As electric vehicles become more prevalent worldwide, their appeal continues to grow. Sales saw another increase in 2024, and with a range of new models set to launch in 2025, this momentum is unlikely to slow.
EVs offer several advantages, such as tax incentives, lower fuel costs, and a smaller environmental footprint, which also carries social appeal. However, affordability remains a concern, despite the introduction of more budget-friendly options in recent years.
With EV ownership becoming more attractive, potential buyers are placing greater emphasis on long-term financial considerations.
Unlike traditional gas-powered vehicles, EVs come with their own set of challenges, particularly when it comes to cost. While they can be cheaper to maintain in some respects, unforeseen expenses can still arise.
Buyers investing in an electric car should be aware of potential hidden costs to avoid unexpected financial burdens. Understanding these factors is crucial for making an informed decision about EV ownership.
1. Battery Replacement
The battery is the most expensive part of an electric vehicle, which is understandable given its importance. Unlike internal combustion engines, EVs depend on large battery packs made from rare and costly metals to power the vehicle, sometimes for over 500 miles per charge.
While electric motors are simpler and cheaper to manufacture than traditional engines, the high cost of battery production remains a primary reason why EVs are generally more expensive than gas-powered cars.
Battery replacement costs can be significant, with estimates ranging from $4,000 to $20,000, according to J.D. Power. This means that in some cases, replacing an EV battery could cost as much as a used gasoline car.
Fortunately, most EV manufacturers offer extensive battery warranties to alleviate these concerns. Toyota, for instance, provides an 8-year/150,000-mile warranty on its hybrid, plug-in hybrid, and fully electric models, ensuring that owners won’t have to worry about replacement costs too soon.
While warranties provide protection, the long-term cost of battery replacement is still a consideration for EV owners. Many drivers may not exceed warranty limits before their coverage expires, but those looking to keep their vehicles for an extended period could eventually face a substantial expense.
As electric vehicle technology advances, reducing battery costs and improving longevity will be essential in making EV ownership more affordable in the long run.
2. Registration Fees
Registering a vehicle is a standard requirement in all U.S. states, but EV owners often face higher fees. Lawmakers in 33 states have introduced additional registration charges for electric vehicles, primarily to compensate for lost gas tax revenue. In some states, these fees can be significant, with Texas charging up to $400 for EV registration.
While the extra cost may seem like a drawback, the savings from not purchasing gasoline typically outweigh the added registration fees.
However, EV owners should be aware that they will likely pay at least $30 more annually compared to gas-powered vehicle owners. This is an important factor to consider when calculating the overall cost of EV ownership.
3. Insurance
Insurance is a necessary expense for all vehicle owners, and EVs are no exception. While rates depend on factors like location and usage, the type of vehicle plays a significant role in determining costs. Unfortunately for EV owners, insurance premiums tend to be higher compared to gas-powered cars.
One reason for this is that EVs are generally more expensive to purchase, with few budget-friendly options available. Additionally, the high cost of battery replacement contributes to elevated insurance rates as insurers factor in the expense of repairing or replacing a damaged battery.
Companies like Progressive confirm that EVs often come with steeper premiums, making it difficult for owners to avoid higher insurance costs, even if they chose an EV to save money in the long run.
4. Tires
Tires are often overlooked when budgeting for a vehicle, as replacements are generally affordable and infrequent for most drivers. However, EV owners may face higher tire costs due to the unique demands of electric vehicles.
Unlike traditional cars, EVs tend to wear down tires more quickly, leading to more frequent replacements and added expenses.
This accelerated wear is primarily caused by two factors: instant torque from electric motors and the heavier weight of EVs due to their large battery packs. The powerful acceleration places extra strain on tires, while the added weight increases tread wear.
While advancements in battery technology and the rise of smaller, lighter EVs may help reduce this issue in the future, for now, EV owners should be prepared for higher tire maintenance costs.
5. Depreciation
Depreciation is an unavoidable reality for all vehicles, as they begin to lose value the moment they leave the dealership. Electric vehicles are no exception, and in many cases, they experience even steeper declines in resale value than their gas-powered counterparts.
While EV technology continues to improve, rapid advancements can make older models less desirable, contributing to faster depreciation.
Some EVs see drastic drops in value, with reports from Wired indicating that certain models in the UK lose up to 50% of their value within a single year, based on data from Edmunds and Cap HPI. While depreciation in the U.S. is not as severe, EVs still tend to lose value faster than internal combustion engine (ICE) vehicles.
One factor influencing this trend is the decreasing sticker price of newer EVs, making older models less attractive. Additionally, government incentives lower the effective purchase price of new EVs, making their depreciation appear even more dramatic compared to their listed MSRP.
However, there is a silver lining to EV depreciation. Buyers looking for a used electric vehicle can often find excellent deals on low-mileage models at significantly reduced prices.
This rapid loss in value may be a disadvantage for original owners, but it presents a great opportunity for those in the market for a secondhand EV, allowing them to take advantage of substantial discounts.
Also Read: Top 10 Automakers with the Most Vehicle Recalls in 2024 and the Safety Issues Behind Them
6. Home Charging Setup
One of the biggest benefits of owning an electric vehicle is the savings on fuel costs. Depending on where you live, you could save thousands of dollars per year by charging your EV at home instead of paying for gasoline.
Home charging allows owners to power their vehicles at the same rate as household electricity, making it far more cost-effective. However, most homes do not come with an EV charger pre-installed, meaning owners must invest in additional infrastructure to take full advantage of home charging.
Installing a charging station can be expensive, especially if electrical upgrades are required. A basic Level 1 charger can cost up to $1,500 after labor, while a Level 2 charger—which provides faster charging—can add another $1,000 or more to upgrade the electrical system.
If the charger needs to be installed outdoors, costs can increase even further due to additional wiring and weatherproofing requirements. These expenses can add up quickly and should be factored into the overall cost of EV ownership.
Fortunately, there are incentives available to help offset these costs. Some government programs offer up to $1,000 in tax deductions for charger installation in rural and low-income areas, though these incentives could change with future policies.
Additionally, some automakers, such as Hyundai, provide free home chargers with the purchase of a new EV. While home charging is a major convenience and a long-term cost saver, the upfront investment in charging infrastructure is an important consideration for potential EV buyers.
7. Public Charging
Public charging is a major concern for EV owners, as range anxiety remains a significant issue. Drivers rely on charging stations to avoid running out of power, but the current infrastructure can be both expensive and inconvenient.
While public chargers are becoming more widespread, their accessibility and efficiency still fall short of the convenience offered by gas stations.
One challenge is compatibility, as older EVs may not support Tesla’s North American Charging Standard and require adapters costing up to $250. Level 2 chargers, while more affordable than gasoline, take around an hour to recharge a battery to 80%, which many drivers find frustrating.
JD Power’s 2024 EV experience survey revealed that less than half of EV owners are satisfied with public Level 2 charging, primarily due to the lengthy wait times.
For those seeking faster charging, DC Fast Charging can replenish up to 80% of a battery in under 25 minutes. However, this convenience comes at a cost, with prices reaching nearly 50 cents per kWh—comparable to or even more expensive than gasoline in some areas.
While companies like Mercedes are working on premium charging stations to enhance the experience, public charging remains a drawback of EV ownership, requiring either extra time or additional expense.
8. Subscription Features
EVs are often associated with advanced technology, with brands like Tesla leading the way in integrating high-tech features. To compete, most EV manufacturers have introduced their own futuristic innovations, making high-end technology a key selling point.
Outside of budget-friendly models like the Nissan Leaf, many EV buyers expect their vehicles to come equipped with cutting-edge software and premium features.
However, a growing number of automakers are locking their best features behind paywalls. Tesla famously charges a subscription fee for its Autopilot and Full Self-Driving capabilities, while Mercedes requires EQS owners to pay $1,200 per year for faster acceleration.
BMW faced backlash for attempting to charge a subscription for heated seats but still requires payments for other software-based features like parking assistance. These pricing models have sparked frustration among consumers who feel they are being charged extra for functions that should already be included in their vehicles.
While subscription-based features are becoming more common across the auto industry, they are especially frustrating for EV buyers who already pay a premium for their cars.
The idea of spending upwards of $100,000 on a vehicle only to be charged monthly for essential features feels like an exploitative business practice. Unless consumer pushback forces change, this trend is likely to continue, making it harder for EV owners to access the full potential of their vehicles without additional costs.
9. Repairs
Vehicle repairs are something every owner hopes to avoid, but accidents and damage can happen. When they do, repair costs can add up quickly, and EVs tend to be even more expensive to fix than traditional gas-powered cars.
While insurance may cover some of the expenses, EV owners still face higher out-of-pocket costs when repairs are needed.
A 2023 study from Mitchell found that collision repairs for EVs cost about $950 more on average than those for internal combustion engine (ICE) vehicles. However, when Teslas were excluded from the data, the price difference dropped to $269.
The primary reasons for higher repair costs include the complexity of EV battery systems and the limited number of technicians qualified to work on electric vehicles. For instance, projected repair costs for a Tesla Model Y over five years are around $1,780, while a Toyota RAV4 Hybrid is expected to cost less than half that, at $690.
These higher repair costs also help explain why EV insurance premiums tend to be more expensive. However, as the EV market grows, repair costs are expected to decline.
With more trained technicians entering the workforce and improvements in the EV repair supply chain, fixing an electric vehicle should become more affordable in the future.
10. Sticker Price
Purchasing a new car is always a major financial commitment, with factors like financing rates, credit scores, and available cash playing a role in the total cost.
However, one undeniable reality is that electric vehicles remain significantly more expensive than their internal combustion engine (ICE) counterparts. Despite efforts to make EVs more affordable, the price gap is still substantial.
According to Edmunds, as of May 2024, there is a 42% price difference between the average MSRP of EVs and ICE vehicles. This gap is even wider in certain segments, with compact SUVs showing a massive 58.5% difference, while pickups have the smallest gap at 18%.
Although the $7,500 federal tax credit helps reduce the disparity, it falls short of bridging these large price differences. As a result, buyers of ICE vehicles often have the option to purchase a fully loaded model for the same price as a base-level EV, making the cost disparity a hidden financial factor.
While the high upfront cost of EVs may seem discouraging, it’s important to remember that ICE cars also have hidden expenses, such as fuel and maintenance. Fortunately, more affordable EV options continue to emerge, gradually shifting the balance.
If you’re considering an EV, this information should help you make an informed decision. Best of luck in your car search!
Also Read: 10 Best Budget-Friendly EVs You Can Buy Right Now With Impressive Range and Features
