Want to Save Money? Buy an EV.
There are many EV models available today that are below or equal to the cost of an equivalent gas-powered vehicle. EV drivers come out ahead when accounting for fueling and maintenance costs.
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Are EVs Affordable?
With the low cost of at-home charging and government incentives, driving an EV is more affordable than you may think. And the upfront cost of electric cars is dropping quickly.
Electric vehicles are becoming more and more of a mainstream technology, with sales of EVs in the U.S. representing 10% of all new car sales in 2024. Prices of new EVs have come down as battery and auto manufacturing has risen, alongside increased model availability for the mass market.
EVs are rapidly approaching price parity with gas-powered cars. According to the latest research, global battery prices declined by 20% in 2024 – and as a result we expect to see many EVs at price parity by 2027.
Even today there are many EV models available that are below or equal to the cost of an equivalent gas-powered vehicle, with new models entering the market to meet growing demand. The average cost of a new car in the U.S. was around $49,000 in 2024 according to Cox Automotive, meaning that many of the most high-volume EV sellers like the Tesla Model Y, Tesla Model 3, Ford Mustang Mach-E, Honda Prologue, and Chevrolet Equinox are equivalent or less than the average cost of a new car in the market.
At the same time, as early adopters purchase new EVs, the used EV market is growing. Pre-owned vehicles account for 70% of car sales in the U.S. According to Recurrent, the sales of used battery-electric vehicles reached all time highs, accounting for 287,000 units in 2024.
But that is only part of the story. Over the lifetime of the vehicle, an EV is expected to save drivers $6,000-$12,000 due to lower fueling and maintenance costs.
Many electricity providers have programs designed to help EV drivers install at-home Level 2 charging, access lower electricity rates, and opt into other incentives. Check with your local provider to see if you can benefit from some of these programs! Even automakers are getting in on the action, with some companies like Ford, GM and Honda creating programs to discount level 2 charging.
What should I know about these tax credits?
Federal and state-level tax credits are available to help lower the cost of new and used EVs for drivers.
The Inflation Reduction Act includes credits that help reduce the cost of new and used EVs, as well as at-home charging equipment, for eligible individuals.
Meanwhile, many states and local governments offer incentives to transition to zero emission transportation.
Many states offer standard rebates for the purchase of a new battery-electric vehicle, including some major markets like New York, Colorado and Massachusetts. Incentives range from $1,500 in places like Delaware to $4,000 in Illinois. In total, around a dozen states offer some sort of standard incentive.
Other state incentive programs are more targeted towards certain groups. California offers generous purchase incentives of up to $12,000, but geared exclusively towards those that are income eligible (or in certain cases location-dependent residents). Maine offers an EV of up to $7,500, but only for qualifying recipients.
States often place a price cap (also known as a manufacturer’s recommended selling price) for new EV purchases. They range depending on the state policy, but typically fall in the $50,000 - $55,000 cost range.
Up to $7,500
Up to $4,000 or 30% of vehicle cost, whichever is lower
Individual Credit: $1,000 or 30% of the installed cost or whichever is of lesser value.
Census Tract Required.
Maximum Adjusted Gross Income (AGI) for credit eligibility:
- $150,000 for Single filers
- $225,000 for Heads of Households
- $300,000 for Joint filers
Maximum vehicle MSRP for credit eligibility:
- $80,000 for vans, SUVs, and pickup trucks;
- $55,000 for all other vehicles.
Vehicles must meet manufacturing criteria to be eligible.
Maximum vehicle sale price for eligibility: $25,000
Maximum AGI for credit eligibility:
- $75,000 Single
- $112,500 Head of Household
- $150,000 Joint filers.
Census Tract Requirement: Limits eligibility to infrastructure installed as defined by 45D(E) census tracts and non-urban census tracts:
- A population census tract where the poverty rate is at least 20%, or
- Non-metropolitan area: the median family income < 80% of the statewide median family income
- Metro-area: the median family income < 80% of statewide median family income or the metropolitan area median family income
Up to $7,500
Maximum Adjusted Gross Income (AGI) for credit eligibility:
- $150,000 for Single filers
- $225,000 for Heads of Households
- $300,000 for Joint filers
Maximum vehicle MSRP for credit eligibility:
- $80,000 for vans, SUVs, and pickup trucks;
- $55,000 for all other vehicles.
Vehicles must meet manufacturing criteria to be eligible.
Up to $4,000 or 30% of vehicle cost, whichever is lower
Maximum AGI for credit eligibility:
- $75,000 Single
- $112,500 Head of Household
- $150,000 Join filers.
Maximum vehicle sale price for eligibility: $25,000
Individual Credit: $1,000 or 30% of the installed cost or whichever is of lesser value.
Census Tract Required.
Census Tract Requirement: Limits eligibility to infrastructure installed as defined by 45D(E) census tracts and non-urban census tracts:
- A population census tract where the poverty rate is at least 20%, or
- Non-metropolitan area: the median family income < 80% of the statewide median family income
- Metro-area: the median family income < 80% of statewide median family income or the metropolitan area median family income
What about the battery?
One common misconception about EVs is that the battery will require replacement, similar to the 12V batteries in gas-powered vehicles.
This is extremely unlikely to occur, with an analysis by Recurrent showing that only 1.5% of vehicles analyzed required a replacement (excluding manufacturer recalls that resulted in a battery replacement).
That’s because battery warranties cover the cost of a battery replacement if necessary, with the federal minimum warranty of 8 years or 100,000 miles. This is longer than most gas-powered vehicle powertrain warranties!
Your battery is likely to outlast the vehicle that surrounds it—in fact most EV batteries will be repurposed for other uses after the vehicle is retired, such as for energy storage or recycled content for new EV batteries.
