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Is this the right time to buy electric? Considerations when financing an EV Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive tools and financial calculators that provide objective and original content. We also allow you to conduct your own research and compare data for no cost – so that you can make informed financial decisions. Bankrate has partnerships with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site come from companies that pay us. This compensation can affect the way and where products appear on this site, including, for example, the sequence in which they be listed within the categories of listing in the event that they are not permitted by law for our loans, mortgage,, and other home lending products. This compensation, however, does have no impact on the information we publish, or the reviews appear on this website. We do not include the universe of companies or financial deals that could be available to you.
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7 minutes read. Published 27 February 2023
Writen by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the details of using loans to buy an automobile.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to control their finances by providing precise, well-researched and well-researched content that breaks down otherwise complicated topics into bite-sized pieces.
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It is a financial strain ownership, from the initial purchase to fueling up at the station, has reached record levels for motorists in the past year. As gas prices have gone down to $3.38 in February. 24, according to AAA -the cost of financing a car gets more expensive . The average cost for financing is $700 a month for new vehicle financing and $525 for vehicles used in the third quarter of 2022’s fiscal year, . With steep costs to fill out and fund, along with the ever-present concerns about climate change, many motorists are looking for a new solution. You may be thinking “Should I buy an electric vehicle?” And you wouldn’t be alone. Electric vehicles (EV) market share has jumped in recent years and TransUnion believes that the market share of EVs will increase to . But the expensive upfront cost of electric vehicles could not be suitable for every driver. Should I buy an electric car? The decision to purchase an electric vehicle should be approached with the same vigor as selecting the model and the maker of the next vehicle. For some, the convenience of paired with minimal maintenance makes the high cost of the price worth it. “From a strictly consumer experience perspective, buying an electric car will be positively uplifting,” says Brian Moody, executive editor at Autotrader. “In addition, the driving experience of electric vehicles can be very enjoyable. It is quicker and more efficient, and electric cars have amazing features, like the ability to heat and cool your vehicle’s interior prior to hitting the road.” If not a full EV, a hybrid or plug-in model could be more efficient than gas-powered models and being kinder on your wallet than an EV. According to Moody states, they tend to carry lower costs as well. They “function like an electric vehicle for everyday use and consume gas only on long trips.” This can be a viable option for those who are interested in going electric, but aren’t willing to commit completely. The market for electric cars has seen great innovation over the last two years, and is expected to continue to grow. Although upfront costs have historically been high, they’re descending as more options are made available and legacy brands dive into the electric car market. The U.S. auto market is moving towards electric vehicles. Record-high gas prices might have helped propel EV sales. Electric vehicles comprised 5.7 percent of all new vehicle registrations in the second quarter of 2022, according to . This may not sound like a lot but it’s a significant increase in comparison to the 1.5 percent share that electric vehicles accounted for in Q2 2018. This growing interest in electric vehicles has resulted in advances in financing options such as tax credits and tax rebates. This market expansion is among the top reasons to consider buying an electric vehicle. While Tesla currently dominates the market, TransUnion predicts the luxury brand will lose its percent of market in 2025, due to the influx of new and mainstream brands that are entering the market. Moody shares a similar perspective regarding car availability. “It used to be true that there were just a handful of very small or very expensive electric cars. While EVs are more expensive in general however, certain models are priced more affordably. For instance the Kia EV6 and Chevrolet Bolt.” The Nissan Leaf is another cost-effective electric vehicle. EV drivers have nearly the same credit profile as the owners of luxury cars. Satyan Merchant Senior Vice President and business leader for automotive at TransUnion has noticed a growing the popularity of EV financing, which has a direct impact on the overall automobile finance industry. TransUnion’s 2022 research found that, of the 33 million people between 2019 and 2021 who originated new traditional and EV loans the majority of EV-related borrowers shared almost identical high-credit profiles to those driving luxury cars. Those driving regular EVs were able to get an average credit score of 775, falling in the top category. They also had an average APR of 2.8 percent. This is lower than the median APR that was 4.9 percent for all new cars for people with credit in the prime category. The high average competitive APR for electric vehicles isn’t only because of the credit ratings of these motorists. They are also making . The study also showed that drivers were more likely to start their . In fact over one-third of them conducted online research on vehicle makes and models. Merchant explains, “Our research clearly shows that electric vehicle buyers have great credit risk profiles, however the group has different preferences, with a greater interest in looking for financing options via electronic means.” The greater interest will likely reflect in the new options available for EV financing, as well as an increasing number of vehicles that are available within the next few years. Options for eco-friendly financing are increasing. The growing demand for electric cars has also led to advancements in financing. Although motorists can use or borrow for their electric vehicles, lenders specifically for EVs are growing in popularity and offer customers with a customized experience via . Alex Liegl, CEO of Tenet, discusses the company’s work with EV financing and its aim to make climate-related investment an easy choice. The Tenet method “gives customers the freedom to control upfront costs for investment and save down-payment cash to be used for other expenditures,” Liegl says. In addition the deferment option which shifts one quarter of the purchase price into one final installment at the end of the financing term. This allows for lower monthly payments and a streamlined financing experience -however, a substantial amount could be due at the end. The goal, Liegl says, is to “help customers completely electrify their lives by making sustainable home upgrades less expensive, such as installations of solar panels, battery backup and electric vehicles, smart appliances and more.” Other organizations, like the ones listed above , serve as a marketplace for loan prequalification directly connected with incentives for EVs and green loans available within your particular state. According to its website, consumers could save as much as $200 each month on monthly EV loan installments. Do EVs have a lower lifetime cost? Then can you say that an electric vehicle is worth it? The good feelings that come from driving a car that is healthier for the environment isn’t always the sole reason why people are switching to electric cars. Additionally, they can reduce costs. Although it’s the case that gas costs are higher while driving, in certain situations, driving electric could be less expensive in the long run. According to a survey conducted in 2020, electric car owners saved an average of and repairs over the course of their ownership, according to Consumer Reports. This is due primarily to the differences in general maintenance and upkeep of EVs. They do not require oil maintenance and have a simpler powertrain. The drivers of battery-electric vehicles as well as plug-in hybrid vehicles paid only 3 cents per mile over the lifetime of the vehicle as opposed to 6 cents for traditional vehicles. However, the electric vehicle experience isn’t always positive. CNET is which is a Red Ventures company, reported on a study conducted from We Predict that found . While it is true that drivers are able to avoid the cost associated with , like oil changes and basic inspections, EV components are more expensive when it comes time to repairs. This means that longer maintenance hours logged combined with more expensive replacement parts can make electric vehicles the same, or more expensive, than driving gas-powered vehicles. Additionally, electric vehicles can be driven accelerate faster than traditional gas-powered vehicles due to the speed of technological advances and the increasing demand for EVs is helping to keep prices in check at the moment. What is the best way to finance an electric vehicle procedure for financing an electric vehicle is a lot like the traditional gas-powered car. It is important that you follow similar steps that you would normally follow, in addition to understanding understand the terms available and the weight that your credit scores and history are able to bear. Like we said, driving electric also carries the potential for state and federal benefits you don’t normally be able to access. One of these benefits is an incentive of $7,500 for newly-built, approved plug-ins as well as fuel-cell vehicles. In 2023, new models may also be eligible to receive an government tax deduction . The vehicle cannot be purchased at a price greater than $25,000. If it qualifies, you can claim credits up to 30% of the purchase price, which is capped at $4,000. The federal tax credits are both accompanied with income restrictions and car requirements, so you need to make sure you and your potential future EV are eligible before you begin. Beyond that, you might get a state tax credit depending on where you live. Consider these questions before purchasing an electric vehicle or operating an electric vehicle is a different set of requirements which you may not have had to deal with in the past. Consider these questions. 1. What is the vehicle range? It is essential to determine the distance your car will get you — for both your normal commute and your travel habits. Energy.gov lists that the 2021 model year cars with possible ranges of as long as 405 miles. Fortunately, motorists will have lesser “range anxiety” as vehicles catch up with the latest technology. It is advisable to check your needs , taking into account your usual commute as well as anticipated leisure activities. 2. Do I have to lease before I buy an electric vehicle? “Leasing an electric vehicle can be a great way to get a taste of ownership in an electric vehicle,” Moody says. The cost is typically lower in a month-to-month arrangement and usually includes a warranty. If you’re on the side of electric vehicles you should consider leasing one to check out the experience and feel. 3. Do I have access charging stations for my vehicle in my neighborhood? Although the Electric Vehicle Council found that around a third of electric vehicle drivers recharge at home, a lot of drivers do not enjoy the convenience of having the Level 2 charger. That’s okay. A lot of EVs now have the option to charge at any electrical outlet, however it may take all night or more to achieve fully charged. However, you may require a quicker charge at times. Many EVs require about 45 minutes to get to 80 percent battery capacity when you use a fast-charging station. To find out where you might be able to get speedier charging take a look at the map, which shows charging stations nearby. Make sure that the charging stations that you are planning to use are compatible with the car you’re thinking of buying. Consider an EV when shopping for your next vehicle If you’re wondering, is an electric vehicle worth the investment? Similar to other luxury vehicles, EVs can carry higher cost upfront and require solid credit scores to enjoy lower interest costs. However, as the market grows and more mid-tier options come up, more drivers can reasonably consider an electric option. Are you among that 36 per cent of Americans who are considering electric? Moody recommends aiming to find the sweet spot by purchasing a used model that is anything in the three- to five-year range to get a better price and a good amount of warranty protection.
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Writen by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ways and pitfalls of using loans to buy a car.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping readers gain confidence to control their finances through providing concise, well-researched and well-written information that breaks down otherwise complex topics into manageable bites.
Auto loans editor
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