the gas station. In a 2024 study, the non-profit Coltura found that EV owners will save, on average, $1,200 in fuel and maintenance. The fuel cost difference between the Nissan and the Mazda is even steeper than that average.

But getting power for your EV is not as simple as choosing regular, midgrade, or premium. EV charging can be divided into three options, each with different costs and benefits.

• Level one charging: This is the most common form of charging and is available through the same outlet you would charge your cellphone with. They are the slowest charging option and provide between two and five miles of charge per hour.
• Level two charging: These chargers, typically installed and found in your garage, use the same power as your washing machine. You can gain 10 to 20 miles of charge in an hour.
• Level three charging: Also known as DC charging, these are available in public settings. They are the quickest option and drivers can receive an 80 percent charge in only 20 minutes.

Just as running your washing machine several times in a row will add to your electric bill, the additional cost incurred from charging at home can add up. This ongoing cost is on top of the one-time average price to install an at-home charger — which can range from about $300 to $50,000, depending on the level of the charger.

But remember that many communities now have access to chargers, meaning you might not need to pay for installation immediately. Check out PlugShare, a free EV station map, to see chargers in your area.

Financing

Although you can finance your vehicle — electric or gas powered — simply by applying online or in person with a few lenders before picking the best loan for your needs, financing a green car can come with some added perks.

Green auto loans serve drivers looking to finance an electric car. These types of loans are typically found through a credit union and tend to have lower interest rates than conventional auto loans.

You may also qualify for EV tax credits, a financial incentive offered in certain states, and a federal credit worth up to $7,500.

Insurance

Insuring your vehicle is a vital part of ownership that protects yourself and your passengers. EV insurance carries the same approach you would take to cover a conventional vehicle option. It will cover collision, bodily injury, liability and comprehensive coverage. And as with any vehicle, your exact price will be based on a variety of factors.

However, insurance for an EV will typically cost more than traditional gas-powered options. One reason is the price of the vehicle parts. For example, a minor accident could result in the need for a battery pack replacement — something that can cost more than $15,000.

Bankrate analyzed 16 vehicle models provided by Quadrant Information Services and found that, on average, premiums will be higher for electric cars. This is demonstrated by the higher insurance costs projected for the Tesla Model 3, one of the most expensive cars to insure on the list.

Pros and cons of electric vehicles

EVs can provide a ride that’s better for the environment and your wallet over the long term, but they’re not without downsides.

Pros

• Less maintenance: Electric cars require fewer trips to the mechanic, which can mean less money spent on costs, such as oil changes and brake system checks.
• Lower cost over the life of the vehicle: Vehicle ownership can be expensive, but EVs may carry a lower lifetime cost.
• Better for the environment: EVs do not release tailpipe air pollutants, making them better for local air quality and overall greenhouse gas emissions.
• Advanced technology available: Many newer electric car models come with advanced control panels and mobile apps to control and monitor the vehicle.

Cons

• Higher purchase cost: On average, buying an EV carries a steeper upfront cost, about $8,000 more, according to KBB’s average June 2024 transaction prices.
• Range anxiety: Charging stations can be few and far between in some areas, leaving some drivers feeling stressed when searching for a place to get power.
• Faster vehicle depreciation: Battery deterioration and vehicle incentives create quick value loss when it comes to electric cars.
• Cost to install a charging station: If you prefer the speed and convenience of a level 2 charger at home, installation can cost over $50,000. Slower charging solutions cost far less, however.

Is an electric car right for you?

Determining if your next set of wheels should be electric should be considered in the same way that you would pick which model or style of a traditional car is right for you — focus on your lifestyle and needs. If your commute works with the available range an EV offers or if you prefer the sleek style and environmental benefits, then an EV may be a great option.

But if jumping into a full EV is too much of a financial commitment, you may want to consider leasing or opt for a hybrid or plug-in if you’re set on buying. Hybrids and PHEVs tend to cost less upfront and still carry some of the money-saving benefits that a fully electric car does.

Consider these main factors when shopping to ensure that an EV is worth investing in.

Vehicle range

If you have a long commute to work and do not have access to chargers along the way or at your destination, consider the vehicle range that your potential new car holds. The average battery range can vary greatly depending on the model. Be sure you do not purchase a car that you cannot easily keep charged for your daily outings.

Access to chargers

Before going to the dealership to shop, check for access to chargers in your area or consider the cost of installation and upkeep of an at-home charger. This means weighing the level one, two and three options with your needs.

Your lifestyle

Not only is it important to consider your lifestyle in terms of form but also in function. EVs tend to operate differently than what you may be used to. Due to its reliance on regenerative braking, for example, you can expect a slower brake but a smoother overall drive.

The bottom line

The true cost of owning an EV can be less expensive than a gas-powered option. Even with steeper vehicle depreciation and potentially higher insurance and financing, the possible lower maintenance and five-year cost to own an EV makes it a promising choice. As a car buyer, it is important to determine which costs matter most to you and whether EV fits the rest of your lifestyle.