Electric Vehicles vs. Internal Combustion: The Real Cost Comparison

In our last blog, we looked at the falling prices of electric vehicles because of unsold stock and the price reductions of the leader in EV sales: Tesla. With the best-selling Tesla, the Model 3, receiving its first restyle for the 2024 model year, we can expect more price reductions as Tesla tries to move the remaining 2023 stock from their lots. With lower purchase prices, do EV’s make more sense to buy now? Let’s look at some comparison numbers between traditional internal combustion engine (ICE) vehicles and EVs.

Kelley Blue Book routinely calculates the five-year cost to own a vehicle, which includes all vehicle-related costs a vehicle owner should incur in the first five years of ownership. The latest comparison data in 2023 shows that EVs cost consumers an average of $65,202 during this time period, while ICE vehicles cost $56,962. Let’s look at the breakdown of costs by type according to Kelley Blue Book:

Financing

The average cost of EV financing is $4,583, while an ICE vehicle is $3,247. This difference can be attributed to the higher EV purchase price.

Insurance

The average cost of collision and liability insurance for EVs is $6,824; ICE vehicles average to $5,707. This cost is likely to increase even more as EV collision repair experience grows and the true additional costs are realized by more insurers.

Fuel vs. Electricity

Kelley calculates that for an ICE vehicle to travel 15,000 miles per year, the average cost of fuel over the five-year ownership (using the nationwide average of fuel prices in that time) is $9,490. EV owners driving the same distance spend $4,295 on charging.

Maintenance and Repair

Another argument often made in favor of EV affordability is maintenance. EVs and ICE vehicles share many maintenance costs, such as replacing wipers, wiper fluid, rotating the tires, etc. The difference lies, of course, in the engine, or lack thereof. Surprisingly, Kelley only shows a $300 savings in five years of maintenance, but doesn’t calculate spark plug changes, air filter changes, etc. For repairs, Kelley figures

that, based on a no-deductible extended warranty, EVs averaged $1,712 in repair costs over five years, while ICE vehicles averaged $1,695.

Depreciation

EVs take a bigger hit in depreciation than their ICE counterparts, and as mentioned earlier, that hit may be getting bigger. Currently, Kelley calculates that EVs lose an average of $43,515 in value in five years compared to ICE vehicles depreciating by only $27,883.

Based on Kelley’s calculations, an ICE vehicle owners will spend far less in five years of ownership compared to an EV. While I believe their maintenance and repair allowances vastly underestimate ICE maintenance, the remaining calculations appear sound, with EV depreciation taking a significantly larger hit than an ICE vehicle, while insurance costs for an EV are higher and will likely continue to increase as more insurers experience the true cost of collision repairs.

So, do falling purchase prices make EVs more financially competitive to ICE vehicles? Not according to Kelley’s calculations. But most EV owners would argue that their choice was more about the environmental impact than the impact to their wallet.