Gas vs. Electric Vehicles: Which Costs Less to Own?

While electric vehicles may cost more upfront, they are cheaper to own on a yearly basis due to their reduced fuel, maintenance, repair, tire, licenses, taxes, and registration costs, according to 2023 data from AAA¹.

Overall, the AAA study found that the cheapest car to drive is a small, gas-powered sedan, followed by a hybrid vehicle or subcompact SUV. Meanwhile, the most expensive car to drive is a half-ton pickup and a medium SUV or midsize pickup, vehicles known as gas guzzlers. An electric vehicle fell in the middle — less expensive than a medium, gas-powered sedan, but more expensive than a compact SUV (unless you drive 20,000 miles or more).

Purchase Price

There’s no doubt that electric vehicles currently cost more to purchase than gas-powered cars, with an average price of $56,371 compared to $48,0644, according to June 2024 data from Kelley Blue Book (KBB)². While previously, KBB reported that the price gap between EVs and gas-powered vehicles will be closing, the gap actually increased since Tesla released the Cybertruck, its best-selling vehicle with an average price of $112,696.

But don’t let sticker shock scare you away: overall, EVs may be cheaper to drive when you take into account tax rebates, fuel savings and more.

Fuel

Electric and hybrid vehicles have the lowest fuel costs. Compared to rising gas prices, electricity costs are generally lower.

Maintenance

Electric vehicles are also the least expensive to maintain, with significantly fewer engine and mechanical breakdowns to worry about.

Insurance

However, one area where electric vehicles rack up higher fees is car insurance. Because EVs have higher purchase prices than gas-powered vehicles, they are generally more expensive to repair and, thus, more expensive to insure, the second-highest vehicle to insure after medium sedans. However, the difference between the most and least expensive vehicle types to insure is less than $250 per year, which is a drop in the bucket as far as annual vehicle ownership costs go.

We’ve reviewed the best car insurance companies for electric vehicles.

Depreciation

Another disadvantage of EVs is that they depreciate more than most gas-powered vehicles save for ½ -ton crew cab pickups, which makes sense when you consider their higher prices to begin with. For the least amount of depreciation, buy a small sedan, which loses only $217 of its value with an annual mileage of 10,000.

Tax Credits

Electric vehicles are the only type of vehicle that will save you money on your tax return in the form of federal rebates. EV owners save, on average, $192 per year on their taxes, licenses and registrations.

However, not every EV owner qualifies for this rebate. To be eligible, you must purchase have purchased the following types of vehicles, in or after 2023:

• New plug-in and fuel cell EVs
• Pre-owned plug-in and fuel cell EVs

For a vehicle purchased before 2023, it must be a new plug-in and fuel cell EV.

Here is a list of electric vehicles that qualify for a rebate of up to $7,500, according to the United States Department of Energy: https://www.fueleconomy.gov/feg/taxevb.shtml.

Along with the vehicle qualifications, there are restrictions on the owner and usage of the vehicle that affect rebate eligibility³:

• You must use the vehicle, not resell it.
• You must use the vehicle in the U.S. primarily.
• Your income cannot exceed:
  • Married couples filing jointly: $300,000
  • Heads of households: $225,000
  • All other filers: $150,000⁴

Note that this is not an exhaustive list of qualifications. Check the IRS website to see if you qualify.

Hybrid vehicles, also known as HEVs (including plug-in hybrid electric vehicles, or PHEVs), cost about 2 percent less to own over the course of a year compared to completely electric vehicles. That being said, EVs benefit greatly from tax rebates, which lowers depreciation. EVs, being able to depend entirely on electricity, have fuel costs that are less than half of hybrid vehicles’.

However, hybrids have the distinct advantage of being able to depend on gas if you’re driving through an area that lacks public charging points, which is a barrier for many people considering EV purchases.

Our gas vs. electric car calculator helps you determine how much an EV could save you, depending on where you live and how much you drive.

If you’re considering switching to a more fuel-efficient car, like a hybrid or smaller sedan, our fuel efficient savings calculator can help you decide whether a trade-in is worth it.

You can use this calculator from AAA to determine the cost of vehicle ownership based on your car model and usage: https://www.aaa.com/autorepair/drivingcosts.

You can also use the following calculators to determine other costs associated with car ownership:

• Fuel Cost Calculator, which estimates the cost of fuel for a road trip or your daily commute.
• Auto Loan Calculator, which estimates your monthly car loan payments.
• Car Affordability Calculator, which estimates the sticker price of a car you can afford based on your income.

So, which vehicle type is right for you? Let’s break it down.

Buy an electric car if:

• You can qualify for federal tax credits.
• You live in an area with a lot of EV charging stations or charging at home is a possibility
• You drive in your home area primarily or have another gas-powered vehicle for long-distance drives.
• You are okay with higher car insurance costs of about 9 percent.

There’s no doubt that electric vehicles are here to stay, especially as the number of publicly available charging stations increases. However, for most people, they are simply too expensive to purchase right now, even with their reduced driving costs, particularly if you don’t qualify for the federal rebate.