If you’re in the market for a new vehicle, chances are you have thought about the possibility of an electric car. They’re all over the news and people can’t seem to stop talking about them. With more and more charging stations being added each day, they seem like a viable option. But, do they make economic sense? Traditionally, electric vehicles (EVs) have a higher upfront cost over a comparable gasoline vehicle, however, they make-up the difference with lower operating costs. With gas prices, electric prices and EV incentives varying significantly across the U.S., the cost effectiveness of an EV will depend on where you live and how you drive. I examined the economics behind purchasing an EV in two states – Massachusetts (where I live) and Florida. The results may surprise you.

Assumptions
Car prices can vary across the U.S. and even within the same make and model of car, depending on the options. For this analysis, I have chosen three vehicles: the Tesla 3 Standard Range, Honda Accord and Honda Accord Hybrid. The Tesla model 3 is currently the EV sales leader by a significant margin – I will assume a purchase price of $44,000 before incentives. The Accord is $32,000 and the Accord Hybrid is $35,000. These are median price assumptions. You could easily spend more or less money for each vehicle. For this analysis, I will also assume 12,000 miles driven annually. The vehicle efficiency ratings come from www.fueleconomy.gov and are listed below, with the gasoline vehicles in MPG and the electric in kWh per 100 miles. I will also assume that the gasoline vehicles will need an oil change every 7,500 miles ($50) and transmission service every 30,000 miles ($150) per Honda’s maintenance schedule. Items such as brakes and tires are assumed to be the same for all vehicles. Due to Tesla’s popularity and huge sales numbers, the federal EV incentive just dropped to $1,875 as of July 1, down from the maximum of $7,500. I will assume financing costs are identical, and for the sake of this analysis, assume an outright purchase of the vehicle. Depreciation is not factored in.

Buying in Massachusetts
Massachusetts has some of the highest electric prices in the U.S. Looking at my last bill, excluding the customer charge, I was paying 22.34 cents a kWh. Our gasoline prices are in line with national averages and my last fill up was $2.70 a gallon. The state does currently offer an EV tax incentive of $2,500, and combined with the federal incentive, this brings the price of the Tesla down to $39,625. Based on these fuel input costs and the assumptions above, we can calculate the cost to operate the vehicles as shown below:

Before accounting for maintenance costs, the Accord Hybrid is actually less expensive to operate per mile at only $0.056, but maintenance adds roughly a cent per mile. On an annual basis, the Tesla would save you $425 over the Accord and $118 over the Accord hybrid, but given the higher up-front cost, it would take more than 15 years to recoup the difference.

Buying in Florida
Florida’s electric prices are much lower by comparison. Based on EIA data, the average rate is 11.73 cents per kWh. AAA states the average price of gas is currently $2.539. While there are no state EV incentives, some utilities do offer rebates. I will assume you are lucky enough to live in Jacksonville and get a $1,000 rebate from your utility. This brings the cost of the Tesla down to $41,125. Based on the Florida assumptions, we can calculate the same operating costs:

In Florida, the EV starts to look like a viable option. The Tesla saves $697 annually over the traditional Accord, however, it would still take over 10 years to recoup the up-front cost. The analysis completely changes if gas were to increase to $3.50 a gallon, in which case the Tesla would save you $1,050 a year in operating costs.

Take Away
In this simple example, the electric vehicle doesn’t look like the best economical choice. But, if you were to change a few assumptions, it would be a different story; maybe you don’t think people would be cross shopping an Accord with a Tesla. If the EV and gas vehicles have the same up-front costs, the EV will clearly be the wiser choice. Also, I didn’t factor in special charging incentive rates or the cost to instill a level 3 charger in your home. Maybe you can charge at work for free? Paring EV charging with solar would also change the math. There are many possible scenarios and assumptions, but it isn’t hard to do the math and figure out if an EV makes sense for you. EVs make sense for a lot of people. In June, 37,818 EVs were sold in the U.S., accounting for 2.5% of all light-duty vehicle sales.