How To Decide Whether You Should Buy An Electric Vehicle

The Inflation Reduction Act (IRA), with an estimated price tag of $369 billion, has many provisions that make electric vehicles more attractive to motorists, but it’s not going to be the right option for every new car buyer. The public might be wondering whether it is finally time to purchase an electric vehicle or whether it is better to wait.

While the higher upfront costs of the EVs relative to traditional vehicles might be an initial turnoff, a savvy consumer will be paying more attention to the total cost of vehicle ownership. According to the U.S. Department of Energy, EVs cost about 4 cents less per mile in maintenance costs, as there is no engine oil, timing belt, oxygen sensor, or spark plugs to take care of. Compared to a gasoline vehicle, EVs’ cost of ownership might equal that of a gas vehicle after 5 to 8 years of use even without a subsidy, as suggested by a study published in a leading peer-reviewed journal. Recouping higher upfront costs will happen sooner if gas prices rise, or if electricity prices remain low, or a short-range EV model is used. In addition, EV enthusiasts point to such perks as the use of HOV lanes, faster acceleration, noiseless rides, and less time spent at the body shop.

There is another aspect to the EVs that makes them unique: in contrast to a depreciating asset like a new toaster, EVs can potentially earn their owners handsome returns once vehicle-to-grid (V2G) applications become more mainstream. These allow the EV owner to sell the electric juice from their vehicle’s battery back to the grid when demand is high.

Who Should Consider Purchasing The EV?

Fans of Tesla and electric GM vehicles can rejoice because the IRA lifted a cap that previously disqualified these EVs from tax credits, after the manufacturer has sold more than 200,000 vehicles. Qualified EVs are now eligible for the government’s tax credit of $7,500. The IRA also authorized a new tax credit of $4,000 for used clean vehicles, up to a maximum sales price of $25,000. However, some new restrictions also apply. The IRA introduces income caps for taxpayers to be eligible and excludes high earners (e.g. $150,000 for joint returns and half of that for single filers).

Restrictions do not stop there. For vehicles to be eligible, the IRA specifies where battery components and critical minerals used in their production should be extracted from or processed. As outlined by the Congressional Research Service, the qualifying vehicles must be assembled in North America, with the stated purpose of supporting a U.S. battery supply chain. Final assembly for each car can be easily checked by entering the vehicle identification number (VIN) and model year into a VIN Decoder.

If your household income and your vehicle qualify for a rebate, there is another important point to consider: access to charging infrastructure. Charging can happen at home, at work, and in public places, and there are a number of apps that map available charging locations. It is equally important to have access to a clean electricity mix, which would maximize the environmental benefits of owning a clean vehicle. There are many options for sourcing clean(er) electricity, ranging from putting solar panels on your house’s roof, to purchasing clean power from a utility, or subscribing to a community solar project.

An EV may make the most sense as a second car, one used less often for long-distance driving. For shorter round trips, EV owners can avoid feeling range anxiety, the fear of running out of battery while on the road without a place to recharge nearby.

Who Should Wait?

Despite the benefits above, there are a number of solid arguments in favor of waiting on an EV purchase. These could be that charging circumstances are less than ideal. Additionally, the IRA tax credit provisions are unlikely to go away for another 10 years, and there is no official cap on the amount of tax credits that can be allocated or the number of vehicles that can be purchased with a tax credit. At the moment, even though electric vehicle model offerings are expanding every year, the EVs tend to serve urbanites without many children and are geared toward the luxury car segment. There might be a wider selection of family-friendly models on the horizon.

Another big reason to wait is the expectation of a breakthrough in battery technology that could drastically increase the range of EVs or decrease their cost. So far, it has been observed that battery technology does not follow the famous Moore’s law, like computer chips did when their performance increased exponentially over time.

It may also be the case that someone’s electricity is too expensive to make purchasing an EV make sense. For example, a study conducted in Los Angeles showed that the electric cars may be economical for only about 17% of area drivers, but might save money for households in the outer-ring suburbs of LA County. This is largely due to electricity costs, which continue to play a swing role in determining the desirability of EV ownership.

There are many reasons to adopt an EV today, including generous tax benefits, lower maintenance costs and, of course, benefits to the environment. That said, the technology is improving rapidly and not every driver has easy charging access or access to clean energy to power the vehicle. At the end of the day, the best option will vary from driver to driver. Nevertheless, the direction the country is heading in is clear: as clean vehicle sales continue to outpace the traditional cars, there will be increasingly more EVs on the road.