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Is now a good moment to purchase an electric vehicle? 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 choices by providing you with interactive financial calculators and tools as well as publishing original and objective content. This allows 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 such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site are from companies that compensate us. This compensation can affect the way and where products appear on this site, including for instance, the order in which they may be listed within the categories of listing, except where prohibited by law. This applies to our loans, mortgage,, and other home lending products. However, this compensation will not influence the information we provide, or the reviews you see on this site. We do not include the universe of companies or financial offers that may be open to you.
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7 min read Published 27 February 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 in navigating the ins and outs of securely borrowing money to purchase the car they want.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain confidence to take control of their finances with precise, well-researched and well-researched content that break down complex subjects into digestible pieces.
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Financial burdens of car ownership starting from the first purchase through refilling at the gas station, hit record highs for motorists in the past year. As gas prices have gone down and a gallon cost $3.38 in February. 24 as per AAA — financing a vehicle is becoming more expensive as . It costs drivers an average of $700 per month for brand new car financing, and $525 for vehicles used in the third quarter of 2022’s fiscal year, . With steep costs to fill with fuel and pay for, plus the constant worries about the climate, many drivers are itching for another option. Perhaps you’re asking “Should I purchase an electric car?” And you wouldn’t be alone. Electric vehicle (EV) market share has been on the rise in the past few years and TransUnion predicts that the EV market share will increase to . However, the cost upfront of an electric car might not be right for all drivers. Should I buy an electric car? The decision to purchase electric should be approached with the same care as choosing the model and make of your next car. For some, the convenience of paired with minimal maintenance makes the high cost worth it. “From an entirely consumer experience perspective, buying an electric car will be very positive,” says Brian Moody the executive editor of Autotrader. “In addition to that, driving in electric vehicles is extremely satisfying. Acceleration is more brisk and electric vehicles come with cool features like the capability to heat or cool down your car’s interior prior to hitting on the highway.” If there’s no full electric car one, a hybrid or plug-in model is more efficient than traditional gas models while saving you money than an EV. According to Moody explains, these typically have lower costs as well. They “function in the same way as an electric vehicle in the daytime and consume gas only on long journeys.” This is why they are a good choice for people who want to drive electric but who aren’t yet willing to commit completely. The electric car market has seen tremendous innovation over the last two years, and is expected to continue to grow. While initial costs have traditionally been high, they’re descending as more options become accessible and established brands move into the market for electric cars. In the U.S. auto market is shifting toward electric Record-high gas prices might have helped boost sales of electric cars. Electric vehicles accounted for 5.7 percent of new vehicle registrations in Q2 2022, according to . This may not sound like a lot but it’s a significant improvement in comparison to the 1.5 percent of EVs in Q2 2018. The growing demand for electric vehicles has resulted in improvements in financing options such as tax credits and tax rebates. This expanded market is among the main reasons to consider purchasing an electric vehicle. While Tesla currently dominates the market, TransUnion predicts the luxury model will be a minority of the percentage of the market by 2025 because of the influx of new and mainstream brands coming into the market. Moody has a similar view when it comes to car availability. “It was once the case that there were just one or two small or expensive electric cars. Although EVs tend to be more costly in general however, certain models are priced more affordably. For instance, there is the Kia EV6 and Chevrolet Bolt.” The Nissan Leaf is another cost-effective alternative to EVs. EV drivers share almost the same credit profile as those who drive luxury vehicles. Satyan Merchant the senior vice president and business leader for automotive at TransUnion, has seen increasing the popularity of EV financing and a subsequent impact on the automotive finance market. The study by TransUnion for 2022 found that, of 33 million people between 2019 to 2021 who took out new EV and traditional vehicle loans The majority of EV borrowers had nearly identical credit profiles to those driving luxurious cars. People who owned conventional EVs had an average score for credit of 775, which falls in the top category. Also, they had an APR average of 2.8 percent. This is less than the median APR which was 4.9 percent for all new cars that are available to borrowers in the prime category. The high average competitive APR for electric vehicles isn’t solely due to the strong credit profiles of these drivers. They are also making . The study also showed the drivers are more inclined to begin their research . In fact over one-third of them 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, such as a higher appetite in shopping around for vehicle financing by digital means.” This increased demand will likely reflect in the new options available for EV financing, as well as an increase in the number of vehicles available in the coming years. Options for eco-friendly financing are expanding This growing market for electric vehicles has brought about improvements in financing. While consumers can borrow or use for their electric vehicles, EV-specific lenders are gaining popularity and provide the customers with a personalized experience through . Alex Liegl, CEO of Tenet, discusses the company’s efforts with EV financing and the company’s goal to make climate investment an easy choice. The Tenet approach “gives customers the ability to control upfront costs for investment and save down-payment cash to pay for other expenses,” Liegl says. Additionally the deferment option that shifts one portion of the price to one final payment at the closing of the term of financing. This will result in smaller monthly payments and an easier financing experience- but a large amount might be due at the end. The aim, Liegl says, is to “help customers fully electrify their lives by making sustainable home upgrades easier to afford, such as installations of solar panels, battery backup, electric vehicles, smart appliances and more.” Other businesses, such as EV-Savings, act as a marketplace for loan prequalification, which is directly tied to incentives for EVs and green loans that are available within your particular state. According to its website, drivers can save up to $200 per month on their monthly EV loan installments. Do EVs have less cost over their lifetime? Therefore can you say that an electric vehicle is worth it? The good feelings that come when you drive a car that is healthier to the planet isn’t always the only reason people are turning to electric cars. Additionally, they can reduce costs. While it is the case that gas costs are higher when driving, in some cases driving electric can be less expensive overall. A survey in 2020 found that drivers of electric vehicles saved an average of and repairs over the course of their ownership, according to Consumer Reports. This is due in part to the distinct differences in upkeep that come with EVs. They do not require oil changes and use more efficient powertrains. The drivers of battery-electric vehicles as well as plug-in hybrid vehicles paid only 3 cents per mile during the course of their vehicle’s life in comparison to 6 cents for traditional vehicles. But driving electric isn’t completely rosy. CNET is a Red Ventures company, reported on a 2021 study of We Predict that found . While it is true that drivers do not have to pay the extra cost of , like oil changes and routine inspections, EV components are more expensive when it comes time to repairs. This means that the longer maintenance times and the costlier replacement parts may make electric vehicles the same, or more expensive as driving gas-powered vehicles. Furthermore, electric vehicles are able to operate be more efficient than the traditional gas-powered option due to the speed of technological advances, although the current demand for EVs helps to keep prices in check at the moment. What is the best way to finance an electric vehicle The process of an electric vehicle is a lot like that of a traditional gasoline-powered car. It is crucial for you to take the exact procedure you normally would, as well as available terms and understanding the weight that your credit score and history are able to bear. Like we said, driving electric also carries potential state and federal benefits that you wouldn’t typically be able to access. One of these is , an incentive of $7,500 that applies to new, qualified plug-in and fuel-cell electric vehicles. In 2023, new models could also claim the government tax deduction . The vehicle cannot be purchased at a price greater than $25,000. If it qualifies you may claim a credit for up to 30 percent of the sale price, which is capped at $4,000. Tax credits for federal residents come with income limitations and vehicle requirements, so make sure you and your future EV meet the requirements before you dive in. Beyond that, you might get the state tax credit based the location you reside in. Questions to ask yourself before purchasing an electric car as well as operating an electric car comes with an additional set of needs that you might not have had to deal with in the past. Think about these issues. 1. What is the range of your vehicle? It is essential to determine the distance your vehicle can bring you — for both your typical commute and for your traveling habits. Energy.gov lists that the 2021 model year vehicles with the potential to cover between 405 and 405 miles. It is likely that drivers will deal with lesser “range anxiety” as their vehicles get up to speed with the latest technology. It is advisable to evaluate your requirements by incorporating your usual commute as well as anticipated leisure activities. 2. Should I rent before buying an electric car? “Leasing an electric car can be a good way to get a taste of EV ownership,” Moody says. The cost is typically lower on a month-to-month basis and usually includes a warranty. If you’re on fence about driving electric you should consider leasing one to check out the feel and experience. 3. Do I have access vehicle chargers in my area? Even though there is evidence that Electric Vehicle Council found that about of EV drivers charge up at home, many drivers don’t possess the option of installing a Level 2 charger. That’s okay. A lot of EVs now have the option to charge from any outlet that is electrical, but it could take the whole night or even longer to receive a full charge. However, you may require a faster charge at certain times. Many EVs require about 45 minutes to get to 80 percent battery capacity when you use an outlet that is fast charging. To determine where you might be able to obtain a faster charge take a look at , which maps out charging stations close to. Double-check that any charging stations that you are planning to frequent are compatible with the vehicle you’re considering. You should consider an electric vehicle when looking for your next vehicle Is an electric vehicle worth the investment? Similar to other luxury vehicles, EVs can carry higher initial costs and require an excellent credit score to benefit from lower interest costs. But as the industry grows with more middle-tier choices pop up, more people are able to consider an electric option. Are you among those who comprise 36 percent Americans considering electric? Moody recommends aiming to find the sweet spot by purchasing a used model that is something that falls in the 3-to-5-year range — to enjoy a lower cost and an adequate amount of warranty protection.
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Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the ins and outs of securely borrowing money to purchase an automobile.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing concise, well-researched and well-written information that breaks down complex subjects into digestible pieces.
Auto loans editor
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