Before buying an EV, consider these hidden costs of ownership

By Russ Heaps

The longer you keep an electric car, the better it compares to the ownership costs of a gas car

Quick facts about hidden costs of electric car ownership

If you're considering a new car, you've probably found all the hype about electric vehicles difficult to ignore. Today, we aren't addressing the pros and cons of buying and owning an EV compared with an internal combustion engine (ICE) gasoline-fueled vehicle. We're here to dive more deeply into the many factors contributing to the costs of electric car daily ownership. We'll examine operational costs, providing a more informed path to estimating the actual cost of electric car ownership.

Growth trajectory of electric cars

Kelley Blue Book parent Cox Automotive forecasts in a new report that 1 million new electric vehicles will be sold in the U.S. in 2023. That's more than twice the volume sold in 2021.

The industry's sales growth comes from Tesla's (TSLA) rapid expansion and the constant launch of new electric cars into the market. Carmakers launched 33 new models this year, and more than 50 additional new or updated EVs will be launched in 2024.

What are the hidden costs of EV ownership?

We define hidden costs of electric vehicle ownership as costs you need to budget for monthly or annually when you own an EV.

In discussing any hidden costs associated with electric car ownership, we are primarily concerned with the ownership costs directly related to an EV's electrified propulsion system. In other words, we address EV ownership costs not shouldered by ICE vehicle owners. Therefore, these are not so much hidden costs as they are costs of moving from ICE vehicles to EVs and those you might not realize or consider when calculating the cost of ownership. Expense surprises are the enemy of a monthly household budget. We aim to expose as many EV cost surprises as possible to help you create and follow a realistic budget.

PRO TIP: I've spent countless hours researching and studying EVs. Also, I clocked time behind the wheel of several electric vehicles. Here is one truth I've uncovered: The longer you keep an electric car, the better it compares to the ownership costs of a gasoline-fueled vehicle, at least on the surface. Not only does the transaction cost difference mean less as it's spread over more time, but other electric vehicle cost advantages, like lower maintenance and energy costs, continue to pile up in the positive column for electric car ownership. However, the one significant disadvantage of EVs that is tough to overcome is the unexpected cost of accelerated depreciation. Read on.

The list of hidden costs

Purchase costs: electric vs. gas

Before digging into what may be some unknown expenses for new EV owners, we need to note the ICE transaction-price advantage briefly. On average, new electric vehicles cost more than those with internal combustion engines. According to data from Cox Automotive, the average cost of a new ICE vehicle was $48,528 in May 2023 compared with $55,488 for the average electric vehicle. That's before factoring in any electric car government rebates or incentives. If you and the EV qualify for the full $7,500 tax credit, it could make up the cost difference. Moreover, electric car prices have tumbled steadily over the last few months -- down more than $10,000 on average in the past year.

However, transaction prices aren't the entire story. Many factors contribute to ownership costs of EVs versus ICE vehicles.

See:The cars, trucks and SUVs with the best resale value

We randomly selected two anecdotal 2023 examples: Hyundai Kona vs. Hyundai Kona Electric and Volvo XC40 vs. XC40 Recharge. Comparing the prices of the entry-level trims of both vehicles, the Kona Electric costs $11,410 more than the Kona, while the XC40 Recharge costs $17,000 more than the gasoline-fueled XC40.

Although the EV and ICE vehicle share the same trim level name for both brands, EVs typically come with more features than ICE vehicles. Consequently, it isn't exactly an apples-to-apples comparison. To compensate for that, let's drop both disparities by 25% to $8,558 for Kona and $12,750 for the XC40. This is our estimate of the average transaction price difference if the EV and ICE vehicles provide the same features.

Still, the bottom line is, EV transaction prices are higher than those of ICE vehicles. Consequently, you must either put more money down upfront or finance a bigger balance with higher monthly payments for the average EV over the average ICE vehicle.

Check out: Four valuable lessons I learned taking a road trip in an electric car

Charging infrastructure

If you do the research, you can probably still find some free Level 2 charging stations in government-owned parking lots and garages near you. For example, 42 free stations are in Greenville, South Carolina, area. However, you may find yourself seeking out a commercial charging station that charges by minute or kilowatt-hour (kWh). Their prices can vary wildly from station to station. Often these stations offer DC fast chargers, which can quickly replenish a battery's charge up to 80%, but at a higher cost.

Moreover, repeated rapid charging can also damage a battery, shortening its life. (More about that below.) Currently, commercial charging stations may be in short supply depending on where you live, requiring you to not only spend the time needed to charge up your EV's battery but also locate and drive to a remote charging station. If you're lucky, your employer provides a few free chargers for its staff.

Home charging

Using the Level 1 charging system included with most EVs is adequate for replenishing the electricity in the battery of typical plug-in hybrid vehicles (PHEVs) because of their smaller capacity batteries. However, Level 1 charging is impractical for electric cars, which may require up to 36 hours to get the larger EV battery up to 80% plus charge. Recognizing that most EV owners charge their vehicles at home and that home charging is cheaper than commercial charging, you will quickly see the wisdom in buying a Level 2 home charger.

Learn more:What is EV, BEV, HEV, PHEV? Here's your guide to types of electric cars

However, owning a Level 2 charger can carry a hefty price tag. Checking Amazon (AMZN), we found the spread to be from about $200 for a portable Level 2 charger to $1,000 for a permanent one. For instance, if you opt for a permanent system in your garage, you should have a professional install it. According to bobvila.com, you can spend anywhere from $400 to $3,400 on installation. The big price spread is because you need a power source of 240V (like your clothes dryer uses). The installer may need to run such a line to the appropriate location for the charge. Check for installation incentives from your state and utility company. Often, there will be some incentives to lower the cost.

PRO TIP: Before laying out the money for a Level 2 charger, ask a professional to evaluate your electrical system to determine if the 240V source is available and the costs associated with running it where you need it. Whether you pick the portable or install a Level 2 charger, you need a 240V power source.

Electricity costs

Just like the price-per-gallon costs of gas, electricity rates fluctuate. According to a March 2023 article in Forbes, electricity costs surged across the U.S. In some areas (Northeast), the prices jumped as much as 57% from January 2021 to January 2023. Forbes predicts this trend will continue. You can adopt some behavior to mitigate rising costs, like determining what time or times of day electricity costs the least in your area. Typically, it's in the early morning. Charging then might save a few bucks.

You'll need to employ a bit of math to calculate what it costs to charge your EV. Begin by locating your latest electric bill. You need to find the total kWh hours used and divide that number into the bottom-line total of that bill. This will give you the cost of a kWh of power.

For example, the average cost for U.S. households is 16 cents per kWh. You also need to determine how many miles, on average, you drive each month. For example, the national average per month in 2021 was 1,124 miles. Most experts agree that an electric car gets three to 4 miles of range from one kWh. We advise being conservative, using 3 miles per kWh as you create your budget. Divide your monthly mileage by three to determine the number of kWh your EV requires each month. Multiply that number by the price you pay for each kWh. The result is an approximate monthly cost for charging your EV. For example, 1,124 ÷ 3 miles of range per kWh = 375 kWh x 16 cents = $60 for the price per month to charge your electric car.

For our comparison vehicles, the government's Environmental Protection Agency (EPA) estimates the annual cost of charging the Kona Electric at $600, while fueling the Kona costs $1,700. Charging the XC40 Recharge for a year will set you back $850. Fueling the XC40 for a year: $2,450.

See: 10 electric SUVs that seat 7

Battery degradation and replacement

We often hear the expense of replacing an EV battery as a key reason for not considering an electric car. That fear is not without merit.

Replacement costs remain historically high. For example, J.D. Power reported that the average cost of replacing the battery in a Tesla Model S, Model X, or Model three could cost at least $13,000. You can buy a 2023 Model three for about $40,240. In other words, the battery is about 30% of the total cost of the Model 3. This is not an exception. The reality is that the battery is a significant contributing factor to the price of an electric vehicle.

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