You have been reading about the benefits of owning an electric car. Like how it can save the Earth by lessening our dependence on petroleum products and oil. And how it is more fuel-efficient than even the latest cars and trucks that are coming into the market. Plus, it allows you to get special incentives and tax credits. The IRS says that you can get a tax credit of as much as $7,500 for qualified electric cars.
What’s more, there are the potential future benefits, such as keeping electricity costs down, or even giving you an emergency generator should you lose power at your house during an emergency. In fact, if you want to future-proof your car, you will want to own an electric car now.
Admittedly, however, one of the problems you would be facing is the fact that electric cars can be very expensive. For one, batteries are very pricey and the cost of replacing batteries in an electric car can run up to thousands of dollars. Then there is also the demand for electric cars. With only a few auto manufacturers launching electric cars that are viable, and more and more people getting interested in them, the law of demand and supply is pushing the prices up.
In fact, according to a 2012 Huffington Post article, the price for the Volt is listed at $40,000. At that price point, electric cars lose their “attractiveness” factor as a more cost effective alternative to a gasoline car. Ben Klayman writes that for the Volt to be competitive, gas prices should sell for $12.50 a gallon in order to make it at par with gasoline powered cars when it comes to fuel costs.
So what does the government do to help electric cars along? Subsidize it. Hence, the current subsidies of up to $7,500. There are even proposals that seek to increase this subsidy amount to a maximum of $10,000.
Tesla chimes in
Tesla wants to give you an idea of how much owning one of its Model S cars is going to cost you by giving you a cost calculator, which is available at http://www.teslamotors.com/true-cost-of-ownership.
For example, the 60 kWh version has a selling price of more than $71,000. At a rate of 3.5%, 10% down payment and a 72-month term, you only pay $986 per month. You can get savings of $11 per month for three years because of government incentives. And if you drive 15,000 miles per year with an average price of gas going at $4.90 over the next three years and electricity costs averaging at 11 cents, you will save $261 per month with a Tesla electric car compared to a sedan with a 20 mpg fuel economy.
A note about government incentives is that it usually gives you a subsidy of $7,500. But it can be higher in some states. For example, California gives you a $10,000 subsidy, which translates to $80 savings per month. Other states and their allotted subsidies and the savings you gain per month are as follows:
- Colorado, $13,500, $178 per month
- Illinois, $11,500, $122 per month
- Georgia, $12,500, $150 per month
- Utah, $8,105, $28 per month
- West Virginia, $15,000, $219 per month
And because Tesla gives you a top resale value guarantee if you finance with them, you can get $36 more savings a month.
All of these savings will bring the monthly costs down to $678 per month.
However, if you factor in the other benefits and the other advantages that electric cars have over gasoline cars, then the savings would be higher. Tesla identifies four additional sources of savings for you:
- Business tax benefit. If you use a Model S for your business, you can save $202 per month from the depreciation costs, operating expense, interest expense and other car-related expenses that you would be able to deduct from your taxable income.
- Tax benefit from sale. If you sell your Model S that you have been using for business after three years, you can have the sale deducted from your taxes, adding another $54 per month of savings.
- Shortened time on the road by using the carpool lane. Some states allow electric cars to drive in carpool lanes, helping you save time when driving even during the rush hour. If you get to save 10 minutes by driving in the carpool lane and you earn $50 per hour – that would equate to savings of around $167 per month.
- No more trips to gas stations for refueling. If you fill up your tank four times in a month and you spend 10 minutes taking the detour to the gas stations and waiting for refueling, then you would add another $33 per month of savings by owning an electric car that does not need the trips to the gas station.
Factor these in and you will only be paying $205 per month to own a 60 kWh Tesla Model S.
Furthermore, in the best case scenario, where you live and work in West Virginia and you use your Tesla car for business, the Model S literally pays for itself.
Even the top of the line 85 kWh Performance Model S, which goes for a little less than $95,000, will only set you back $1,099 per month with the $1,312 per month financing, $7,500 government subsidy, savings over gasoline powered cars and guaranteed resale value. This is without the savings from business tax benefit, shorter commuting time and no unnecessary trips to the gas station. If you factor all of these in, you will only be paying $508 per month for the 85 kWh Performance Tesla Model S.
Of course, these estimates are based on assumptions and your monthly outlay might be a bit higher. For one, the electric car vs. gasoline car savings comparison would depend on the price of premium gas hitting an average of $4.90 over the next three years and given that you drive 15,000 miles a year. And if the price of electricity stays at $0.11 per kilowatt hour for the next three years.
But what if you live in Hawaii where electricity is charged at 37 cents per kilowatt hour? That $261 per month savings will be down to $154 per month. So before you decide, be sure to calculate the costs according to your own driving behavior and the relevant utilities costs in your location.
Too good to be true?
The California New Car Dealers Association, which is a trade association that counts more than 1,100 new car and truck dealers in California, has written the Department of Motor Vehicles (DMV) in California to complain about what they called misleading advertising by Tesla. The CNCDA asserts that Tesla makes people think that its electric cars are much more affordable than they really are.
The CNCDA has compiled a dozen complaints against the pricing calculator provided by Tesla on its site. These complaints can be broadly categorized into two:
- Savings that are based on assumptions and outside credits.
- Savings that are based on metrics that are not easily quantified or achieved.
Among other things, the CNCDA has raised issue about the inclusion of savings you get from not going to the gas station anymore, the federal subsidy, the money you get when you sell the car and the money you save by going on the car pool lane. But most notably, the CNCDA does not like the comparison between electricity and gasoline cars.
Moreover, the CNCDA also contends that Tesla cannot claim that you would be getting a $7,500 subsidy outright. You would need to have a federal tax liability of $7,500 or more in order to get that subsidy. For some, it could be as low as $2,500.
These complaints, however, do not discredit Tesla’s pricing claims. In fact, a quick look at Chevrolet’s information page on the Volt Electric Car at http://www.chevrolet.com/volt-electric-car.html shows a similar pricing strategy. It says there that prices for the Volt can go less than $27,000 with a $7,500 tax credit, translating to something as low as $269 per month.
It comes with the price!
Tesla’s Model S electric cars can be purchased for $71,000 to $95,000. It is still very expensive, but thankfully, there are incentives and savings that you should factor in. At a required 10% down payment, you could easily pay the upfront payment with the money you get from your tax credits of up to $7,500, and if you are lucky enough to live in West Virginia, up to $15,000.
The best thing is that financing with Tesla allows you to have the best resale value in three years and you stand to get more savings if you sell after that time.
So in the end, you might find that owning an electric car is actually cheaper than your gasoline car, even more so if you use your car more often.
If you want to know more about the true cost of owning a Tesla electric car, go over to their online financing calculator and input your own driving data.