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Is it 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 aim is to assist you make better financial choices by offering you interactive financial calculators and tools as well as publishing original and objective content. We also allow users to conduct research and analyze data for free – so that you can make informed 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 deals that are displayed on this site come from companies who pay us. This compensation could affect how and where products appear on the site, such as the sequence in which they appear in the listing categories, except where prohibited by law. This applies to our loan products, such as mortgages and home equity, and other home loan products. However, this compensation will affect the content we publish or the reviews appear on this website. We do not include the vast array of companies or financial offerings that could be accessible to you.
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7 minutes read. Published on February 27, 2023.
Written by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the ways and pitfalls of using loans to buy a car.
Edited 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 confidence to manage their finances with concise, well-researched, and clear information that break down complex subjects into digestible pieces.
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The financial burden of car ownership starting from the first purchase until fueling up at the station, has reached record levels for motorists in the past year. As gas prices have gone down and a gallon cost $3.38 on Feb. 24 according to AAA — financing a vehicle is becoming more expensive as . It costs drivers an average of $700 per month for new vehicle financing and $525 for used in the third quarter of 2022’s fiscal year, . With steep costs to fill with fuel and pay for, and the ever-present worries over climate change, many motorists are itching for another solution. You might be asking “Should I invest in an electric vehicle?” And you wouldn’t be the only one. Electric vehicle (EV) sales have increased in recent years, and TransUnion estimates that the EV market share will reach . However, the cost upfront of an electric vehicle might not be right for all drivers. Should I buy an electric car? The decision to purchase an electric vehicle must be approached with the same care that you would determining the make and model of the next vehicle. For some, the convenience of having a low maintenance can make the cost of the price worth it. “From an entirely consumer experience perspective, buying an electric vehicle will be very positive,” says Brian Moody, executive editor at Autotrader. “In addition, the driving experience of electric vehicles is extremely satisfying. Acceleration is more brisk and electric vehicles come with amazing features, like the ability to heat up and cool your vehicle’s interior before you hit on the highway.” And, if you don’t have a fully electric vehicle and a hybrid model can be more fuel-efficient than traditional gas models while being kinder on your wallet than an EV. According to Moody states, they typically have a lower price tag and “function in the same way as an electric car in the daytime 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 electric car industry has seen tremendous innovation over the last two years, and will continue to expand. While upfront costs have historically been high, they’re descending as more options are made accessible and established brands move into the electric car market. The U.S. auto market is changing to electric. Record-high gasoline prices might have helped increase sales of electric vehicles. EVs made up 5.7 percent of new vehicle registrations in Q2 2022 according to . It may not seem like much, but it’s a notable increase over the 1.5 percent of EVs in the second quarter of 2018. The growing demand for electric vehicles has led to improvements in financing options, including and tax credits. This market expansion is one of the primary reasons to consider purchasing an EV. While Tesla has a majority of the market, TransUnion predicts the luxury brand will lose its market share by 2025 because of the influx of new and more mainstream makes that are entering the market. Moody has a similar view when it comes to the availability of vehicles. “It was once the case that there were just one or two small or very expensive electric vehicles. While EVs cost more in general, some individual models are more reasonably priced. For example there is the Kia EV6 and Chevrolet Bolt.” The Nissan Leaf is another cost-effective electric vehicle. EV drivers share almost the same credit profile as those who drive luxury vehicles. Satyan Merchant, senior vice president and automotive business leader at TransUnion, has seen increasing interest in EV financing, and an ensuing impact on the overall auto finance industry. TransUnion’s 2022 research found that out of 33 million consumers between 2019 to 2021 who originated new EV and traditional car loans The majority of EV borrowers had nearly identical credit profile to those who own high-end vehicles. People who owned conventional EVs held an average score for credit of 775, falling in the top category. They also had an average APR of 2.8 percent. This is lower than the average APR of 4.9 percent for all new cars for people with credit in the prime category. The competitive average APR of EVs isn’t just due to the high credit ratings of these motorists. Buyers are generally also making . The study also revealed the drivers are more inclined to begin their journey . In reality, more than one-third conducted research online on car types and makes. Merchant states, “Our research clearly shows that electric vehicle buyers have excellent credit risk profiles. However, the group has different preferences, such as a higher desire to shop around for vehicle financing by electronic means.” The greater interest is likely to be evident in new options for EV financing combined with an increasing number of vehicles that are available in the coming years. The options for green financing are growing. This expanding demand for electric cars has also led to advancements in financing. Although motorists can use or borrow to their electric vehicles, EV-specific lenders are becoming more popular and provide the customers with a personalized experience through . Alex Liegl, CEO of Tenet, discusses the company’s involvement with EV financing and its goal to make climate investment an easy decision. The Tenet method “gives customers the ability to manage upfront investment costs and also save money from down payments to pay for other expenses,” Liegl says. In addition the deferment option which shifts one portion of the cost to one final installment at the close of the financing. This allows for smaller monthly payments and a streamlined financing experience — but a large amount may 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 as well as electric vehicles, smart appliances and more.” Other businesses, such as EV-Savings, act as an online marketplace for loan prequalification, which is directly tied to incentives for EVs and green loans offered throughout your region. According to its website, drivers could save as much as $200 each month on monthly electric vehicle loan payment. Are EVs able to have lower costs over the life of their lease? So can you say that an electric vehicle is worth the cost? The good feelings that come from driving a car that is more sustainable in terms of environmental impact isn’t the only reason people are turning to EVs. Additionally, they can save money. While it is true that gasoline is used up during driving, in some instances, electric vehicles can be more affordable overall. According to a survey conducted in 2020, drivers of electric vehicles saved an average of and repairs throughout the duration of ownership according to Consumer Reports. This is due primarily to the distinct differences in maintenance and upkeep of EVs. They do not require oil maintenance and have more efficient powertrains. Those driving battery-electric vehicles and plug-in hybrid vehicles paid only 3 cents per miles over the course of their vehicle’s life, compared to 6 cents for traditional vehicles. However, driving electric isn’t all rosy. CNET, an affiliate of the Red Ventures company, reported on a study conducted of We Predict that found . While it is true that drivers do not have to pay the cost associated with maintenance, such as oil changes and routine inspections, EV parts are much more expensive when it comes time to repairs. This means that longer maintenance times and more expensive replacement parts can make driving electric just as, or pricier more expensive than driving gasoline-powered vehicles. Furthermore, electric vehicles are able to operate be more efficient than the traditional gas-powered option due to technological advancements, although the current demand for EVs helps to maintain prices. How do you finance an electric car The process of an electric vehicle is fairly similar to that of a traditional gasoline-powered car. It is essential for you to take the exact procedure that you would normally follow, in addition to understanding understand the terms available and the importance that your credit score and history carry. As mentioned that driving electric vehicles also carry potential state and federal benefits that you wouldn’t typically have access to. One of these is , an incentive of $7,500 that applies to new, certified plug-in or fuel cell electric cars. In 2023, new models may also be eligible to claim an federal tax credit . The car cannot be bought for more than $25,000. If the vehicle is eligible you may claim tax credits of up to 30 percent of the sale cost, with a maximum of $4,000. Tax credits for federal residents come with income limitations and vehicle requirements, so make sure that you and your future EV qualify before diving in. In addition, you may get the state tax credit based the location you reside in. Questions to ask yourself before purchasing an electric vehicle or operating an electric vehicle comes with an additional set of needs 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 take you for your daily commute as well as your daily travel. Energy.gov provides that the 2021 model year vehicles with possible ranges of up to 405 miles. Fortunately, drivers will likely deal with less “range anxiety” as vehicles catch up with technology available. However, it’s important to check your needs , taking into account your typical commute and expected 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. is typically less expensive on a monthly basis and typically comes with a warranty. If you are on the fence about driving electric you should consider leasing one to check out the experience and feel. 3. Have I access to charging stations for my vehicle in my neighborhood? Even though there is evidence that Electric Vehicle Council found that the majority of electric vehicle owners recharge at home, many drivers do not have the luxury of installing an EV charger that is Level 2. That’s okay. A lot of EVs can now be charged to charge from any electrical outlet, however it could take the whole night or more to achieve an entire charge. But, you might require a quicker charge at times. A lot of EVs take around 45 minutes to reach 80 percent battery capacity at a fast-charging station. To find out the locations you could be able to get a faster charge take a look at this map that shows charging stations nearby. Check that the charging stations you intend to frequent will work with your vehicle you’re thinking of buying. You should consider an electric vehicle when looking for your next vehicle If you’re wondering, is the electric car worth it? Similar to other luxury vehicles, EVs can carry higher upfront costs, and drivers need a strong credit profile to take advantage of the low rates of interest. However, as the market grows and more mid-tier options pop up, more drivers could consider an electric option. Are you among that 36 per cent of Americans considering electric? Moody recommends aiming to find the sweet spot by purchasing used and lightly used anything in the three to five-year range — to get a better price and a good amount of warranty protection.
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Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the details of 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 from late 2021. They are dedicated to helping readers gain the confidence to control their finances by providing precise, well-studied information that breaks down otherwise complex topics into manageable bites.
Auto loans editor
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