The Expert Podcast

If you are in the vehicle market for a new or used truck or car, one thing you may notice is that there are not a lot of cars available. It's hard to find cars on dealers’ lots. New cars are almost non-existent, with many dealers having only one or two cars in inventory. Used cars are slightly more available, but even their prices are through the roof. In fact, as the prices of gas, groceries, and mortgages have gone up, used car prices are starting to back off slightly.

One area that sales slowdowns are not affecting is electric vehicles (EVs). Electric vehicle sales are booming. Even though there are shortages, people are clamoring for these vehicles. What gives? Electric vehicles are no easier to produce than gasoline vehicles, so factories aren't churning them out any faster. In fact, EVs still represent only a single-digit percentage of new cars being manufactured versus gasoline cars. Most manufacturers produce between five and eight percent of their cars as electric, so there aren't a ton of them. Yet, people want them.

Why is that happening? Some of it, of course, has to do with gasoline prices. People see gasoline going from $3 per gallon to $6 per gallon—or $5 per gallon—and they think, “I better get an EV.” They want to trade in their car for an EV but find that there are no EVs available. But let’s do the math—does it even make sense?

If you drive 2,000 miles per month in a gasoline vehicle that gets 20 miles per gallon (not great mileage), you will need to purchase 100 gallons of gas every month. At $5 per gallon, that's $500 a month in gas. That’s a lot of money. What if you completely go electric? With no gasoline bills, your electric bill would obviously go up, but for now, let’s leave that out. Most electric vehicles cost $15,000 to $20,000 more than their gasoline counterparts.

If you're looking for a low-end new gasoline vehicle in the $20,000 to $30,000 range, you won’t find an electric vehicle at that price point. Instead, you may have to spend $60,000 on an EV. So, in reality, an EV will likely cost you $20,000 more than a gasoline vehicle. If you finance that $20,000 difference, it will cost you about $400 more per month. You might save on gas, but the increased car payment will bring you close to breaking even.

The other difference is if you drive less than 2,000 miles per month, you don’t “get back” your car payment savings. If you only drive 1,500 miles per month, the math doesn’t break even. So, a lot of the move to EVs is psychological—people aren’t doing the full math. Once more EVs are available in the $30,000 to $40,000 range, it might make more financial sense. But even then, you have to consider battery replacement costs and increased electric bills.

Think about how much your electric bill goes up during expensive energy seasons. In the South (Texas, Florida, Carolinas, Arizona), air conditioning can significantly raise your bill in summer. In northern climates (New York, New England, Illinois, Wisconsin), heating bills increase in winter. Even if you use propane or fuel oil for heating, your energy costs will rise. On average, plugging in your car to recharge all the time could increase your electric bill by $300 to $400.

Forget about whether EVs are better for the environment or if your electricity comes from coal plants—that’s a separate issue. Consider the actual costs. Additionally, what happens in seven or eight years when the battery runs out? Unlike a gasoline engine that can last 150,000 to 200,000 miles with proper maintenance, EV batteries have a wide range of lifespans depending on charging habits, weather conditions, and vibrations.

Here’s an example: someone bought an eight- or nine-year-old EV with 80,000 miles for $11,000. Two days later, they discovered the battery was dead. The replacement cost? $14,000—if the battery were even available. The car had been out of production so long that no batteries were being manufactured for it anymore.

Gasoline engines often have interchangeable parts and decades-long production histories. For instance, the Chevy small-block V8 has been in production for 40-50 years, with parts readily available. EV batteries, however, are custom-made for each model and are not interchangeable. Since they are shaped specifically for their vehicle, finding a replacement battery in seven or eight years could be nearly impossible.

Tell us what you think about electric vehicles. How do they affect your plans? Share your thoughts—especially every time you pay $6 per gallon at the gas station!