Thursday, April 2, 2015

How We Saved $270 a Month by Switching to an Electric Car



Two years ago, gas cost almost $4.00/gallon and I had just started commuting over 70 miles a day to work, 5 days a week. This was in addition to about 200 miles in family trips and errands that we put on the car each month. The 2012 Mazda 5 that we owned at the time got about 24 MPG and we were paying more than $280 just for gas each month. Something needed to change!

My wife and I started shopping for more fuel efficient vehicles and decided to look into whether or not an electric car might be a smart move us. We decided to take the plunge into all electric driving with a Ford Focus Electric and immediately started saving around $227/month - in fuel costs alone

The funny part is that our monthly payment for the car itself also went down from $333 to $308. It was weird to get a brand new $41,000 car (Ford Focus Electric) that cost less each month than the $25,000 car (Mazda 5) we had purchased two years prior. 


On top of that, we no longer needed oil changes at $50 a pop every 3 or 4 months (the Mazda 5 called for a more expensive fully synthetic oil) . In total, it eased our monthly budget by around $270. With a $308 lease payment minus the total cost savings of $269, it was like having a car for $39/month! WOW.

Day One Savings (gas car vs electric car):


Wait! Hold the phone! Why is our monthly payment for a $41,000 car lower than the payment for a $25,000 car? That is the magic of the Federal tax credit combined with a lease. When you lease, you only pay for a portion of the car's total value, typically three years worth. In this case, after $5,251 of manufacturer incentives this came down to $18,280. Even better, in a lease the manufacturer gets the entire $7,500 credit and they roll it back into the lease thereby lowering the cost of your monthly payments. 

For us and our Ford Focus Electric, that meant that the $18,280 three-year lease ($522/month) was reduced to $10,780 or just $308/month thanks to the federal tax credit. Even better, if we still love the car at the end of the leasing term, we won't lose what we paid since we have the option of purchasing its remaining value for $17,480.


But gas is so cheap now...

It's true. Almost two years later, gas is a lot cheaper (I also commute less). One might think that our cost savings evaporated. But even with gas being only $2.75/gal and having a shorter 50 mile commute, we still save about $137/month compared to our old gas powered car. This made me wonder: How cheap would gas have to get to cancel out the savings of an EV? So I did the math, and there turned out to be a definitive line in the sand. 

Gas would have to drop to 55 cents/gallon just to be competitive and break even (not counting our finance payment savings). This factors in both fuel savings and oil change savings. The price of gas hasn't been that low since 1974. No matter how optimistic you are about the dropping price of oil, I don't think a single economist is expecting to see those numbers at the gas station again. This means that every family will save between $70 to $251 per month depending on how many miles you drive and how the cost of gas fluctuates. This is why the drop in gas prices has not affected plug-in car sales like some might expect. 



Still not convinced?

Even with all this math, two years ago I was still not sold. I was raised with the notion that the cheapest car to own is the one you have right now. We were already vested and were actually underwater in our Mazda 5. To help me make a more logical decision, I made a spreadsheet that factored in yearly depreciation, how many more car payments we had left and the estimated market value of the Mazda 5 when it was paid off. All this I projected out 5 years. The EV still saved us a few thousand dollars in the end. 

That’s when I knew. There was no logical reason to hold on to our gas car. There were financial benefits in the short term and in the long term. The only reasons to not move forward were purely emotional. 

The chart below is a quick way for you to estimate how much you might save each month by switching to an EV. It assumes the fuel efficiency of your current gas car is 24 miles/gal. If it is worse, your savings will be even more. On the left, find the row that matches how much gas costs near you (or what it might change to), and jump across to the column that represents how many miles you drive a month. There are lots of factors in play here, but it will be a close estimate. 



Values assumed in the chart:  Gas economy: 24 MPG vs. electric vehicle economy:.276 Kilowatts/mile at $0.12 / kWh (electricity cost). Also factors in 5000 miles between oil changes at $50 per oil change
Formula = (Miles / MPG*Cost of Gas) - (Miles * kW/mile * Cost of Electricity) + (Miles / oil change frequency * Cost of oil change)

I'd love to hear from you! How much money do you think you could save each month by switching to an all-electric vehicle? Have you ever thought about switching to an electric car to save money? Need help with next steps? Please ask. I'm here to help!


About the Author: 
Joe describes himself as a skeptical researcher and a hesitant convert to an eco-friendly lifestyle. An accidental electric car enthusiast, Joe has fallen in love with both the money-saving and planet-saving powers of electric vehicles and wants to empower as many families as possible to make the switch to electric car technology. Interested in having Joe test drive your electric car or write about your brand? Contact us here.


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25 comments:

  1. I think that is awesome. It's definitely something I would consider in the future.

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  2. this is pretty interesting. I would definitely do more research on it. thank you

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  3. Sounds interesting, but I own my vehicles outright, no payment. And we have a large family, so we wouldn't fit into one of those little cars.

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    1. My wife and I can not wait until there are larger family sized EV's on the market. By the time you need your next family vehicle maybe there will be one for you. Are you a one car family?

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  4. I've always heard the amazing benefits of an Electric Car and I see where it would save you tons of Money. This was an informative article

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  5. Wow, that's a huge savings!! Thanks for breaking it all down!

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  6. It does make sense to me. I'm glad you found such a nifty way to save. :)

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  7. I can totally see your savings. Lets face it that gas will not drop low enough to make it cheaper to use gas car.

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  8. How happy are you with the Ford Focus? I'm debating switching from my Prius (down from a minivan 5 years ago!) to an EV due to similar issues. I can't help but love the Fiat but it might be *too* small. Many folks around here (San Francisco Bay Area) drive Nissan Leafs and I am seeing more and more Chevy Sparks and BMW i3s. I just read that PG&E (our utility) will start offering EV rebates later this year so I think I will take the plunge when that happens.

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    1. We loved the Ford Focus Electric. It looked more like a normal car and had more upscale features than other comparable EVs. We were planing on turning it in at the end of our lease, but we love the thing so much, it will be a tough decision. Good luck in your search.

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    2. I wanted to respond as well in case you wanted a mom's take on it.

      I really really like our car. It is zippy and fun to drive. And a very pretty color and the electric model comes with some features that the standard focus doesn't, which makes it feel extra luxurious.

      Things that I wish were different: The battery takes up a lot of the trunk space, thereby reducing the capacity of the trunk.

      It doesn't have the "charge to 80% capacity in 20 minutes" feature that the Nissan Leaf, the Tesla cars, and a few others have. We would rarely use that feature even if we had it but it would make it easier to take road trips with the EV if we wanted to (we usually rent a car for road trips - and we're saving so much money each month that it's not a big deal to spend $40-$50 once every 8 weeks or so to rent a car)

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  9. That's so great! Electric cars definitely have a lot of potential!

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  10. Wow, that cost breakdown is eye-opening! Thanks for sharing this. I never even considered an electric car.

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  11. That is great! We have a big family so we have to have a big vehicle (12 passenger van) and it is definitely expensive to fill however, it lasts me 2 1/2 weeks if not longer.

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  12. My husband wants to eventually get an electric car. And with gas prices so temperamental, it's a great cost saving alternative.

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  13. I'm so interested in an electric car. I didn't know about any of these benefits!

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  14. I had NO idea there was a federal tax credit for buying an electric car. This is incredibly helpful information. We are a one-car household and we pay $376 a month for our car loan right now (not counting gas, insurance, oil changes, etc) so this is definitely something we need to look into!

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    1. On top of Federal credits, some states and electric companies have credits too. Happy hunting.

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  15. It's very interesting to see the numbers laid out inn a spreadsheet, an the savings are undeniable. However, I just can't seem to bring myself to get an electric car; saving money is one thing, but taking the joy out of driving, well, it just doesn't seem worth it. I've ridden in a Prius, and I hated it - it had absolutely no get up and go! I have a gas Ford Focus, and I love it, but I don't think I would be so fond of it if it had any less horsepower. I guess I'm willing to spend the extra money to save the driving pleasure.

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    1. Once we rented a normal '14 focus and got to compare it to our electric focus. The electric had a lot more get up and go than the gas version. Take one for a test drive. I think you'll be surprised. Electric motors are well known for better torque than gas engines. I'm not surprised to hear that about the Prius though, or hybrids in general. Most hybrids have electric motors that are way to small. Put a full sized, normal electric motor in a car, and it will fly and trust you back in your seat.

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    2. I actually just went and looked it up and the Electric Ford Focus has more horsepower than most gas powered Foci (what is the plural of Focus when it's a name? Focuses? Foci? Focoi?).

      I would be fascinated for you to go test drive an electric focus and then email me and tell me how you thought it compared. I personally think the Focus Electric is a lot of fun to drive. Like Joe said, we rented a gas powered Focus one time because I needed to take a long trip and it felt like I was driving my car (because it's the same inside) but it had taken a Valium.

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  16. I have no idea how much we save. I currently drive a SUV but I wouldn't want to give that up for a smaller car. I hope they will eventually make full size SUVs electric, that I could totally get on board with

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  17. I've never considered switching. I use a Flex Fuel vehicle and gas is generally cheaper for me using E85. I would also need a big vehicle to carry my entire family every where so this isn't for me. Maybe in a few years.

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  18. Great info! My dad has an electric car and LOVES it!

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  19. There are so many benefits to having an electric car right now while prices are still low and people haven't caught on. Sure getting charged up may be a bit of an issue, but that will sort itself out in time!

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