Personal Finance
How EVs and gasoline cars compare on total cost
David Paul Morris/Bloomberg via Getty Images
Electric vehicles may save consumers money over the long-term relative to traditional gasoline-powered cars.
While EVs still tend to cost more upfront to purchase, recurring charges for fuel and maintenance are generally cheaper — adding up to a total lifetime cost that can be lower than that of a gas vehicle, experts said.
However, whether or not EVs beat gasoline cars on total cost depends on factors such as EV model, where the buyer lives and how they charge the battery, research shows.
EVs are expected to more easily reach cost parity with gasoline cars as battery prices continue to fall, experts said.
Some EV prices ‘starting to break even’ with gas models
The average consumer paid about $56,000 to buy a new EV in June 2024, relative to $49,000 for a gas-powered vehicle, according to Kelley Blue Book.
That financial gap is narrowing, however.
Car makers have been cutting EV prices, and the federal government also offers a tax credit up to $7,500 to qualifying buyers of new EVs. Consumers can opt to receive that tax break as an upfront discount on the car.
States and utilities may also offer tax breaks to defray the cost of the vehicle purchase or charging infrastructure.
“The expectation is EVs will continue to get cheaper, largely driven by [lower] battery costs,” said Maxwell Woody, a researcher at the University of Michigan’s Center for Sustainable Systems who co-authored a recent study on EV and gasoline car costs.
Relative to gas car prices, some smaller EVs “are already starting to break even, even without the incentives,” Woody said.
But most people still pay an EV premium, said Chris Harto, senior transportation and energy policy analyst at Consumer Reports.
For buyers, “it’s really a question of, what’s the [long-term] payback on that extra cost?” Harto said.
Why EVs may win out in the long run
Owning an EV saves the typical driver $6,000 to $12,000 over the life of the vehicle, relative to a comparable gas-powered model, according to a Consumer Reports study published in 2023.
“If anything, the [total] savings might be a little bit better today,” Harto said.
EVs are less likely to need repair and maintenance, partly because they have fewer moving parts than cars with conventional fuel engines, according to the U.S. Department of Energy.
It’s also “significantly cheaper” to refuel an EV due to its higher energy efficiency and generally lower electricity prices relative to gasoline, Woody said.
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The Consumer Reports study examined six popular EVs that qualified for a federal tax credit, Harto said. Tax breaks from states, municipalities or utilities weren’t included.
Similarly, a 2024 J.D. Power study found EVs beat their gas-powered counterparts on total cost over a five-year ownership period in all states except Maine and West Virginia.
EV buyers in Colorado, Illinois, Nevada and New Jersey would save more than $8,000 over that period, according to the analysis, published in Automotive News last month.
Why geography matters
The J.D. Power analysis highlights a key caveat: The relative financial benefits derived from an EV depend heavily on case-by-case factors like a driver’s geographical location.
For example, the total lifetime cost of a midsize electric SUV with a 300-mile range can vary by $52,000 — or nearly 40% — depending on location, according to the University of Michigan study.
Such disparities are largely due to regional differences in prices for electricity and gasoline, Woody said.
“In places like Texas with particularly low gas prices, it’s harder for an EV to break even,” Woody said.
Additionally, EVs generally make more financial sense for those who recharge their batteries at home, Woody said. Public charging generally costs more, he said.
This is especially true in areas where EV owners can take advantage of lower residential electricity prices during off-peak hours, like overnight charging, Woody said.
“If you don’t have access to home charging, it’s going to be really hard to save money with an EV,” he said.
Home charging access reduces the lifetime cost of a 300-mile midsize SUV by roughly $10,000, on average, and up to $26,000, according to the University of Michigan study.
“Cities that are particularly friendly for [EVs] have several things in common, including a low cost of electricity (or at least time-of-use pricing that includes an option with low prices), high gasoline prices, moderate climates, and direct purchase incentives,” according to the study, which analyzed costs in 14 different U.S. cities.
Overall, small and low-range EVs (with about 200 miles) had a less expensive total cost of ownership than similarly sized gas vehicles across all cities, even without tax incentives, the study found.
Likewise, longer-range EVs with a roughly 300-mile range, especially for smaller vehicles like compact cars and midsize sedans, “can be comparable” without incentives. However, the longest-range models — about 400 miles — generally aren’t yet cost-competitive with gasoline vehicles, even with subsidies, it found.
A trader wears a Trump hat as he works on the floor of the New York Stock Exchange during the opening bell on Nov. 6, 2024.
Timothy A. Clary | Afp | Getty Images
On Nov. 5, the presidential election handed a decisive victory for President-elect Donald Trump. In the days that followed, the markets soared.
A “Trump trade” led to new index highs for the S&P 500 and Dow Jones Industrial Average, lifted with the help of certain sectors expected to do well under the president-elect’s second term.
As of Monday, the postelection market fervor had started to subside to preelection levels.
Yet, some experts say they are seeing a renewal of so-called animal spirits.
“Animal spirits” is a term first coined by economist John Maynard Keynes and refers to the tendency for human emotion to drive investment gains and losses.
Some experts say animal spirits are a sign of consumer confidence. However, the phenomenon can also be trouble for investors if they take on “excessive risk,” said Brad Klontz, a psychologist and certified financial planner.
“It’s essentially why dead investors outperform living investors, because dead investors are not impacted by their animal spirits,” Klontz said.
Research has shown dead investors’ portfolios tend to outperform, since they are left untouched because they are less likely to be influenced by emotional decisions, such as panic selling or buying.
Investors may be excited or fearful
The recent market runup was not prompted by individual investors chasing the market to a meaningful extent, according to Scott Wren, senior global market strategist at Wells Fargo. Individuals, who were split in their election choices, are also divided in their investment outlook, he said.
“Depending on who your candidate was, you may be excited about the future or fearing the future,” Wren said.
Instead, it has been professional traders and money managers — who couldn’t sit on cash when the S&P 500 index was setting new records every two or three days — who have helped drive the markets higher, he said.
There is also big-picture excitement going into 2025, according to Wren, with expectations for lower taxes, less regulation and reasonable levels of inflation. However, the U.S. economy might have a couple of quarters of slower growth in 2025, he said.
“We’re not going to have a recession,” Wren said. “We think that’s very unlikely.”
‘Nobody is immune’ to investing missteps
Ideally, investors ought to sell stocks when they are priced high and buy when they are low.
But research consistently finds the opposite tends to happen.
Humans are wired to take on a herd mentality and follow the crowd, which guides our decision-making on everything from who we vote for to how we invest, according to Klontz.
“The first thing is to just recognize that nobody is immune from this,” Klontz said.
Now is the perfect time for investors to make sure they have an asset allocation that is appropriate to their personal risk tolerance and financial goals, he said.
“It’s harder to do when the market’s crashed,” Klontz said.
Additionally, it is important to keep in mind that financial advisors, like all humans, are also susceptible to biases. When seeking financial advice, investors should ask questions such as “What would you do as my advisor if the market went down 50%?” Klontz said.
Good advisors should have systems in place to keep them from making big mistakes, Klontz said. They may have an investment committee or a predetermined approach for how they will act.
Importantly, investors should also be asking themselves the same question, Klontz said. For example, if the market drops 40%, are you OK with your portfolio dropping from $100,000 to $60,000?
“If the answer is no, then you probably shouldn’t be all in stocks,” Klontz said.
However, if you are young enough, a big market drop could be an important opportunity to dollar cost average — or invest a fixed amount of money on a regular basis — and position your money for larger gains when it recovers.
“Most people have a real tough time doing that, which is why advisors can help,” provided they are familiar with behavioral tendencies, Klontz said.
If you still haven’t booked your holiday travel plans, take note: Prices tend to rise the closer you get to the days you’re looking to travel.
To afford holiday trips, about 50% of respondents are cutting back on other expenses while 49% are picking up discounts and deals, according to the 2024 Holiday Travel Outlook by Hopper, a travel site.
Some last-minute holiday travelers are leaning into so-called “Travel Tuesday” — or the Tuesday after Cyber Monday and Black Friday — which falls on Dec. 3 this year.
Search interest for Travel Tuesday rose more than 500% from 2021 to 2023, according to a recent report by McKinsey and Company.
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There’s a reason why shoppers are searching for the term.
Last year, 83% more deals were offered on Travel Tuesday versus Cyber Monday and 92% more than Black Friday, according to Hopper data.
Yet, there may be some limitations on the deals available, experts say.
“The challenge for a lot of people is, ‘Do I wait?'” said Sally French, a travel expert at NerdWallet.
For travelers who are set on specific days and places to visit, the answer might be “no.”
“While airlines and online travel agencies are going to offer flight deals on Travel Tuesday, there is no reason to wait,” said Phil Dengler, co-founder of The Vacationer, a travel platform.
How much you benefit from potential discounts on Travel Tuesday will depend on your flexibility, experts say.
“If you have zero flexibility,” said Hayley Berg, economist at Hopper, then “if you see a good deal before Travel Deal Tuesday, feel free to book it.”
How Travel Tuesday works
People wait in line for security checkpoints ahead of the Thanksgiving holiday at O’Hare International Airport in Chicago, Illinois, U.S. November 22, 2023.
Vincent Alban | Reuters
Similar to Black Friday and Cyber Monday sales, Travel Tuesday deals sometimes begin to roll out before the day itself, said Dengler. They might even stretch into the day after.
Nonetheless, you will typically need to book the flight, hotel stay or cruise trip by the end of the day in order to reap the benefits, he said.
As you shop, make sure to read the fine print in case discounts only apply for certain routes and days, Dengler explained.
Retailers often have a limited stock for Black Friday and Cyber Monday doorbusters. With Travel Tuesday, there may be a limited number of airline seats or hotel rooms, NerdWallet’s French said.
“They’re not going to fly two planes on the same route at the same time,” she said.
‘Be ready’ to book
Travel Tuesday might be better suited for deciding when and where you’ll go for an upcoming vacation in 2025, versus a very specific itinerary home over the holidays.
If you are not flexible on the days and destinations you plan to travel to and you find a flight available at a price you’re comfortable with, “book that trip right now,” French said.
“If you wait until Travel Tuesday, then that deal could be gone,” she said. “You don’t want to wait for Travel Tuesday for it to be sold out.”
In some cases, it doesn’t hurt to book ahead and keep browsing for potential price drops, experts say.
You typically have 24 hours from booking to cancel for a full refund as long, as it’s seven days before a flight’s scheduled departure time, Dengler said. Plus, some airlines don’t have change fees for non-basic economy fares, he said.
If those terms are in your favor, “if you see a better deal on Travel Tuesday, simply cancel your current bookings and book the Travel Tuesday offer,” Dengler said.
On the flip side, if you’re less tied to specific dates and places, but have a general sense of where and when you want to travel, then holding off until discount days may be worthwhile.
“We tend to see the deals do get better and better the closer we are to actual Black Friday or actual Travel Tuesday,” French said.
The biggest takeaway for travelers is to start thinking about what you might want to book, Berg said.
“I really encourage travelers to do that exploration now so that on Travel Deal Tuesday, they can be ready to actually book,” she said.
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