posted on December 9, 2013
Electric cars are growing in popularity for their green image and non-reliance on gas. However, the up-front cost and issues some manufacturers have had with batteries are scaring away some would-be early adopters. Before you get ready to buy your next car, let’s take a look at whether purchasing a hybrid or electric car can really save you money.
Average cost of owning a car
In AAA’s 2013 analysis of total driving costs, they found that the average sedan costs its owner over $9,000 per year, with a large sedan or SUV costing north of $11,000 a year.
About a quarter of that annual cost, roughly $2,000 to $3,000, goes towards paying for your fuel costs. According to the U.S. Energy Information Administration, gasoline accounts for about 4% of your household’s pre-tax income. Ouch!
Saving money with a hybrid
Hybrids represent the first step towards electric cars. Some hybrids re-charge their batteries from regular driving only, while others have an additional plug-in option to cut gasoline use further.
The initial cost to buy a hybrid is $2,000 to $10,000 more than the typical gas-powered vehicle. Sometimes you can get tax breaks for buying a hybrid, but let’s not take those into account here because not everyone gets the break.
To save money over the life of your car (let’s assume a conservative five years), you need to save around $2,000 per year in expenses over a regular gas guzzler. That savings comes from lower fuel use and lower maintenance costs.
Remember that you still do use some gas with a hybrid, but a lot less. For the 2013 Ford Fusion, the estimated cost of gas over the entire life of the car is $3,891. That’s a lot less than the $2,000 to $3,000 per year you’d be spending on gas otherwise.
If you compare a hybrid to its most similar non-hybrid counterpart, depending on the vehicle make and model, you’ll find that the five year cost of ownership can save you tons. A 2013 comparison by Forbes found that a Toyota Prius saved about $5,000 in fuel costs and $1,500 overall when compared to the most similar Toyota model.
The top three money savers were surprisingly all higher end models. At the top were the Lexus CT 200h saving $6,379 vs. a Lexus IS 250, the Lincoln MKZ Hybrid, with a savings of $4,778 vs. the standard MKZ, and the Audi Q5 Hybrid which saves $3,805 over five years.
Before buying, though, it’s important to do your own research on the specific make and model. Some hybrids don’t make as much sense. For example, the GMC Yukon Hybrid SUV can add over $9,000 to an owner’s five-year total cost.
Saving money with an electric car
I have been lucky to be a part of a family where efficient cars are the norm. My parents own a Camry Hybrid and a Nissan Leaf. My dad picked up his shiny new Leaf a few months ago and has been thrilled with the car. He doesn’t even know what gas costs per gallon anymore; he has not been to the gas station since he bought the car!
According to Kelly Blue Book, the cost to own that car in Denver, Colorado is $37,070 over five years. The cost of ownership falls in between the compact Nissan Sentra and full-size Nissan Altima. For a car with great luxury features, very low maintenance, and zero gas station visits, that is a pretty great deal.
In some states, comparing the cost of gas to electricity makes the savings even better. In California, the cost of gasoline is $3.56 per gallon. The electricity cost equivalent? $1.63. In my hometown, the cost of gas is $3.15 per gallon. The equivalent electricity cost is $1.24. That is a huge energy cost savings!
Want to see the gas costs compared to electricity costs for your state? Check out the government’s eGallon calculator.
The winner?
The proof is in the numbers. Over five years, a hybrid or electric car can save you a lot of money compared to traditional gas cars, but do your own research on the specific car. Depending on the car, how much you drive, and where you live, your savings could be huge.
The next time you’re in the market for a car, don’t let the sticker shock of an electric or hybrid scare you away. Not only can you save on costs down the road, but you can rent your car on Turo to help your car pay for itself. Think about the long term and how much you can save.
Eric Rosenberg
Eric is a personal finance, entrepreneurship, travel, and real estate blogger. When he's away from the computer, he's out flying planes, riding bikes, and DJing the occasional dance party.
