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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 mission is to help you make smarter financial decisions by offering you interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and analyze data for free - so that you can make informed financial decisions. Bankrate has partnerships with issuers, including 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 this site, including, for example, the order in which they appear within the listing categories, except where prohibited by law. Our mortgage, home equity and other products for home loans. But this compensation does have no impact on the information we provide, or the reviews you see on this site. We do not include the vast array of companies or financial offers that may be available to you.
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7 minutes read. Published on February 27, 2023.
Authored by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ways and pitfalls of taking out loans to purchase an automobile.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to manage their finances through providing precise, well-researched and well-researched content that dissects complex topics into manageable bites.
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Financial burdens of ownership beginning with the purchase until refilling at the gas station, hit record highs for drivers over the course of the year. While gas prices have crept down -- a gallon averaged $3.38 on Feb. 24 as per AAA -the cost of financing a car is becoming more expensive as . Drivers pay an average of $700 per month for new car financing, and $525 for vehicles used in 2022's third quarter, . With steep costs to fill up and finance, plus the constant worries about the climate, many drivers are looking for a new option. You might be asking "Should I invest in an electric car?" And you wouldn't be the only one. Electric vehicles (EV) market share has been on the rise over the last few years, and TransUnion believes that the market share of EVs will increase to . However, the cost upfront of electric vehicles could not be suitable for all drivers. Should I buy an electric car? The decision to purchase an electric vehicle should be approached with the same care that you would choosing the model and make of the next vehicle. Some people find the convenience of paired with minimal maintenance can make the cost of the price worth it. "From the point of view of a pure consumer viewpoint, 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. It is quicker and more efficient, and electric vehicles come with amazing features, like the ability to heat up and cool your car's interior prior to hitting on the highway." In the event that you are not a full EV, a hybrid or plug-in model could be more efficient than conventional gas models, while saving you money than an EV. According to Moody states, they tend to carry a lower price tag as well. They "function as an electric vehicle in the daytime, consuming gas only for lengthy trips." This is why they are a good choice for people who want to drive electric but who aren't yet ready to commit fully. The electric car market has seen tremendous innovation over the past two years and is expected to continue to grow. While initial costs have traditionally been high, they're dropping as more options are made accessible and established brands move into the market for electric cars. In the U.S. auto market is moving towards electric vehicles. Record-high gas prices may have helped to increase sales of electric vehicles. Electric vehicles accounted for 5.7 percent of new vehicle registrations in Q2 2022, according to . That may not seem big however it's an impressive increase over the 1.5 percent share that electric vehicles accounted for in Q2 2018. The growing demand for electric vehicles has led to advancements in available financing such as tax credits and tax rebates. This increased market is one of the primary motives to think about buying an electric vehicle. Although Tesla currently dominates the market, TransUnion predicts the luxury brand will fall of the percent of market in 2025, due to the increasing number of innovative and more mainstream makes entering the space. Moody offers a similar outlook in relation to vehicle availability. "It was once the case that there were just a handful of very small or expensive electric vehicles. Although EVs tend to be more costly as a whole however, certain models are less expensive. For instance there is the Kia EV6 and Chevrolet Bolt." The Nissan Leaf is another cost-effective electric vehicle. EV drivers have nearly the exact same credit profiles as those who drive luxury vehicles. Satyan Merchant the senior vice president and chief of business for automotive at TransUnion has noticed a growing popularity in EV financing, which has a direct impact on the overall auto finance industry. TransUnion's 2022 study reported that from the 3 million people between 2019 to 2021 who financed new EV and traditional car loans the majority of EV-related borrowers had nearly identical credit profiles as those who drive luxurious cars. Those driving regular EVs were able to get an average score for credit of 775, which falls into the category of prime. They also had an average APR of 2.8 percent. This is less than the median APR which was 4.9 percent for all new cars that are available to people with credit in the prime category. The competitive average APR of EVs isn't just due to the high credit profiles of these drivers. The buyers are also generally making . The study also revealed motorists were much more likely commence their . In fact over one-third of them did online research on the vehicle makes and models. Merchant states, "Our research clearly shows that electric vehicle buyers have good credit risk profiles, but this group also has varying preferences, such as a higher desire to shop around for vehicle financing by digital channels." This larger appetite is likely to be evident in new choices for EV financing, as well as an increasing number of vehicles that are available within the next few years. Options for eco-friendly financing are increasing. The growing marketplace for electric vehicles led to advancements in financing. Although drivers can utilize or lending for electric vehicles, lenders specifically for EVs are becoming more popular and provide customers with a customized experience by offering . Alex Liegl, CEO of , comments on the company's efforts on EV financing and its goal to make climate investing an easy choice. The Tenet approach "gives customers the ability to control upfront costs for investment and to save the cash for down payment to be used for other expenditures," Liegl says. Along with this the deferment option that transfers a portion of the price into one final payment at the closing of the term of financing. This allows for lower monthly payments and an easy financing experience- but a large amount might be due by the end of the term. The aim, Liegl says, is to "help customers completely electrify their lives by making environmentally sustainable home improvements less expensive, such as installing solar panels, battery backup, smart appliances, EV charging and more." Other businesses, such as EV-Savings, act as a marketplace for loan prequalification that is directly linked to incentives for electric vehicles and green loans offered within your particular state. According to their website, drivers could save as much as $200 each month on monthly EV loan payment. Are EVs able to have less cost over their lifetime? Therefore, is an electric car worth it? The satisfaction that comes from driving a car that is more sustainable for the environment isn't the only reason people are turning to electric cars. Additionally, they can reduce costs. Although it's true that gasoline is used up when driving, in some situations, driving electric could be less expensive in the long run. In a 2020 survey, electric car owners saved an average of and repairs over the course of their ownership according to Consumer Reports. This is due in part to the different methods of upkeep that come with EVs. They do not require oil changes and use a simpler powertrain. Drivers of battery-electric vehicles and plug-in hybrids spent just 3 cents per mile over the life of the vehicle in comparison to 6 cents for traditional vehicles. But driving electric isn't completely rosy. CNET, a Red Ventures company, reported on a 2021 study from We Predict that found . Although it's true that drivers do not have to pay the extra cost of maintenance, such as oil changes and routine inspections, EV components are more expensive when it comes to repairs. This means that more maintenance hours logged combined with more expensive replacement parts can result in electric cars being more expensive, or even less, than driving gas-powered vehicles. Moreover, electric cars can accelerate faster than gas-powered cars because of the speed of technological advances however, the present demand for EVs is helping to stabilize prices at the moment. How do you finance an electric vehicle process of an electric vehicle is a lot like the process of financing a conventional gas-powered vehicle. It is crucial for you to take the exact procedures that you would normally follow, in addition to understanding available terms and understanding the weight your credit scores and your history are able to bear. As previously mentioned the electric vehicle also comes with federal and potential state benefits that you wouldn't typically have access to. One of them is an incentive of $7,500 which is available to all newly-built, approved plug-ins as well as fuel-cell vehicles. If you buy a new vehicle in 2023, you may also be eligible to get the Federal tax credits . The vehicle cannot be purchased at a price greater than $25,000. If it qualifies you may claim tax credits of up to 30 percent of the sales price, which is capped at $4,000. The federal tax credits are both accompanied with income restrictions and vehicle requirements, so be sure you and your potential future EV are eligible before you begin. In addition, you may get an income tax credit for your state based on the state you live in. Consider these questions before purchasing an electric vehicle as well as operating an electric car is a different set of requirements which you may not have encountered before. Think about these issues. 1. What is the range of the vehicle? It is important to check the distance your vehicle can take you for both your typical commute as well as your daily travel. Energy.gov reports that the 2021 model year vehicles with a potential range of up to 405 miles. It is likely that drivers will be able to manage lower levels of "range anxiety" as vehicles catch up with available technology. However, it's important to assess your needs by factoring in your usual commute as well as anticipated leisure activities. 2. Should I consider leasing before purchasing an electric car? "Leasing an electric vehicle can be a good way to try out the waters of electric car ownership," Moody says. The cost is typically lower in a month-to-month arrangement and usually includes a warranty. If you are on the side of electric vehicles you should consider leasing one to test the feeling and the driving experience. 3. Are I able to connect to car chargers in my region? Even though the Electric Vehicle Council found that around a third of electric vehicle drivers can charge at home, a lot of drivers don't enjoy the convenience of installing a Level 2 charger. That's okay. Many EVs are now able to charge at any outlet that is electrical, but it could take the whole night or longer to get a full charge. That said, you might require a quicker charge at times. Many EVs require about 45 minutes to get to the 80 percent capacity of their batteries at a fast-charging station. For information on the locations you could have the chance to receive a faster charge, check out , which maps out charging stations close to. Check that the charging stations you plan to use can be used with the vehicle you're thinking of buying. Consider an EV when shopping for your next car. Is the electric car worth it? Similar to other luxury vehicles, EVs can carry higher cost upfront, and drivers need solid credit scores to enjoy low interest rates. However, as the industry expands as more options for mid-tier vehicles pop up, more people could look into electric alternatives. Are you one of that 36 per cent of Americans thinking about electric? Moody recommends aiming to find the sweet spot by purchasing used and lightly used something that falls in the three- to five-year range to benefit from a lower cost and an adequate quantity of warranty coverage.
Writen by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ways and pitfalls of using loans to buy the car they want.
Editor: 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 confidence to control their finances through providing clear, well-researched information that is broken down into complex topics into manageable bites.
Auto loans editor
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