Buying a new electric vehicle could be cheaper than continuing to drive your old paid off gas guzzler
By: Hans Lidner
Tags: Lifestyle, Gasoline Car, Tesla, Electric Car, Green Energy

Lower cost EV options today:

Everyone knows Tesla, and can see their fancy cars every day on our streets. And they are incredible and a joy to drive! I know first hand. I was one of the early buyers of the Model S here in Canada back in 2013. I loved it, and it was truly an experience for me and my kids. They felt it was like a spaceship. Sadly, I had to sell it two years later to make room for a down payment on a house. I loved every minute of it though, and I knew then that EV’s were going to revolutionize transportation and the auto industry world.

Unfortunately, Tesla’s are pricey (to put it mildly!). Almost all their cars have big power, with none clocking 0–60 mph in more than 5.6 seconds (the latest Model S version can do it in under 2 seconds!!). All models also have what I consider long range batteries (none less than 250 mile range, or 420 km). That extra power and range costs money, and it drives their prices up. Hence, not everyone can afford a Tesla.

Here’s the upside: there are more and more EV options coming to market. And if you are a typical driver, you can find an alternate EV that should be suited to both your driving needs and budget. If your daily commute clocks in at less than 70 minutes one way, and you do not have regular weekend cottage trips over 2.5 hours away, then these other options should meet your requirements. Meaning you can bypass the Tesla and avoid paying their heavy premium for power and range that isn’t needed.

TESLA RETAIL PRICES ARE LISTED ONLINE AND ARE NON-NEGOTIABLE, AS ARE THEIR TRADE-IN OFFERS. UNLIKE THE CAR BRANDS BELOW, WHERE LISTED PRICES ARE MERELY A NEGOTIATION STARTING POINT.

Here are some fully electric vehicles you can acquire right now in North America, as of October 2020. Also included are the base prices and stated range for a single battery charge:

VW e-Golf ($38,000 Cdn / $28,000 US) (Range 232 km/ 144 m)

Hyundai Ioniq ($41,000 Cdn / $31,000 US) (Range: 311 km / 193 m)

Hyundai Kona ($45,000Cdn / $34,000 US) (Range: 470 km/ 292 m)

Kia Soul ($42,000 Cdn / $31,000 US) (Range: 391km / 243 m)

Kia Niro ($45,000 Cdn / $34,000 US) (Range: 289 km / 180 m)

Nissan Leaf ($45,000 Cdn / $34,000 US) (Range: 252km / 157 m)

BMW i3 ($45,000 Cdn / $34,000 US) (Range 246km / 153 m)

Chevy Bolt ($45,000 Cdn / $34,000 US) (Range: 383km / 238 m)

Note: All photos from vehicle manufacturer press kit

There are a couple others coming soon (VW & Honda), but this should give you a good idea of the selection you currently have in North America.

Total Cost of Ownership (TCO) Factors

For this exercise we will assume a 5 Year horizon. Here are the factors that go into owning and operating a personal vehicle, and I will break down how the numbers worked out in our specific transaction for each category:

Purchase price

Rebates

Insurance

Fuel

Maintenance + Repairs

Depreciation + Residual Value after 5 years

1. Purchase Price

Tesla prices are listed online and are set in stone, as are their trade-in offers for your old ICE car. This streamlines their business model, and allows them to conduct all retail transactions online with no need to involve sales people. This is good for Tesla, but not so good for you if you are savvy buyer. Their sales people are essentially just there to faciliate the delivery of your vehicle and answer any questions you might have along the way.

Here is the great thing about these non-Tesla EV vendors: They are still using their 100 year old sales formula. Each transaction is negotiated individually between you and a live salesperson. The MSRP is in fact just that, a ‘suggested’ price. This is where you can use it to your advantage. I have purposely withheld the specific make and model we purchased, as I do not want this to come across as a specific brand advertisement.

With any car vendors not named Tesla, there are always sales and promotions. If you time it right, the sales person will sweeten the deal further. Usually towards the end of a month when they want to make their monthly quota, or during late fall when the current year models need to be cleared off their lot to make room for the next year models coming in. (As in right around now during the writing of this article!)

(Note: All figures from here on will be quoted in Canadian $CAD)

In our case, we picked an EV with the full sticker price, plus delivery and other fees for a total of $43,000. The dealership was running a promo which chopped another $1,500 off the price. Plus the Sales Person took off another $1,500 off and threw in $500 worth of extra accessories.

She was capped out on discounts by then. But I wasn’t satisfied. I knew the 2021 models were just around the corner and they still had 4 of these particular electric 2020’s to sell.

So that brings me to the next step...your trade in. This is where the salesperson has added flexibility. She initially offered us $5500. But I went prepared with 3 other competing quotes from other dealerships. One had the trade in at $5200 for the old Nissan. But the other had it at $6500! And Tesla had it at a paltry $3900, which I obviously kept to myself. Feeling the pressure, and seeing on paper what the competitor was offering, she jumped from $5500 to $6800 to eclipse that other offer and earn my business. I was suprised we got anything over $5000. This was the result of letting two sales people bid each other up. With trade-ins you can do this and in my case it worked splendid!

In summary we paid $43,000 — $3,000 promo — $6800 trade in = $33,200. Can’t forget the tax man! At 13% here in Canada, that brings the total cost to about $37,500. There were also very low interest finance options available, for those who can’t pay it all upfront.

Total Purchase Price summary:

NEW EV $37,500

OLD Gas Guzzler (GG) $0

2. Rebates

In most countries where EV’s are sold, there are government incentives to subsidize the transition towards lower carbon emmisions. They vary from state to state and country to country. They usually also diminish as the cost of the vehicle rises. For our case, there was only a federal rebate of $5,000, and none at the state/province level. And this only applied to vehicles under a $53,000 MSRP threshold. Note these are applied after taxes.

4 years ago you could get up to $14,400 in rebates for a single vehicle here in Ontario. Places like California, Connecticut, Colorado, as well as British Columbia and Quebec on this side of the border, still offer generous incentives beyond the federal subsidies.

No one can say how much longer these governments rebates will last, but right now they are very lucrative and drop the TCO of EV’s.

So in my case the rebate dropped the total new EV cost from $37,500 down to $32,500.

3. Insurance

When we shopped around for rates, it was pretty much the same between the two. In fact, if there were slight differences, it was in favour of the New EV. This was due to advanced safety features like blind spot warning, rear cross traffic alert, rear view camera, collision warning, and adaptive cruise control. Our model even had an autopilot built in that could keep you centered in your lane on the highway.

But for the sake of comparison it was close enough that we can consider it a wash and ignore insurance.

4. Fuel

This will vary greatly between how far people drive in a given year. We live relatively close to our jobs, and do not have regular weekend cottage trips or ski outings in the winter. As such our annual mileage is on the lower side. The more you drive and spend on gas, the more incentive towards the EV.

In our case we averaged about $200 a month for gas in the old Nissan. About $2,400 for the year.

Now the electricity required to fuel the EV takes some educated guessing. One broad measure is to assume about 1/4 of the total gasoline cost for the equivalent electricity needed. That would bring the total annual cost to $600 to charge the EV. But hold on….

With the proliferation of charging stations across the country, and many of them completely free, there are ample opportunities to pick up gratuitous charge-ups along the way. For instance the parking lot at my gym has free level 2 chargers. Everytime I go for a workout, which is 2–3 times a week, I get a free 45–60km boost. That alone covers a big chunk of our weekly charging needs.

Many shopping malls have free chargers now. Most IKEAs do, too. And if they are not free the cost is nominal, like $1.00 to $2.50 per hour of charging. Many employers are also beginning to offer charge stations at work. It helps with their green initiatives and progressive goals. And many car dealerships now have free public charging stations. It accompishes two things for them: It charges their growing inventory of Electric vehicles on their lots; and it’s a marketing tool to bring bodies onto their premises.

The point is, a large amount of our charging needs will come from free public stations. We have had the car two months now and used only $30 worth of electricity from our home grid. At this rate about 80% of our charging needs will be from free public stations. We are lucky I realize.

But maybe you do not have the free charging options like I do. So for the sake of this comparison I will assume paying 2/3 of the $600 annual fuel charge at home or at pay stations. So $400 annually.

Total 5 Year Fuel Cost Summary:

NEW EV $2,000

OLD GG $12,000

5. Maintenance + Repairs

These figures of course can vary over the course of 5 years. You might be lucky and avoid any major repairs. Or in our case, in the span of 2 years we needed a brake job, transmission repair, new spark plugs and new tires. We fixed two of them, and I guess the dealership that took our car will discover they are on the hook for the sparkplugs and transmission. But don’t feel bad, at least they can fix these things on the cheap in their own shop, unlike you and me.

The New EV comes with full warranty and all service included for 3 years. Overall though, the ongoing service needs for an EV is significantly lower than an ICE car. No oil changes, no friction-based engine components, no belts, no transmission, and no internal moving parts. On top of that the EV can improve via software updates (Yes, just like Tesla our EV can update its software to improve performance and add new features. It just doesn’t do it over the air, you need to bring it to dealership for a quick update).

Also note that the wear and tear on brakes is far less with EV’s due to regenerative braking. Instead of wasting all the momentum that was built up in the moving speed of the car, it uses reversing energy on the battery to slow it down and convert that back into extra charge for the battery. Science in motion, folks!! This avoids much use of brake pads and friction to stop the car, as opposed to an ICE.

So first 3 years are covered in new car warranty, and years 4–5 I assume only about $500 total. Other than air filters, I’m not sure what else would be needed. The battery should be good for at least 8 years.

The cost of the tires is a wash as the old car would also require a new set in that timespan.

For our old Nissan, we had 3–4 oil changes a year at roughly $75 each, plus occasional repairs as needed. Repairs, oil changes, and maintenance over the last 3 years averaged $1200 per annum. And its components are only going to get older moving forward.

Total 5 Year Maintenance Summary:

NEW EV: $500

OLD GG: $6,000

6. Depreciation + Residual Value

What will the car be worth in 5 years? And it doesnt matter what you want to do with it after. Keep driving it? Sell it? Trade towards another vehicle? It does not affect the 5 Year TCO.

This category requires some assumptions and statistical data to derive accurate figures. The depreciation of an ICE car is easy. You can lookup online the wholesale values for any ICE car, and extrapolate what trade-in value it could fetch in 5 years. Edmunds and Kelly Bluebook are good sources. Or even simpler look at retail asking prices on the Autotrader websites. Assess its residual value by looking at the going rate of similar models, in our case, 2008/2009 models. Keep in mind these are asking prices, and likely a bit higher than what you would actually get on a trade in or private sale.

In our case we came up with $3,000 for the old car in 2025. And that’s generous...especially when you consider ICE cars will become less popular with time as the industry adjusts more and more towards EV’s.

To asses the future value of a used EV, it gets a bit trickier because there is only limited data.

There is plenty of information for 5+ year Tesla Model S’s and Model X’s. And there are 3 year old Model 3’s to compare. But Model S and X are an entirely different category from the cars we are discussing here. The Model 3 is closer, but they have barely depreciated in those 3 years. Many are still commanding premiums over 85–90% of their new cost back in 2018! I would love this to be the case, but I doubt those EV’s listed above will share those lofty resale values. The Nissan Leaf has been around longer, but they have evolved much since 4 years ago and current models are hardly comparable. I guess one could look at the Chevy Bolt for comparison, even though they haven’t been too popular. And even with the Bolt, if you take the true “purchase price” into account, net of all the rebates, dealership promotions etc., and compare to what those 2017/2018 models are still getting today, they have performed very well for resale value.

EV’s do not depreciate as much as ICE cars do. They last longer, have less wear, and far lower operating costs.

I calculated that in 5 years our EV would still fetch about about 55% of its “true” retail price net of promotions ($39,000). This comes to $22,000. Of course as batteries evolve and get cheaper they could help drive down the secondary EV resale prices as well. But that will hammer ICE resales even harder as they become more and more obsolete.

Total 5 Year Residual Summary:

NEW EV: $22,000

OLD GG: $3,000

FINAL TALLY

As per the analysis, here are the 5 year results:

NEW EV

(Purchase $32,500 + Electricity $2,000 + R&M $500) = $35,000

Minus (Residual Value after 5 years) $22,000

TCO 5 YEARS = $13,000

— — — — — — — — —

OLD GG

(Purchase $0 + Fuel $12,000 + R&M $6000) = $18,000

Minus (Residual Value) $3,000

TCO 5 YEARS = $15,000

— — — — — — — — —

In a nutshell, as long as my assumptions are relatively accurate, we will save $2,000 over 5 years to make the switch to the new car. Strange, but true!

But even if it the overall cost was level, or if it came out to an extra grand or three, wouldnt it still make absolute sense to make the switch? Considering all the extra benefits, think about it.

We switched from an old car worth $6,000 to a new car priced at $41,000, for what amounts to a nearly break even cost. Thats WHACK!

Parting Thoughts

The benefit of the reduced cost of the EV comes with time as the fuel and maintenance savings start to outweigh the initial increased monthly new car payments versus the gas vehicle. Plus the higher asset value at the 5 year point.

But this is where it gets even better! If you are planning on driving the new EV beyond the 5 years, after it’s paid off, there will be no more monthly car payments to make. So after year 5, the gap widens further and further. If we did a 6, 7, or 8 year TCO comparison it would favor the EV more and more.

This is how the new EV math is distorting traditional car cost comparisons. There are other factors which could come into play which would pull either of these numbers in different directions. For instance, depending on what interest rate you pay on financing (ours was only 0.5%), that should be factored in as well. Also, you could calculate the opportunity cost of paying all those extra monthly dollars ( in our case about $135 ) and put it towards an investment instead, but those returns are not guaranteed.

And how do you quantify all those added safety features and comforts? All the time saved by never having to go fill up at a gas station again; always leaving in the morning with a full tank; the blind spot warning that may have saved you from an accident; the autopilot and lane keep assist that may have prevented you or loved one from drifting; the beautiful silence of an electric motor allowing you nicer ambiance to converse with other passengers.

This is my wife’s first experience with an electric car. Within the first 3 days, she was hooked and vowed to never go back to ICE. She absolutely loves her new car, and has zero regrets. In fact some of our friends are following our lead, and are planning their transition to a lower carbon footprint plus enjoying some extra coin in their pockets.

Thanks for staying with me all the way to the end. This is my first story publication here, and I’d love to hear your thoughts.