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!
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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