Have You Considered Buying an Electric Car?

The following is a post by MPFJ staff writer, Kevin Mercadante, who is a professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

If you know much about electric cars, then you know that the technology hasn’t entirely been perfected. They lack the power of gas-powered cars, they tend to be on the small size (commuter cars for the most part), and perhaps most disappointing here in the US, they have very limited range.

But as the years pass, the technology is improving, if only slowly, and the prices are becoming more reasonable in relation to conventional vehicles. Is it time to consider an electric car, even if they aren’t perfect?

 

Why now might be a good time to buy an electric car

Despite the limitations of electric cars, there are some strong advantages to owning one even now. This is especially true if you don’t drive great distances, and tend to keep your driving to less than 100 miles a day. If that describes your driving habits, here are some benefits to consider:

Saving money on gas. This is the most obvious and tangible benefit of owning an electric car. At current prices, if you are buying 15 gallons of gas to operate your vehicle every week (or driving about 300 miles per week), then you’re spending over $50 per week on fuel. That’s over $2,600 per year that you won’t have to pay if you have an electric car. Sure, your electric bill will increase to cover the cost of charging your car, but it won’t approach the amount of money you are currently paying for gasoline.

Protecting the environment. Since emissions from gas-powered cars are the leading source of air pollution, you’ll be doing your part to clean up the environment by driving an electric car. There is some environmental impact from the electricity that is being used to power your car, but since much of that comes from hydroelectric and nuclear power – an increasing amounts from solar and wind – the negative impact will be far less than for gas-powered cars.

Avoiding the worst of the next gas crisis/price spike. You’ll the counting your blessings if another gas crisis or major price spike hits and you already have an electric car. As a result, you will miss the worst effects of the rise in the price of fuel, but also of the endless hours waiting in line for a reduced amount of gas (we had that situation here in Atlanta in 2008, but it also happened twice in the 1970s). At a minimum, an electric car will allow you to get to and from work so that you will be able to earn a paycheck during the worst of crisis.

Getting in ahead of the herd. If some sort of gas crisis does occur – and you shouldn’t bet against it – an electric car may turn out to be a strategic asset. The price of these cars will soar as gasoline prices rise, but since you purchased yours already, you will have one in the lower price.

 

Electric car prices are falling steadily

As the technology improves and electric cars gain popularity and sales, prices on them are coming into line with that of conventional vehicles. While they are still more expensive than comparable economy cars, electrics are now reasonably priced compared to other vehicle types. If you are looking at full-sized cars, luxury cars, or SUVs, you may want to take a look at electrics. They can be less expensive, and provide many or all of the benefits listed above.

As a way to increase sales of electric cars, some manufacturers have even cut their prices, or are offering preferred financing deals, and even selling the cars at a loss. They see electrics as the wave of the future and worth subsidizing for the time being.

According to Kelly Blue Book, here are prices for five popular electric vehicles:

  • 2014 Chevy Spark EV $29,650
  • 2013 Nissan Leaf $27,495
  • 2013 Fiat 500e EV $32,600
  • 2013 Ford Focus EV $35,995
  • 2014 Chevrolet Volt $39,995

Admittedly, these prices will rise with the addition of certain options. And electric cars are not without their limitations. The Nissan Leaf is unable to drive as many as 100 miles per day (a common limitation of electrics) and may not work if your job is upwards of 50 miles from home, or you like to go on long trips.

But all limitations notwithstanding, electric cars offer certain undeniable advantages. And as prices come into range with other vehicle types, those advantages become worth paying for.

How about you all? What do you think about electric cars? Has the time finally come? Or, do you think that the technology and price structure still need more time?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/chryslergroup/8229193772/sizes/

Comments

  1. I’d debate that the price of electric cars may actually fall in the event of a gas crisis. I believe a large part of the premium price paid for electric vehicles is the extensive research and development costs associated with the new technology. Even though demand would increase, the R+D costs could be shared between many more potential customers (assuming production can be increased) effectively reducing overheads.

    I considered purchasing a Prius around 4 years ago, however at the time the price premium exceeded the fuel cost saving I would have seen over the first 200,000km of driving – and I have heard stories of battery lives drastically reducing over time making for a costly repair. Of course the technology has come a long way since then…
    Financial Independence recently posted…BitCoin Investment: The case against itMy Profile

  2. Maybe this was a typo, but you said “I’d debate that the price of electric cars may actually fall in the event of a gas crisis.” – in the post I said that they’d probably rise in a gas crisis, not fall. The crush of sudden demand would just about guarantee it. Any price benefits from higher demand/production wouldn’t come until well after the fact.
    Kevin@OutOfYourRut recently posted…Can We REALLY Count on Social Security?My Profile

    • In a short term demand spike the price would definitely rise, but if increased demand was sustained I would expect economies of scale to reduce the price over the long term (obviously it would spike first as production isn’t instant, however by reducing production of fuel cars manufacturers could increase supply).

      Think of it this way – you spend $10m developing a new product but only sell 1,000 of them – assuming zero production costs, you still need to sell each product for $10k to break even. If you sold 100k of them, each one only needs to sell for $10 to recoup research and development costs. Part of the reason electric car costs are decreasing over time is due to this R+D cost being recouped.

      Theres an interesting article at http://economicsofcleancars.wordpress.com/economics/market-demand/ which explores the economies of scale behind green car production.
      Financial Independence recently posted…BitCoin Investment: The case against itMy Profile

  3. I do think that electric cars have potential, but what many people fail to realize is that the emissions that come from producing the batteries is much worse than the emissions from gas. The process of producing the batteries is highly chemical based and there is a lot of emissions from it. The manufacturers are working on change, but until that is done, you really aren’t protecting the environment, just making it cheaper on yourself over the long run compared to gas.
    Grayson @ Debt Roundup recently posted…One of My Biggest Money MistakesMy Profile

  4. Hi Grayson – I’ve heard that too, but not at all sure that it matches up against the 10-15 years that a typical gas fired car is on the road. There are doubtlessly environmental concerns with the production of any car (or manufactured gizmo) so the manufacture of a gas powered car isn’t a pure play either.
    Kevin@OutOfYourRut recently posted…Can We REALLY Count on Social Security?My Profile

  5. My wife and I are still not ready for an electric vehicle but we were very interested in a plug-in hybrid. After examining what was available last December, we ended up buying a regular hybrid Prius. The cost differential was just not worth it.
    Bryce @ Save and Conquer recently posted…What Are I-Bonds and What Are They Good For?My Profile

  6. Hi Bryce – The hybrid will still have you covered in a gas crisis. You can run it primarily on electric until things cool down a bit.
    Kevin@OutOfYourRut recently posted…Can We REALLY Count on Social Security?My Profile

  7. I probably will go for an electric car in the future, but for the mean time I think a hybrid car is a better option if we really want something that could save us money on gas.
    Beat The 9 to 5 recently posted…How To Leverage Hootsuite for Blogging and Social MediaMy Profile

  8. I don’t think I’d consider an electric car just yet. I don’t think the advantages would outweigh the disadvantages at this point in time (for us). I would, however, possibly purchase a hybrid. We’re not in need of a new car right now and we aren’t going to go buy a hybrid just for the sake of having one. When it’s time to buy a car, though, I can see us switching to a hybrid.
    Mr. Utopia @ Personal Finance Utopia recently posted…Getting an MBA is a Waste Unless You Do ThisMy Profile

  9. Hybrids it is for now! While I love the thought of electric cars and its come a long way, it’s still not tried and true and our infrastructure can’t handle it. My dream car right now is the Tesla Model S, but that’s a pretty big dream at $70,000. I currently also live in an apt complex with no access to a power outlet to plug in an electric. I’m hoping that the technology will progress and that electric cars will become a more viable option in the next few years.
    Christine @ ThePursuitofGreen recently posted…Dreaming of a TeslaMy Profile

    • Hi Christine – Your point about apartments is well taken! And I suppose it’s also true of condos without garages too. With no place to safely plug in the car for recharging, there’s no much point in owning an electric car. Running a power line from the apartment to the car probably won’t work. Not only will it be a target for thieves and vandals, but it also may be frowned on by the apartment complex or homeowners association if it’s a condo.
      Kevin@OutOfYourRut recently posted…Can We REALLY Count on Social Security?My Profile

  10. I’m not sold on electric cars, especially because of their size. I’m not a big guy, so it’s not a comfort issue, it’s just that they seem like rolling deathtraps. If you get hit in one of those things, you will be crushed! As for the “good for the ecosystem” craze, i’m not so sure. If I’m not mistaken, electric energy gives off radiation and a type of pollution of its own. In that aspect you’re still not being all that green.

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