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Is now a good time to invest in electric vehicles? 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 research and analyze data for free – so that you can make sound financial decisions. Bankrate has partnerships with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site come from companies that compensate us. This compensation can affect the way and where products appear on this website, for example the order in which they may appear in the listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. This compensation, however, does have no impact on the content we publish or the reviews that you see on this site. We do not include the entire universe of businesses or financial offers that may be available to you.
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7 min read Published February 27, 2023
Written by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the details of using loans to buy the car they want.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complex topics into manageable bites.
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It is a financial strain car ownership starting from the first purchase through fueling up at the station, has reached record levels for drivers over the course of the year. Although gas prices have climbed down and a gallon cost $3.38 on Feb. 24 according to AAA — financing a vehicle gets more expensive . The average cost for financing is $700 per month for new car financing, and $525 for used vehicles in the third quarter of 2022’s calendar, . With the high cost of filling out and fund, along with the ever-present concerns about climate change, many motorists are looking for a new solution. You might be asking “Should I buy an electric vehicle?” And you wouldn’t be the only one. Electric vehicles (EV) market share has increased in the past few years and TransUnion believes that the EV market share will reach . However, the cost upfront of an electric vehicle may not be the best choice for every driver. Should I buy an electric car? The decision to purchase an electric vehicle is one that should be considered with the same vigor as determining the make and model of the next vehicle. For some, the ease of having a low maintenance can make the cost worth it. “From a strictly consumer experience perspective, buying an electric vehicle is extremely positive,” says Brian Moody, executive editor at Autotrader. “In addition to that, driving in electric vehicles is extremely satisfying. Acceleration is more brisk and electric cars come with amazing features, like the ability to heat or cool down your vehicle’s interior before hitting roads.” And, 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. As Moody explains, these tend to carry an affordable price in addition to being able to “function like an electric car on a day-to-day basis with gas being used only for long journeys.” This makes them an option for people who want to drive electric but not ready to commit fully. The market for electric cars has seen a lot of innovation in the last two years and will continue to expand. While upfront costs have historically been high, they’re dropping as more options are made available and legacy brands dive into the market for electric cars. In the U.S. auto market is changing to electric. Record-high gasoline prices could have helped increase sales of electric vehicles. Electric vehicles comprised 5.7 percent of all new vehicle registrations in the second quarter of 2022, according to . It may not seem like much however it’s an impressive increase in comparison to the 1.5 percent that EVs represented in the second quarter of 2018. The growing demand for electric vehicles has resulted in improvements in financing options such as tax credits and tax rebates. This increased market is among the top reasons to consider purchasing an electric vehicle. Although Tesla has a majority of the market, TransUnion predicts the luxury brand will fall of the percent of market in 2025 because of the number of new and mainstream models that are entering the market. Moody has a similar view when it comes to vehicle availability. “It used to be true that there was only a handful of very small or very expensive electric vehicles. Although EVs are more expensive as a whole but some models are less expensive. For example, Kia EV6 and Chevrolet Bolt. Kia EV6 and Chevrolet Bolt.” The Nissan Leaf is another cost-effective EV option. EV drivers share almost the same credit profile as the owners of luxury cars. Satyan Merchant, senior vice president and chief of business for automotive at TransUnion has witnessed a rise in interest in EV financing, and an ensuing impact on the automotive finance market. TransUnion’s 2022 study reported that out of 33 million consumers between 2019 and 2021 who originated new EV and traditional vehicle loans, most EV borrowers shared almost identical high-credit profiles to those driving luxurious vehicles. Those driving mainstream EVs had an average credit score of 775 and fell 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 on all new cars for borrowers in the prime category. The competitive average APR of EVs isn’t just because of the credit profiles of these drivers. Buyers are generally also making . The study also found motorists were much more likely start their journey . In actual fact nearly one third of the respondents conducted online research on vehicle models and makes. Merchant explains, “Our research clearly shows that electric vehicle buyers have great credit risk profiles. However, this group also has varying preferences, with a greater desire to shop around for financing options via digital means.” The greater interest will likely be reflected in new choices for EV financing as well as the expansion of available vehicles expected in the coming years. The options for green financing are expanding This growing market for electric vehicles has led to advancements in financing. While it is true that motorists can use or borrow for electric vehicles, EV-specific lenders are becoming more popular and provide the customers with a personalized experience through . Alex Liegl, CEO of Tenet, explains the company’s efforts on EV financing and its aim to make climate-related investment an easy choice. The Tenet approach “gives customers the freedom to manage upfront investment costs and also save money from down payments to be used for other expenditures,” Liegl says. Additionally the deferment option which shifts a third of the price into one final payment at the end of the financing term. This allows for lower monthly payments and an easy financing experience- but a large amount may be due by the end of the term. The goal, Liegl says, is to “help customers completely transform their lives with electricity by making environmentally sustainable home improvements more affordable, including installations of solar panels, battery backup, electric vehicles, smart appliances and much more.” Other businesses, such as EV-Savings, act as a marketplace for loan prequalification directly connected with EV incentives and green loans available throughout your region. According to its website, consumers could save as much as $200 per month on their monthly electric vehicle loan installments. Do EVs have a lower lifetime cost? So what makes an electric car worth it? The positive feelings that come with operating a vehicle that is better to the planet isn’t always the sole reason why people are switching to EVs. It also has the potential to reduce costs. Although it’s true that gas accrued while driving, in certain instances, electric vehicles can be cheaper in the long run. A survey in 2020 found that electric vehicle owners saved an average of and repairs throughout the duration of ownership, according to Consumer Reports. This is due in part to the distinct differences in upkeep that come with EVs. These vehicles do not need oil changes or maintenance, and they have more efficient powertrains. Those driving battery-electric vehicles and plug-in hybrid vehicles paid only 3 cents per mile over the course of their vehicle’s life as opposed to 6 cents per mile for conventional vehicles. However, driving electric isn’t all pleasant. CNET, a Red Ventures company, reported on a 2021 study of We Predict that found . While it is true that drivers can avoid the cost associated with , like oil changes and simple inspections, electric components are more costly when it comes time to repairs. This means that longer maintenance time and more expensive replacement parts can result in electric cars being more expensive, or even less more expensive than driving gasoline-powered vehicles. Moreover, electric cars can accelerate faster than gas-powered cars due to technological advancements, although the current demand for EVs has helped maintain prices. How to finance an electric car The process of an electric vehicle is quite similar to the process of financing a conventional gas-powered car. It is important to follow the same procedures you typically would, and available terms and understanding the importance that your credit score and past carry. As mentioned, driving electric also carries potential state and federal benefits that you would not normally be able to access. One of these is , an incentive worth $7500 that applies to new, certified plug-in as well as fuel-cell vehicles. New in 2023, you might also be able to claim a Federal tax credits . The vehicle cannot be purchased for more than $25,000. If the vehicle is eligible you may claim tax credits of up to 30% of the purchase cost, with a maximum of $4,000. The federal tax credits are both accompanied with income limitations and car requirements, so you need to make sure that you and your future EV are eligible before you begin. Beyond that, you might be able to claim an income tax credit for your state based on where you live. Consider these questions before purchasing an electric car or operating an electric vehicle comes with an additional set of requirements which you may not have encountered before. Take a look at these questions. 1. What is the range of the vehicle? It is essential to determine the distance your vehicle can get you — for your daily commute as well as your daily travel. Energy.gov reports the average range for 2021 model year vehicles that have possible ranges of between 405 and 405 miles. It is likely that drivers will deal with lesser “range anxiety” because vehicles are catching up with technology available. It is advisable to assess your needs by factoring in your typical commute and expected leisure activities. 2. Should I lease before I buy an electric car? “Leasing an electric vehicle can be a good way to test the waters of ownership in an electric vehicle,” Moody says. It is usually less expensive in a month-to-month arrangement and usually includes a warranty. If you’re on the side of electric vehicles, consider leasing one to see if you like the experience and feel. 3. Are I able to connect to charging stations for my vehicle in my neighborhood? While it is true that the Electric Vehicle Council found that about of EV drivers can charge at home, many drivers do not possess the option of having the Level 2 charger. That’s okay. A majority of EVs can now be charged to charge from any electrical outlet, although it could take the whole night or more to achieve a full charge. However, you may need a speedier charge at times. Many EVs take around 45 minutes to get to 80 percent battery capacity at an outlet that is fast charging. To find out the locations you could be able to obtain an earlier charge take a look at the map, which shows charging stations close to. Check that the charging stations you plan to use can be used with the car you’re looking at. Think about an electric car when you’re shopping for your next vehicle Is the electric car worth it? Similar to other luxury vehicles, EVs can carry higher initial costs and require a strong credit profile to enjoy lower interest costs. But as the industry grows and more mid-tier options spring up, more drivers are able to consider an electric option. Are you one of those who comprise 36 percent Americans who are considering electric? Moody suggests aiming to find the sweet spot by purchasing a used model that is something in the 3-to-5-year range to enjoy a lower cost and an adequate amount of warranty protection.
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Authored by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the details of borrowing money to purchase a car.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to control their finances by providing clear, well-researched information that is broken down into complicated topics into bite-sized pieces.
Auto loans editor
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