Author Topic: Evaluating cost effectiveness of buying an EV  (Read 1201 times)

studentloanobliterator

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Evaluating cost effectiveness of buying an EV
« on: January 17, 2020, 12:40:58 PM »
Hi all - I know electric cars have been discussed quite a bit here, so if this question has been asked, I'll gladly take down this post (or link to the original thread).

I'm considering selling my gas car and buying an electric. I work from home and do my errands with my bike, so I hardly use my car at all, which makes me skeptical that I even need to own a car.

About a year ago, I made a spreadsheet to compare the cost of owning my current car vs. changing to a Zipcar membership. Since comparing ownership vs. rental/subscription costs is an apples/oranges comparison, my goal was to get a rough estimate on a monthly/annual cost of ownership. Part of the challenge was sorting out time-based costs, such as insurance and registration, with milage-based costs, such as maintenance and gas. I came up with the following points:

  • Time-based costs:
    • Registration
    • Insurance
  • Milage-based costs:
    • Maintenance
    • Gas

I my annual mileage and the expected remaining miles on the car to estimate the remaining lifetime of this car in years, allowing me to calculate both the time- and miles-based costs. This gave me a rough idea of what this car should cost per month. Comparing to Zipcar, keeping the car ended up being better.

However, I've recently been learning about electric cars and how they're better at everything. I'm sold on the idea that whenever I'm in the market for a new* car, I'll be getting an EV.

Where I'm getting tripped up at this point is deciding between selling my car now, or keeping it until it breaks down and getting a new* EV at that point.

I love making spreadsheets. I want to be able to break this down in terms of costs, rather than make this decision on emotion. But I'm not sure what factors I should be considering to make this call.

What are your thoughts?

*new to me. I want a brand-new Tesla real bad but that's going to have to wait until I'm FIREd.

Hibernaculum

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Re: Evaluating cost effectiveness of buying an EV
« Reply #1 on: January 17, 2020, 02:38:18 PM »
At your mileage, your biggest hit is likely to be depreciation, even with a used car. As cool as electric cars are, they make less sense the fewer miles you drive.

Also worth keeping mind that the carbon emissions associated with manufacturing a car add up to about the tailpipe emissions you'd have exhausted, at what, 55k miles or something, and I'm not sure these embedded costs are much different between a ICE and electric vehicle.

On the plus side, I would imagine that the lower maintenance requirements of an electric vehicle would be a real plus. But what do I know? for the driving I do (about 6500 miles a year), I'm in an ICE minivan.

FINate

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Re: Evaluating cost effectiveness of buying an EV
« Reply #2 on: January 17, 2020, 02:51:10 PM »
What kind of car do you have? In most cases running your current car into the ground is the most cost efficient option, even if this means higher maintenance cost.

If you do decide to go EV, why not buy used? I'm seeing used Nissan Leafs with less than 100k miles for less than $10k. Yes, their batteries degrade faster than other EVs and the range is not great, but a great option for around town.

dandarc

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Re: Evaluating cost effectiveness of buying an EV
« Reply #3 on: January 17, 2020, 03:24:10 PM »
What kind of car do you have? In most cases running your current car into the ground is the most cost efficient option, even if this means higher maintenance cost.

If you do decide to go EV, why not buy used? I'm seeing used Nissan Leafs with less than 100k miles for less than $10k. Yes, their batteries degrade faster than other EVs and the range is not great, but a great option for around town.
Can confirm. Just did the "I just bought a car with 60K miles on it sight unseen" maintenance, including a new set of tires, and even including things like adding a circuit to our house for changing still under 10K on a 2014 leaf with 11 bars (~75-80 miles of range at 100%).

Best part so far has been the whole "It sort of feels like driving a spaceship" thing for me.

JLee

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Re: Evaluating cost effectiveness of buying an EV
« Reply #4 on: January 17, 2020, 03:37:09 PM »
I paid $19k for a 2017 Bolt EV last month.  238 mile EPA range and historically excellent battery longevity.  For a car that was $43k new, I'm quite pleased.

studentloanobliterator

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Re: Evaluating cost effectiveness of buying an EV
« Reply #5 on: January 17, 2020, 05:05:57 PM »
If you do decide to go EV, why not buy used? I'm seeing used Nissan Leafs with less than 100k miles for less than $10k. Yes, their batteries degrade faster than other EVs and the range is not great, but a great option for around town.

That would be my plan, to buy a used car. Perhaps my wording wasn't clear. "New car" = "new to me", not "brand spankin' new".

My question is more about what numbers should factor into the decision - my gut feeling is that it probably makes more sense to ditch the gas car and get a used Leaf, Bolt, or similar. But I want to be able to quantify the cost of ownership as well as I can to properly compare the two options.

As cool as electric cars are, they make less sense the fewer miles you drive.

I'm not sure that adds up, particularly if you're buying used. Would you mind elaborating? Because as far as I can tell, the main cost differences between the two are maintenance and gas/electricity costs (EVs winning by a landslide on both).

studentloanobliterator

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Re: Evaluating cost effectiveness of buying an EV
« Reply #6 on: January 17, 2020, 06:14:29 PM »
To give an idea of what factors I'm looking at, here's my math so far with my current car, a 2008 Corolla.

Annual Expenses:
Registration$60.00
Insurance$236.40
Total Annual$296.40

Mileage-based expenses:
Gas$0.12
Maintenance$0.13
Total Cost per Mile$0.24

Assumptions:
  • The gas $/mile is based on typical gas prices in my area ($3.50) and the Corolla's average mpg (30).
  • Maintenance is a tricky estimate. Most resources I can find give a cost in terms of years, assuming typical American driving habits. I drive significantly less than average, so a more meaningful number for me is cost per mile. I estimate my current maintenance cost per mile by dividing the number of miles I've driven this car (roughly 40,000) by the amount I've spent on maintenance so far (roughly $5000). This makes the assumption that the maintenance cost of a car is linear, but without better data that's the best I have right now - suggestions for a better way to estimate this are welcome!
So, from these two numbers, and my rough annual milage of 6,000, I estimate that my annual cost is $1,746.40. ( (6000 * 0.24) + 296.40 = 1746.40 )

This leaves several questions for me:
  • Are there costs that I'm leaving out?
  • What cost assumptions should I make about an EV?
  • How should depreciation factor into my 'cost of ownership' math? Do cars depreciate more from time or mileage? Does depreciation really matter if you're comparing to the cost of a different used car?
Part of the problem I have with this type of decision is that so much is based on speculation. And in cars I don't really know what assumptions are safe to make and where I'm oversimplifying.

nereo

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Re: Evaluating cost effectiveness of buying an EV
« Reply #7 on: January 17, 2020, 06:37:23 PM »
I was in a similar boat as you two years ago.

Bottom line: since you only drive 6,000 miles per year and since your current car already gets 30(+) mpg thereís little for you to save by buying an EV.  Your insurance and registration arenít likely to change (unless your state gives a rebate for EVs - some do, so check), and while maintenance on a newer EV is certainly going to be less, youíll still need breaks and tires.  Then of course, while you wonít be buying gasoline anywhere you probably will be paying for at least some of the electricity, so your ďfuelĒ cost is unlikely to be zero (unless your work has free charging - mine did!) and whether you can charge it during off-peak.

Some quick and dirty numbers suggest youíll save $500-700/year with an EV.  Unless you can sell yours and get a new car for a net cost of under $4k itís not a great financial decision.  That doesnít mean itís not a good decision for you. 

curiositydriven

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Re: Evaluating cost effectiveness of buying an EV
« Reply #8 on: January 17, 2020, 06:37:49 PM »
Recently purchased a nissan leaf (new) and considered this extensively. PM me if you have questions. The answer is highly dependent on the specific rebates / tax breaks offered in your area as well as some unique lease deals for some new EVs, as well as the cost of gas vs electric and the availability of free chargers in your area, as well as how many miles of ICE driving you can replace with a particular vehicle given it's range. I think you have to do these calculations yourself because they are so specific to your area etc.

As an example, in my area a new 2019 nissan leaf was <19k after utility, state and federal rebates. This was a good deal but actually the hyundai ioniq ev offered a lease deal for about $1500 per year (less than depreciation of even a very used car) right after I purchased. Used nissan leafs are a weird market - 1) battery degradation is a major issue, 2) they started from way less range depending on the year. So for many EVs the depreciation curve is very steep, since a 20% degraded battery on a car that started with 80 mile range is now 64 miles as compared with a new one offering 150.

In my area (one of the most expensive electric markets), cost per mile for an EV is about $0.06  per mile of electricity (0.24 dollars / kwh X 4 kwh/mile) as compared with ~$16 cents per mile gasoline. So I save estimated $0.1 per mile, or $1000 per 10,000 miles. I came to the conclusion that the Leaf would be similar in cost to a $12k average Honda ICE vehicle in 70,000 miles or so.

As someone mentioned, the more miles you drive the better a deal the EV is. The depreciation of the EVs is a bit different from ICE, as it seems to me more related to technology improvement and battery degradation (less clearly linked to miles) than to miles driven. If you're going to buy a used Leaf I recommend you purchase the LeafSpy app and connnector that goes with it that let's you check out the granular battery health of the car you're buying. Would recommend looking at the mynissanleaf.com and facebook leaf groups where there are many experts that can tell you how good a deal you're getting on a particular model. You might also consider plug-in hybrids which can replace most of your driving with electric but there's more and cheaper models and the battery degradation is less important if you're seeking the cheapest option.

Retire-Canada

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Re: Evaluating cost effectiveness of buying an EV
« Reply #9 on: January 18, 2020, 07:30:01 AM »

What are your thoughts?

I have an ICE truck that's 10 years old. I plan to drive it another 10-15 years to maximize the value I get from it and minimize its environmental impact. My next vehicle will be an EV. I'll keep that vehicle for its full life cycle as well. My truck is just in its sweet spot for depreciation/maintenance so selling it doesn't make sense to me. A significant portion of the pollution that truck will make in its life cycle happened before I drove it off the lot and the used market is not in need of another truck. So getting it rid of it is not sensible from an environmental perspective IMO.

Driving it as little as possible. Carpooling as much as possible and using the vehicle for its complete life cycle does make sense to me.

This has the benefit of forcing me to make good decisions with vehicles as I know the impacts will be felt for decades and EV tech improve exponentially over the next 10-15 years. When I do buy an EV the market will be far more mature and the product will be a lot better. That's ideal as I'll keep that vehicle 20-25 years.
« Last Edit: January 18, 2020, 08:50:39 AM by Retire-Canada »

Greystache

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Re: Evaluating cost effectiveness of buying an EV
« Reply #10 on: January 18, 2020, 08:01:26 AM »
We have two older ICE cars (2003 and 2005). We plan to buy a used electric vehicle as soon as one of the ICE vehicles dies. By die, I mean that they would require a repair that exceeds their current value.  So far they have been amazingly reliable and cheap to maintain. Like you, we don't put many miles on either car except for the occasional road trip and sometimes we rent a car for that purpose. It is very cheap to operate an old car. Registration is cheap, insurance is cheap (we stopped carrying collision and comprehensive) and so far maintenance has been cheap. I am able to do most of the work myself. In the last 5 years the most expensive thing has been a new starter. Regardless of how inexpensive fuel and maintenance is on an electric vehicle, it can't beat a reliable old ICE car that is not driven very many miles.

curiositydriven

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Re: Evaluating cost effectiveness of buying an EV
« Reply #11 on: January 18, 2020, 08:13:02 AM »
Re: the environmental benefits of EVs, there are many myths about how the manufacturing or electric generation co2 costs relate to the life cycle value of switching. This has been studied extensively - https://theicct.org/sites/default/files/publications/EV-life-cycle-GHG_ICCT-Briefing_09022018_vF.pdf. The battery does involve extra co2 costs to produce but these are dwarfed by the ongoing costs of driving an average ICE vehicle. Retire-canada, you can see from the pdf report that the manufacturing is about 15% of your total lifecycle Co2 emissions for an average ICE vehicle.

If you want to look up the CO2 emissions for EV for your specific area based on the source of electricity, try this tool - https://evtool.ucsusa.org/ . CO2 emissions per mile vary by a factor of 2 or so depending on where you get your electricity. In my area it's about 100 grams per mile for an EV, in West Virginia its 200 (ICE vehicle is 380).

I do agree with everyone that if you're comparing driving a <5k car with driving a new EV, there's no way it will be cheaper to drive the EV unless you get an early model leaf which has it's own issues with range. I think the simple rule of thumb would be that if you're making a decision to drive the vehicle for 50k miles, the electric costs of the EV would be 5k cheaper than gas (but do the math in your area). So it's only the cheapest option if the price is within 5k of the gas vehicle you're comparing it to. But of course there are other values to consider (environment, etc).

curiositydriven

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Re: Evaluating cost effectiveness of buying an EV
« Reply #12 on: January 18, 2020, 08:24:42 AM »
To me, the ultimate mustachian EV car would be to wait around for a lease deal like this - https://www.greencarreports.com/news/1125981_at-79-a-month-is-this-the-best-electric-car-lease-deal-of-2019 . It's about 4k of expense over 4 years, and if you're driving close to their limit of driving you'd be saving $3k of gas per year (more if you have a free charger or cheap local electricity). So I think at that point your total cost of ownership can come pretty close to the very cheapest vehicles.

Deals like this do pop up now and again on EVs. A lot of these car manufacturers are trying to transition pretty unsuccessfully and they have products (like the Ioniq EV) that they end up dumping at the end of the year. Another one to consider is used plug-in hybrids. If you can drive almost all your miles on electric mode you can get the fuel savings of EV without the range issues.


FINate

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Re: Evaluating cost effectiveness of buying an EV
« Reply #13 on: January 18, 2020, 06:05:18 PM »
This site does a pretty good breakdown comparing EV and ICE operating costs: https://www.corporatemonkeycpa.com/2017/12/09/how-to-calculate-your-ev-cost-per-mile/

Depreciation is the big unknown because EVs and battery tech are evolving so rapidly. EVs depreciate more like computers than vehicles and the author's recommendation therefore is to lease.

Quote
You can lose your shorts on your EVís depreciation, and thatís not going to make up for a small annual savings in fuel costs.  This is why I recommend leasing an EV, rather than purchasing one outright, until the battery technology improves and there is a more robust market for used electric vehicles.

Of course, you probably don't want to lease an old EV so this doesn't apply to your situation, but it brings up a good question: Will Leafs and Bolts keep plummeting in value, or will depreciation flatten out? It's anyone's guess at this point.

For how little you drive it's going to be very difficult for an EV to beat your 30 MPG ICE. Guessing your 2008 Corolla has about 100k miles or less and is paid off. If you keep it maintained you should get at least another 100k miles out of it. If you keep driving 6k miles a year then that's another 16 years! EVs should be very well established by then, along with a mature used market. 

curiositydriven

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Re: Evaluating cost effectiveness of buying an EV
« Reply #14 on: January 18, 2020, 07:43:16 PM »
The depreciation is a serious issue and worth studying in detail before buying. Here's the analysis I've done, plugging in the price you are offered to sell to carvana for base model nissan leafs of different years (6k miles/year):
2019 new nissan leaf s - $30k --> 22.5k with federal credit --> $19k with state credit + utility rebates
2019 nissan leaf s (40 kwh battery) with 4k miles - $18.5k sell to carvana
2018 nissan leaf s (40 kwh battery) with 10k miles - $16.5k sell to carvana
2017 nissan leaf s (30 kwh battery) with 16k miles - $11.5k sell to carvana
2016 nissan leaf s (30 kwh battery) with 22k miles - $11.5k sell to carvana
2016 nissan leaf s (24 kwh battery) with 22k miles - $9.8k sell to carvana
2015 nissan leaf s (24 kwh battery) with 28k miles - $8.7k sell to carvana

You could look at these data a few different ways. I look at it as - the price of the used EV is primarily a function of the range of the vehicle. The last few years of depreciation for the 2018 leaf is pretty good, whereas the depreciation for the 2015-2017 year leafs is bad. That's the opposite of what you'd normally expect for an ICE vehicle. It could be that the 2018 will get drastically depreciated as people switch to 200+ mile range EVs in the next 1-2 years, or it could be that its 150 mile range is good enough to avoid that depreciation.

MMM mentioned buying a 2016 30kwh battery leaf for $14k new in a previous post (https://www.mrmoneymustache.com/2016/10/04/so-i-bought-an-electric-car/). So for someone in that position, the depreciation to a carvana sale of $11.5k over 3 years is very small. It's a complicated analysis because the prices people have been paying for these vehicles new are really all over the place depending on your area.
« Last Edit: January 18, 2020, 07:50:56 PM by curiositydriven »

BicycleB

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Re: Evaluating cost effectiveness of buying an EV
« Reply #15 on: January 19, 2020, 12:44:03 AM »
Great answers on this thread, especially about the variance of prices and the importance of depreciation.

Factors missing from the calculation:
1. Capital (if you invest $10,000 it should make $400/year using the 4% rule, $500 using the 5% rule of thumb for typical accumulation earnings... put $10,000 into a car and you lose that income)
2. Any expense of installing chargers (I live in a house with no external outlet at all; what would your cost be?)

Fwiw, I too drive about 6000 miles/year (4800/yr in last 2 years) and own a 10 year old ICE. Have studied for my own situation, concluded that EV not yet a reliable savings financially. Low miles of driving already saves most of the fuel cost!

To it seems that the upcoming years will bring many changes and opportunities in the auto market. My suggestion is delay any action that is not screamingly excellent. In the meantime, minimize miles and look for opportunities.

PS. To me, a creative good option would be work out a sharing arrangement with someone else who is buying or has bought an electric vehicle. Am circulating this idea in my neighborhood this year; already found a neighbor who is considering a Leaf purchase, and shares a vehicle with someone. Also, I hear ebikes can be cost effective.

curiositydriven

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Re: Evaluating cost effectiveness of buying an EV
« Reply #16 on: January 19, 2020, 05:15:47 AM »
You can trickle charge your vehicle from a regular 110V plug without paying for anything extra (charges at 4-5 miles per hour). Comparing a 2019 leaf for 19k vs a 2013 nissan rogue for 11k:
Fuel: -600/year EV
Maintenance: -500/year EV
Depreciation: +1000/year EV (2k vs 1k/year estimate)
Cost of capital: +320/year EV
---------------------------
+220/year EV , total EV more expensive

Overall, I think the conclusion I reached personally is that it really depends what you're comparing it to. If you get a good deal on the EV  it could be ballpark as expensive as a 5-8k cheaper ICE vehicle over 5 years due to the fuel costs/maintenance. New leaf for 19k is close to a borderline mustachian vehicle like a late model used 10-13k, but not a really hardcore vehicle like a sub-4k toyota. You could buy a 2016 nissan leaf for 10-11k which has a 8 year/100,000 battery warranty, and might push you closer to that territory but there are some unknowables (what's the lifetime of the battery after 8 years? how much does it cost to replace?) and a car with a more limited range has to work for your commute.

But there are other benefits - you get a newer vehicle with some safety features, and you'd be saving 7-8 tons of CO2 emissions over 60,000 miles and contributing to an important environmental transition. That depends on your values and your financial situation.

StashingAway

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Re: Evaluating cost effectiveness of buying an EV
« Reply #17 on: January 19, 2020, 06:11:12 AM »
As others have mentioned, you should add these factors to your cost analysis:
  • Cost to install charging
  • Depreciation. This will be significantly higher in any EV you buy (even moderately used) than your Corolla. Batteries are expensive to replace and this gets factored in when people buy used EVs
  • Opportunity cost

Once you do that math, you will have a clearer picture of when to switch. At your mileage, I suspect it will be in favor of keeping your current car (it certainly was for me, to my dismay!)
« Last Edit: January 19, 2020, 06:14:46 AM by StashingAway »

nereo

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Re: Evaluating cost effectiveness of buying an EV
« Reply #18 on: January 19, 2020, 06:28:09 AM »
Depreciation only matters if you are planning on selling the car later as opposed to driving it until the end of its useful lifecycle and selling for scrap.

As an example - if you there are two car choices which both cost $20k, and one will be worth $5k in 5 years and the other $12k .... that difference in depreciation is irrelevant if the owner is going to keep the car for 15+ years.  Calculate the end-value at 15+ years if you like, but for almost all extensively driven cars it will be roughly the same.  Despite vastly differing depreciation curves, (almost) all cars go to (almost) zero.

curiositydriven

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Re: Evaluating cost effectiveness of buying an EV
« Reply #19 on: January 19, 2020, 08:20:52 AM »
Also, would point out that cost to install charging is zero. You don't need a fast charger at your house and can use a regular plug if you have one in the garage/outside.

StashingAway

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Re: Evaluating cost effectiveness of buying an EV
« Reply #20 on: January 19, 2020, 08:26:07 AM »
Depreciation only matters if you are planning on selling the car later as opposed to driving it until the end of its useful lifecycle and selling for scrap.

That's a good point. I suppose I use it as an indicator of current utility of the car (at least for the types of vehicles that we're talking about). But it's not a direct cost if you don't sell the car.

For instance, a $20K EV selling for $10K a few years later is in big part due to the degradation of the batteries and possibility of need of replacement. Whereas a $10K Camary selling for $7K in the same timeframe is because the Camary has a more reliable reputation and probably lower future ownership costs.

So I guess what I'm really saying is that long term cost of ownership/reliability might be a different number for the EV compared to the current car.