How Affordable Are EVs Right Now Across the US?
If you’ve been waiting for the price of EVs to go down so you can finally join the electric revolution, you’ll be disappointed to know that they’re more expensive than ever. According to Kelley Blue Book, the cost of the average new EV fell by 0.6% in 2022. The bad news is that the average MSRP for an electric vehicle is still $61,448.
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While that’s painfully expensive, it’s not truly representative of the norm. Automakers recently introduced several ultra-luxury models that artificially raised the average sticker price for the entire industry. Edmunds recently profiled a half-dozen EVs with MSRPs under $34,000, four of which have asking prices that start in the $20,000s. But even that much more reasonable number might be significantly higher than what you’ll actually pay — depending on geography.
The federal government has long offered tax credits of up to $7,500 for the purchase of a qualifying EV. That’s a significant incentive because — unlike a deduction that only reduces your taxable income — a credit lowers your tax bill on a dollar-for-dollar basis.
The catch was that once a manufacturer sold 200,000 EVs, the credit began phasing out to $0. Predictably, the most popular models — like those from Tesla and General Motors — lost the credit first, but that has since changed.
The Inflation Reduction Act of 2022 lifted the 200,000-vehicle threshold, so the most in-demand EVs are eligible for the credit once again. But the legislation also limited the credit only to vehicles assembled in North America, which takes most imports off the table. Finally, the act created a new credit of up to $4,000 for EVs that enter production starting on Jan. 1, 2024.
Just as savvy shoppers can stack a manufacturer’s coupon with store coupons at the supermarket, EV buyers can combine federal credits with any incentives their state might offer — so where you buy your EV has a lot to do with what you’ll pay. More on that soon.
For now, forget what you’ve read about the long-term savings that EVs can offer — ownership costs like lower maintenance and repair bills — and focus on what you’ll actually pay to buy one.
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Last May, Energy Innovation (EI), a nonpartisan energy and climate policy think tank, released an illuminating study that evaluated the real cost of buying and owning an EV from state to state. Unlike the many studies that gauge long-term EV ownership costs, the EI study broke down what it actually means to buy one.
Since 85% of new-vehicle buyers finance their purchase, they’re far more concerned with what they’ll pay per month to own one than how much they’ll save compared to gas cars over long periods like 10 years. The study estimated real monthly and annual ownership costs during the crucial loan-repayment period by evaluating the following factors across all 50 states and Washington, D.C.:
- Purchase price
- Maintenance costs
- State rebates
- Federal tax credits
The results showed that the real-world cost of what you’re likely to pay per month during the financing period is lower for EVs than for comparable gas vehicles in 48 states plus the District of Columbia. The two duds were Hawaii and Rhode Island, which have expensive electricity and stingy state EV incentives.
First, the obvious. The cost of gas has fluctuated quite a bit since EI published its study. But the price per gallon was well under its 2022 high back then and it’s still above its previous lows today. And since gas is only one factor, the results still closely mirror the reality on the ground.
The study showed that New Jersey is far and away the cheapest state to buy an EV. Electric cars are 15.3% cheaper there than comparable gas vehicles. The other top states are:
- Washington: 10.5% less expensive
- Delaware: 9.85% less expensive
- Oregon: 9.4% less expensive
- California: 8.06% less expensive
- Nevada: 7.53% less expensive
- Colorado: 7.25% less expensive
While some things have changed in the months since EI published its study, the root causes of geographic price disparity in EV ownership have not.
For context as to just how big a role location plays in the cost of buying an EV, you don’t have to look any further than No. 1 New Jersey, which rolls out the red carpet for anyone willing to go electric.
The Charge Up New Jersey Program offers up to $4,000 for the purchase or lease of a new EV. Unlike so many incentives that come back to you as rebates or credits at tax time, the New Jersey discount is a point-of-sale incentive that you can apply directly at the dealership at the time of purchase. To date, the state has paid out more than $57 million to more than 13,600 EV drivers.
Also, many utilities have big incentives throughout the state. PSE&G, for example, offers $1,500 toward the installation of a Level 2 charger and off-peak charging discounts to EV owners.
Finally, New Jersey exempts the purchase of EVs from state sales tax, which is 6.625%. That alone can knock thousands of dollars off the purchase price — here, too, you get the discount upfront at the point of purchase, not as a rebate or credit later on.
Presuming a New Jerseyan qualifies for the full $7,500 federal credit, the generous helping of gravy that the state pours on can quickly add up to five-figure savings on the purchase price alone — money you don’t have to finance or put down — with thousands more in installation and electricity discounts down the line.
Conversely, West Virginia offers just a $250 utility rebate for the purchase and installation of a Level 2 charger. Wyoming, on the other hand, has no incentives at all and is even considering banning the sale of electric vehicles outright to preserve its fossil fuel industry.
Which Other States Lower the Cost of Going Electric?
According to Kelley Blue Book, the following states offer incentives of at least $1,000, although many of them give away several thousands in credits, rebates, tax exemptions and utility discounts that are nearly as lucrative as those you’d get in New Jersey:
- Maryland (starting in 2023)
- New Hampshire
- New York
- Rhode Island
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