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Is it a good time to buy electric? Considerations when financing an EV Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by offering you interactive financial calculators and tools as well as publishing original and objective content. This allows you to conduct research and compare data for no cost – so that you can make sound financial decisions. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site come from companies that pay us. This compensation could affect how and where products are displayed on the site, such as for instance, the order in which they may appear in the listing categories, except where prohibited by law for our loan products, such as mortgages and home equity, and other home loan products. This compensation, however, does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offerings that could be accessible to you.
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7 min read published 27 February 2023
Authored 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 ins and outs of securely borrowing money to purchase an automobile.
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 passionate about helping readers gain the confidence to control their finances with precise, well-researched and well-researched content that dissects complex subjects into digestible pieces.
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It is a financial strain ownership beginning with the purchase through refilling at the gas station, hit record highs for motorists in the past year. While gas prices have crept down and a gallon cost $3.38 in February. 24, according to AAA — financing a vehicle gets more expensive . The average cost for financing is $700 per month for brand new car financing, and $525 for used in the third quarter of 2022’s calendar, . With high costs to fill with fuel and pay for, along with the ever-present concerns about climate issues, many drivers are looking for a new solution. Perhaps you’re asking “Should I buy an electric vehicle?” And you wouldn’t be the only one. Electric vehicles (EV) demand has increased in recent years and TransUnion estimates that the market share for EVs will grow to . But the expensive upfront cost of an electric vehicle might not be right for everyone. Do I need to buy an electric car? The choice to buy electric must be approached with the same care that you would choosing the model and make of the next vehicle. Some people find the convenience of low maintenance makes the high cost of the price worth it. “From an entirely consumer experience perspective, buying an electric vehicle will be extremely positive,” says Brian Moody, executive editor at Autotrader. “In addition to that, driving in electric vehicles can be very enjoyable. The acceleration is faster and electric cars have amazing features, like the capability to heat the vehicle’s interior prior to hitting on the highway.” And, if there’s no full electric car and a hybrid model could be more efficient than conventional gas models, while being kinder on your wallet as compared to an EV. As Moody states, they tend to carry a lower price tag and “function in the same way as an electric vehicle in the daytime with gas being used only for lengthy trips.” This can be a viable option for drivers interested in driving electric but who aren’t yet ready to commit fully. The market for electric cars has seen a lot of innovation in the last two years and is set to continue growing. While upfront costs have historically been high, they’re dropping as more options are made available , and traditional brands are dipping into the market for electric cars. The U.S. auto market is shifting toward electric Record-high gas prices might have helped propel EV sales. Electric vehicles comprised 5.7 percent of new vehicle registrations in Q2 2022, according to . It may not seem like much but it’s a significant improvement over the 1.5 percent that electric vehicles accounted for in the second quarter of 2018. The growing demand for electric vehicles has resulted in advances in financing options such as tax credits and tax rebates. This expanded market is one of the primary reasons to consider purchasing an EV. While Tesla is currently the most popular choice, TransUnion predicts the luxury brand will lose its percent of market in 2025 due to the influx of new and mainstream brands coming into the market. Moody has a similar view in relation to the availability of vehicles. “It was the norm that there were just a handful of very small or expensive electric vehicles. While EVs are more expensive overall, some individual models are less expensive. For example there is the Kia EV6 and Chevrolet Bolt.” The Nissan Leaf is another cost-effective EV option. EV drivers share almost the exact same credit profiles as those driving luxury Satyan Merchant the senior vice president and business leader for automotive at TransUnion has witnessed a rise in the popularity of EV financing, which has a direct impact on the automobile finance industry. TransUnion’s 2022 study reported that, of 33 million people between 2019 to 2021 who financed new EV and traditional car loans the majority of EV-related customers had similar credit profile to those who own high-end automobiles. People who owned mainstream EVs were able to get an average score for credit of 775, falling into the prime category. The average interest rate was 2.8 percent. This is lower than the median APR that was 4.9 percent for all new cars that are available to borrowers in the prime category. The low average APR for EVs isn’t just because of the credit profiles of these drivers. They are also making . The study also revealed the drivers are more inclined to commence their journey . In actual fact, more than one-third did online research on the vehicle models and makes. Merchant says, “Our research clearly shows that buyers of electric vehicles have good credit risk profiles. However, the group has different preferences, including a larger interest in looking for financing options via digital means.” This increased demand is likely to be evident in the new options available for EV financing combined with an increase in the number of vehicles available within the next few years. Alternatives for environmentally friendly financing are growing. This expanding market for electric vehicles has also brought about improvements in financing. While it is true that motorists can use or borrow to their electric vehicles, EV-specific lenders are gaining popularity and provide the customers with a personalized experience by offering . Alex Liegl, CEO of Tenet, explains the company’s work with EV financing and its aim to make climate investing an easy choice. The Tenet approach “gives customers the flexibility to control upfront costs for investment and to save the cash for down payment to use for other expenses,” Liegl says. In addition the deferment option that transfers one third of the price to one final installment at the close of the financing. This allows for lower monthly payments and a streamlined financing experience -however, a substantial amount might be due at the end. The aim, Liegl says, is to “help customers fully transform their lives with electricity by making environmentally sustainable home improvements more affordable, including the installation of solar panels and battery backups, electric vehicles, smart appliances and more.” Other businesses, such as EV-Savings, act as an online marketplace for loan prequalification directly connected with incentives for electric vehicles and green loans that are available throughout your region. According to their website, drivers can save up to $200 each month on monthly electric vehicle loan payment. Do EVs have lower costs over the life of their lease? Then can you say that an electric vehicle is worth it? The positive feelings that come with operating a vehicle that is more sustainable for the environment isn’t always the sole reason why people are switching towards electric vehicles. Additionally, they can reduce costs. While it’s true that gasoline is used up when driving, in some situations, driving electric could be cheaper overall. A survey in 2020 found that electric car owners reduced the cost of repairs over the lifetime of ownership, according to Consumer Reports. This is due primarily to the distinct differences in upkeep that come with 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 spent only 3 cents per miles over the lifetime of the vehicle in comparison to 6 cents per mile for conventional vehicles. But driving electric isn’t completely pleasant. CNET, 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 extra cost of regular maintenance such as oil change and basic inspections, EV components are more costly when it comes time to repairs. This means that more maintenance hours logged combined with higher-priced replacement parts could result in electric cars being more expensive, or even less more expensive than driving gasoline-powered vehicles. Additionally, electric vehicles can be driven accelerate faster than traditional gas-powered vehicles because of technological advancements however, the present demand for EVs has helped keep prices in check at the moment. What is the best way to finance an electric vehicle process of an electric vehicle is fairly similar to the traditional gas-powered vehicle. It is important for you to take the exact procedure that you would normally follow, in addition to understanding available terms and understanding the weight that the credit rating and your history carry. Like we said the electric vehicle also comes with federal and potential state benefits that you would not typically have access to. One of these benefits is an incentive worth $7,500 which is available to all newly-built, approved plug-ins as well as fuel-cell vehicles. In 2023, new models might also be able to get a Federal tax credits . The car cannot be bought at a price greater than $25,000. If it qualifies, you can claim tax credits of up to 30 percent of the sale price, capped at $4,000. The federal tax credits are both accompanied with income limits and car requirements, so you need to make sure you and your future EV meet the requirements before you dive in. Beyond that, you might be able to claim the state tax credit based on where you live. You should ask yourself these questions prior to buying an electric vehicle Owning as well as operating an electric vehicle is a different set of needs which you may not have encountered before. Consider these questions. 1. What is the range of your vehicle? It is essential to determine the distance your car will bring you — for your daily commute as well as your daily travel. Energy.gov lists the average range for 2021 model year vehicles that have the potential to cover up to 405 miles. Fortunately, motorists will deal with less “range anxiety” as vehicles catch up with available technology. It is advisable to evaluate your needs by factoring in your usual commute as well as anticipated leisure activities. 2. Should I consider leasing before purchasing an electric vehicle? “Leasing an electric car can be a good option to test the waters of ownership in an electric vehicle,” Moody says. It is usually less expensive on a month-to-month basis and typically comes with a warranty. If you’re on fence about driving electric and are considering leasing one, see if you like the experience and feel. 3. Are I able to connect to vehicle chargers in my area? Although there is evidence that Electric Vehicle Council found that the majority of electric vehicle owners can charge at home, many drivers don’t possess the option of having a Level 2 charger. That’s okay. Many EVs now have the option to charge using any outlet that is electrical, but it may take all night or more to achieve fully charged. That said, you might require a faster charge at certain times. A lot of EVs take about 45 minutes to get to 80 percent battery capacity at a fast-charging station. For information on the locations you could have the chance to receive a faster charge take a look at this map that shows charging stations nearby. Make sure that the charging stations you intend to use are compatible with the vehicle you’re looking at. Think about an electric car when you’re shopping for your next vehicle Is an electric vehicle worth the investment? As with other luxury vehicles, EVs can carry higher cost upfront, and drivers need a strong credit profile to enjoy low interest rates. But as the industry grows as more options for mid-tier vehicles spring up, more people are able to look into electric alternatives. Are you among that 36 per cent of Americans thinking about electric? Moody suggests aiming at the sweet spot, purchasing a used model that is anything in the 3-to-5-year range — to benefit from a lower cost and an adequate amount of warranty coverage.
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Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the ins and outs of securely using loans to buy a car.
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 passionate about helping readers gain confidence to control their finances by providing clear, well-researched information that breaks down otherwise complex subjects into digestible pieces.
Auto loans editor
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