Can you save money and the planet by owning a Tesla or another electric car?

  • Electric vehicles have a small but growing share of the auto market.
  • In 2018, Tesla dominated electric vehicle sales, with 79%, mostly due to the debut of the Model 3.
  • As 20% of consumers consider going electric for their next vehicle purchase, there are some key tax and other financial considerations to keep in mind.
A Tesla Model 3 at the Paris International Motor, October 2, 2018.
Uli Deck | picture alliance | Getty Images
A Tesla Model 3 at the Paris International Motor, October 2, 2018.

You've probably heard of the Nissan Leaf, Chevrolet Bolt and Tesla Model 3.

And most car companies, if they are not selling an electric vehicle, are working on bringing one to market.

But consumers in the market for new cars have a right to ask "are we there yet?" when it comes to whether it makes sense to own an electric vehicle — both for financial and environmental reasons.

Electric vehicles nearly doubled their market share from 2017 to 2018, according to car research company Edmunds. Still, they represent a small portion of the market.

Electric vehicles — including plug-in hybrid cars — accounted for 2% of vehicle sales last year, up from 1.1% in 2017.

Much of that jump can be attributed to Tesla's cars, which represented 79% of pure electric vehicle sales in 2018, according to Edmunds. The Model 3 was in the lead, with 59% of electric vehicle sales.

While the current market share may seem low, that could be poised to change. Travel organization AAA has found that 20% of individuals indicated this year that they plan to consider an electric vehicle when purchasing their next car. That is up from 15% last year.

"We do believe the future is electric," Greg Brannon, director of automotive engineering and industry relations at AAA, said.

How quickly that transformation happens will depend on factors including gas prices, which often drive alternative vehicle sales, as well the choices available to consumers, Brannon said.

For consumers considering an electric vehicle now, they need to weigh the advantages — and growing pains — that come with acquiring these emerging products.

Tax credits

Consumers who buy an electric vehicle are currently eligible for up to $7,500 in tax credits.

But those credits have started to phase out for some brands. Once automakers have sold more than 200,000 units, their tax credits are reduced.

For Tesla, for example, the tax credit was cut in half on Jan. 1, and is scheduled to be cut in half again on July 1.

But a congressional bill proposed last week aims to put a halt to those cuts. The bipartisan legislation — from Rep. Dan Kildee, D-Mich., and Sens. Debbie Stabenow, D-Mich., Lamar Alexander, R-Tenn., Gary Peters, D-Mich., and Susan Collins, R-Maine — would extend the tax credits to an additional 400,000 electric vehicles per manufacturer.

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Reduced tax credits have been a "huge deterrent" for purchasing these vehicles, said Dan Ives, managing director at Wedbush.

"If this legislation came through, it would be a huge shot in the arm for Tesla," Ives said.

The only way to reach widespread adoption — 70% of all automobiles by 2023 or 2024 — is to have these kinds of subsidies in place, Ives said.

Charging costs

Prospective electric vehicle owners may assume that once they cut their ties to gasoline, they are free from the costs and guilt associated with it. But that is not entirely the case, according to experts.

A big issue with owning an electric vehicle is charging. As models have advanced, the miles of range — or how far you can drive before you recharge it — has extended. Now, consumers can expect new models to last for 200 miles or more, according to Eric Ibara, director of residual values at Kelley Blue Book.

Operating costs by vehicle

Operating costs
Small sedan
Medium sedan
Large sedan
Hybrid vehicle
Electric vehicle
Average
Fuel 8.01 cents 9.18 cents 12.19 cents 5.70 cents 3.68 cents 11.05 cents
Maintenance, repair and tires 7.25 cents 8.58 cents 8.80 cents 7.49 cents 7.60 cents 8.21 cents
Cost per mile 15.26 cents 17.76 cents 20.99 cents 13.19 cents 11.28 cents 19.26 cents
Source: AAA

But depending on the model you drive, your transportability could be limited.

"A nightmare scenario is you're stuck in traffic on the freeway and your battery dies and you need to call a tow truck," Ibara said.

Tesla is addressing that issue by putting charging stations across the country. But those stations are only compatible with its cars.

Companies such as Electrify America and ChargePoint are also establishing charging stations that work with other car brands. But using these services will cost you, experts warn.

"It's gotten very expensive to publicly charge an electric vehicle," said Sam Jaffe, managing director at Cairn ERA. "Tesla used to give it away for free; they don't with the Model 3. And with other networks, you're paying a lot."

Fully charging your battery — depending on your model — could take anywhere from 40 minutes to eight hours.

Ownership costs by vehicle

Ownership costs
Small sedan
Medium sedan
Large sedan
Hybrid vehicle
Electric vehicle
Average
Full-coverage insurance $1,315 $1,232 $1,209 $1,200 $1,215 $1,189
License, registration, taxes $466 $690 $783 $617 ($677) $738
Depreciation (15,000 miles annually) $2,268 $3,580 $3,893 $3,068 $5,471 $3,289
Finance charge $439 $700 $770 $621 $683 $744
Cost per year $4,488 $6,202 $6,655 $5,506 $6,692 $5,960
Cost per day $12.30 $16.99 $18.23 $15.08 $18.33 $16.33
Source: AAA

Meanwhile, many people are turning to electric vehicles as a more environmentally friendly option. But in some respects, electric cars can also be bad for the environment, experts say.

"There's no question that electric vehicles are not environmentally neutral," said Jack Gillis, executive director of the Consumer Federation of America and author of "The Car Book."

While less emissions are produced by the cars themselves while driving on the streets, carbon dioxide is still being emitted by power plants to charge the electric cars, Gillis said.

Still, electric vehicles pollute about half as much as traditional cars, including those external power sources, according to Gillis. That makes them "significantly better" than gas-powered vehicles for the environment, he said.

Resale value

One catch that comes with buying an electric vehicle is that it can be difficult to sell.

That is particularly because the tax credits are only available to the first owners.

And because the technology is evolving quickly, electric vehicle owners may be eager to upgrade.

A first-generation Nissan Leaf, which was introduced in 2010, had a range of about 85 miles, according to Ron Montoya, senior consumer advice editor at Edmunds, while today's model has about two times as much. Those older models are available on the used car market, he said.

"People always want the most range they can get, so you're going to want to lean towards a newer purchase," Montoya said.

Vehicle type Annual cost (Based on 15,000 miles driven annually)
Small sedan $6,777
Hybrid $7,485
Small SUV $7,869
Electric vehicle $8,384
Medium sedan $8,866
Minivan $9,677
Medium SUV $9,697
Large sedan $9,804
Pickup truck $10,215
Average $8,849
Source: AAA

Another alternative is leasing, which may be attractive to consumers who are not sure if they want to commit to switching the type of car they drive, Ibara said.

"By doing the lease, they may feel, 'Well, in three years, if I don't like it, I'll go back to a gas engine vehicle,'" Ibara said. "[It] mentally makes it a little more palatable."

Some consumers, however, are willing to wait.

That goes for Brian Wohlgemuth of Indiana, who has test-driven a Tesla and liked it, but found it impractical for his family, which includes nine grandkids.

A Model 3 would cost him twice as much as a newer SUV, he said, and a Tesla Model X would cost more than his house payment. And other electric vehicle brands do not compare.

"Tesla's features are a decade ahead of all the other automotive manufacturers," Wohlgemuth said.

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