Hybrid and electric vehicles are growing in popularity, albeit slowly. According to Experian’s Q2 2023 Automotive Consumer Trends report, 7.5% of new vehicle registrations are for electric vehicles and more than 2.7 million electric vehicles are currently on the road.
Hybrid and electric cars often cost more upfront but can bring long-term savings compared with gas vehicles. If you’re considering a switch, it’s important to understand whether an electric or hybrid vehicle can actually save you money and, if so, how much.
Does it cost more to purchase a hybrid or electric car?
The cost of a new vehicle depends not only on the type of vehicle you buy but also on the model you choose. On average, though, here’s how much it would cost to finance each type of vehicle, assuming a 60-month repayment term and an interest rate of 6%:
|Average Monthly Payment
Source: Cox Automotive
Switching to a hybrid car will likely increase your monthly payment, but depending on your down payment and other factors, it may not be by much. If you’re considering going straight to an electric vehicle, you’ll want to make sure your budget has enough room for an even higher payment.
That said, costs can vary widely depending on the make and model. For example, the price for a Tesla Model 3 can range from roughly $39,000 to more than $52,000 based on your desired specifications. In contrast, a Honda CR-V hybrid can range from $33,650 to $39,500, depending on which trim you choose.
It’s also important to note the potential tax breaks you can get with all-electric and plug-in hybrid vehicles. The federal government offers a credit worth up to $7,500, depending on the capacity of the battery in the vehicle and other factors. Some states offer additional incentives that could further drive down the cost of your vehicle purchase.
Gas vs. hybrid vs. electric: how much is the cost of ownership?
As seasoned car owners know, the cost of owning a vehicle goes far beyond the monthly payment to your auto lender. You’ll also need to consider fuel prices, electricity costs, repair and maintenance, insurance and more.
- Electricity vs. fuel: The cost of electricity and fuel can vary depending on where you live. However, an example from the U.S. Department of Energy shows that using average miles driven and costs for electricity and gas, it would cost an estimated $720 each year to drive an electric vehicle, compared with $1,548 for a gas-powered vehicle. Just keep in mind that some areas may not have as many electric vehicle charging stations as others, so access should be a major consideration.
- Repairs and maintenance: With fewer moving parts, electric and plug-in hybrid vehicles tend to require less maintenance. According to AAA, you can expect to pay an average of $949 annually on electric vehicle maintenance, compared with $1,279 for a gas-powered vehicle.
- Insurance: While an electric or hybrid vehicle can save you money in several ways, you can expect to pay more to insure one. According to a study by Self Financial, for instance, you’ll pay $418 more per year to insure an electric vehicle compared with a gas-powered vehicle.
Keep in mind where you live has an impact on how much it’ll cost to own an electric or hybrid model. Gas prices, insurance criteria and other factors that vary by location can all affect how much you have to pay for your new car
Accounting for all the ongoing costs of vehicle ownership is important: “You know, insurance, registration, gas prices or potential charging costs,” says Melinda Zabritski, Experian’s senior director of automotive financial solutions. “If it’s an electric vehicle, do you have to have anything installed at your home for charging?”
Which is better to buy: hybrid or electric car?
The right decision between a hybrid and an electric car will depend on your financial situation and preferences. Here are a few factors to consider.
Electric vehicles tend to be more expensive than hybrid vehicles when comparing similar models, which means a higher monthly payment.
Over time, however, you’ll likely have fewer fuel, maintenance and repair costs. Additionally, only certain plug-in hybrids qualify for tax credits. Review your budget to get an idea of what you can afford.
Electric charging stations are growing in number, and there are apps you can use to find ones close by wherever you are. But they’re still not as plentiful as gas stations, which remain an option with a hybrid vehicle.
What’s more, it can take several hours to fully charge an electric vehicle, which can be an issue if you don’t plan ahead or take a road trip. Consider how you plan to use your vehicle and look into home charging options for added convenience.
Feelings on gas emissions
Many people switch to electric or hybrid vehicles because they care about the environment and want to reduce their contribution to the emissions that fuel-powered vehicles put out.
Of course, going hybrid or electric doesn’t bring your emissions down to zero – even plug-in hybrids still require gasoline, and electricity for charging can be produced from burning coal or gas, among other sources.
However, if your carbon footprint is important to you, an electric vehicle has a slightly better advantage.
The bottom line
Electric and hybrid vehicles can save you money over time, but the financial aspect of owning a car isn’t the only one to consider.
“I would really treat it as any other purchase, where you’re looking at your total costs and the pros and cons before buying,” Zabritski says.
Take your time to think about all the factors that go into owning a vehicle and how it might impact your decision to purchase a certain type of car. Once you’ve made your decision and are ready to purchase your new vehicle, make sure your credit is in the best shape possible before applying for a loan. You can get your free credit score and credit report to find out where you stand and take action to improve your credit so you get the best rates and terms on your new auto loan.