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Is it a good moment to purchase an electric vehicle? Considerations when financing an EV Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by providing you with interactive financial calculators and tools, publishing original and objective content. This allows users to conduct research and analyze data for free and help you make informed financial decisions. Bankrate has agreements with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site come from companies that pay us. This compensation can affect the way and when products are featured on this website, for example, for example, the order in which they may be listed within the categories of listing, except where prohibited by law. This applies to our loans, mortgage,, and other home lending products. But this compensation does have no impact on the information we publish, or the reviews you read on this site. We do not include the entire universe of businesses or financial offers that may be open to you.
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7 min read published on February 27, 2023.
Writen by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the details of taking out loans to purchase a car.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain confidence to manage their finances with concise, well-researched, and clear information that breaks down otherwise complex topics into manageable bites.
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The financial burden of vehicle ownership starting from the first purchase through refilling at the gas station, hit record highs for motorists in the past year. While gas prices have crept down — a gallon averaged $3.38 on Feb. 24, according to AAA -financing a vehicle gets more expensive . Drivers pay an average of $700 a month for new vehicle financing and $525 for used in the third quarter of 2022’s fiscal year, . With the high cost of filling up and finance, along with the ever-present concerns about climate change, many motorists are searching for an alternative option. You may be thinking “Should I invest in an electric car?” And you wouldn’t be the only one. Electric vehicles (EV) sales have been on the rise in recent years, and TransUnion estimates that the EV market share will grow to . However, the high upfront cost of an electric car might not be right for every driver. Should I purchase an electric vehicle? The decision to purchase electric must be approached with the same care that you would selecting the model and the maker of the next vehicle. For some, the ease of paired with minimal maintenance makes the high cost worth it. “From the point of view of a pure consumer perspective, buying an electric vehicle is very positive,” says Brian Moody the executive editor of Autotrader. “In addition, the driving experience of electric cars is very rewarding. Acceleration is more brisk and electric cars come with cool features like the capability to heat and cool your car’s interior before hitting the road.” If there’s no full electric car one, a hybrid or plug-in model can be more fuel-efficient than conventional gas models, while being kinder on your wallet than an electric vehicle. According to Moody explains, these tend to carry an affordable price and “function as an electric vehicle for everyday use, consuming gas only for long trips.” This can be a viable option for drivers interested in driving electric, but aren’t willing to commit completely. The market for electric cars has seen great innovation over the last two years, and is expected to continue to grow. While initial costs have traditionally been high, they’re dropping as more options become available and legacy brands dive into the electric car market. The U.S. auto market is shifting toward electric Record-high gas prices could have helped boost sales of electric cars. EVs made up 5.7 percent of new car registrations in Q2 2022, according to . That may not seem big, but it’s a notable improvement from the 1.5 percent share that EVs represented in Q2 2018. The growing demand for electric vehicles has resulted in advancements in available financing, including and tax credits. This market expansion is among the main reasons to consider buying an electric vehicle. Although Tesla has a majority of the market, TransUnion predicts the luxury model will be a minority of the percent of market in 2025, due to the increasing number of innovative and more mainstream makes coming into the market. Moody has a similar view in relation to vehicle availability. “It was once the case that there were just few small or very expensive electric vehicles. While EVs cost more overall however, certain models are less expensive. For instance, the Kia EV6 and Chevrolet Bolt.” The Nissan Leaf is another cost-effective electric vehicle. EV drivers share almost the exact same credit profiles as those who drive luxury vehicles. Satyan Merchant the senior vice president and chief of business for automotive at TransUnion, has seen increasing interest in EV financing, which has a direct influence on the entire automobile finance industry. TransUnion’s 2022 research found that out from the 3 million customers between 2019 to 2021 who financed new traditional and EV loans the majority of EV-related customers had similar credit profiles to those driving luxurious automobiles. Those driving mainstream EVs were able to get an average credit score of 775, falling in the top category. The average interest rate was 2.8 percent. This is lower than the average APR that was 4.9 percent for all new cars that are available to borrowers in the prime category. The low average APR for EVs isn’t just due to the strong credit scores of these drivers. They are also making . The study also showed motorists were much more likely commence their . In actual fact over one-third of them conducted online research on vehicle models and makes. Merchant states, “Our research clearly shows that buyers of electric vehicles have great credit risk profiles, however this group also has varying preferences, with a greater desire to shop around for financing of vehicles through electronic means.” This larger appetite is likely to be evident in the new options available for EV financing combined with an increase in the number of vehicles available in the coming years. The options for green financing are increasing. The growing market for electric vehicles has led to advancements in financing. While motorists can use or borrow for electric vehicles, EV-specific lenders are growing in popularity and offer drivers with a tailored experience by offering . Alex Liegl, CEO of , comments on the company’s work with EV financing and the company’s goal to make climate-related investment an easy choice. The Tenet approach “gives customers the freedom to manage their upfront investment costs and to save the cash for down payment to pay for other expenses,” Liegl says. In addition, there is a deferment option that shifts a third of the price into one final payment at the close of the financing. This allows for smaller monthly payments and a streamlined financing experience — but a large amount could be due at the end. The goal, Liegl says, is to “help customers fully transform their lives with electricity by making sustainable home upgrades less expensive, such as the installation of solar panels and battery backups, smart appliances, EV charging and more.” Other businesses, such as EV-Savings, act as a marketplace for loan prequalification that is directly linked to incentives for EVs and green loans available within your particular state. According to their website, customers could save as much as $200 each month on monthly electric vehicle loan installments. Do EVs have lower costs over the life of their lease? Therefore can you say that an electric vehicle is worth the cost? The satisfaction that comes with operating a vehicle that is healthier in terms of environmental impact isn’t always the sole reason why people are switching to electric cars. It also has the potential to save money. While it is true that gas accrued when driving, in some instances, electric vehicles can be cheaper overall. According to a survey conducted in 2020, electric vehicle owners have saved on average and repairs throughout the duration of ownership as per Consumer Reports. This is due in part to the distinct differences in maintenance that EVs have. They don’t need oil changes or maintenance, and they have a simpler powertrain. The drivers of battery-electric vehicles as well as plug-in hybrid vehicles paid only 3 cents per mile over the course of their vehicle’s life in comparison to 6 cents per mile for conventional vehicles. But driving electric isn’t completely positive. CNET is a Red Ventures company, reported on a 2021 study by We Predict that found . While it is true that drivers are able to avoid the additional cost associated with , like oil changes and basic inspections, EV components are more costly when it comes time for repairs. This means that more maintenance hours logged combined with more expensive replacement parts can make electric vehicles the same, or more expensive as driving gas-powered vehicles. Additionally, electric vehicles can be driven accelerate faster than gas-powered cars because of the speed of tech advancements however, the present demand for EVs has helped maintain prices. How to finance an electric vehicle The procedure of financing an electric car is quite similar to the process of financing a conventional gas-powered vehicle. It is essential for you to take the exact steps that you would normally follow, in addition to understanding available terms and understanding the weight your credit score and your history have to carry. As previously mentioned, driving electric also carries potential state and federal benefits you don’t traditionally have access to. One of these benefits is an incentive of $7,500 that applies to new, qualified plug-in or fuel cell electric cars. If you buy a new vehicle in 2023, you might also be able to receive the federal tax credit . The vehicle cannot be purchased at a price greater than $25,000. If the vehicle is eligible you may claim credits up to 30% of the purchase cost, with a maximum of $4,000. Tax credits for federal residents come with income restrictions and vehicle requirements, so make sure that you and your future EV are eligible before you begin. In addition, you may be able to claim a state tax credit depending the location you reside in. You should ask yourself these questions prior to purchasing an electric vehicle as well as operating an electric car is a different set of needs that you may not have dealt with before. Take a look at these questions. 1. What is the range of your vehicle? It is crucial to know the distance that your car can bring you — for both your typical commute and for your traveling habits. Energy.gov lists the average range for 2021 model year vehicles that have a potential range of between 405 and 405 miles. It is likely that drivers will have lower levels of “range anxiety” as their vehicles get up to speed with the latest technology. But it is wise to evaluate your needs , taking into account your normal commute, as well as your expected leisure activities. 2. Should I lease before I buy an electric car? “Leasing an electric vehicle can be a good option to try out the waters of ownership in an electric vehicle,” Moody says. is typically less expensive in a month-to-month arrangement and generally comes with a guarantee. If you’re on the side of electric vehicles, consider leasing one to check out the feel and experience. 3. Do I have access charging stations for my vehicle in my neighborhood? Even though it is true that the Electric Vehicle Council found that about of EV drivers recharge at home, a lot of drivers don’t possess the option of installing an EV charger that is Level 2. That’s okay. Many EVs can now be charged to charge using any electrical outlet, however it may take all night or longer to get a full charge. But, you might require a faster charge at certain times. Many EVs require about 45 minutes to get to the 80 percent capacity of their batteries at the fastest charging station. For information on where you might have the chance to receive speedier charging, check out the map, which shows charging stations in the vicinity. Check that the charging stations you plan to visit will work with your vehicle you’re considering. Think about an electric car when you’re shopping for your next car. Is the electric car worth it? As with other luxury vehicles, EVs can carry higher initial costs and owners must have an excellent credit score to enjoy low interest rates. However, as the market grows with more middle-tier choices spring up, more people are able to think about electric options. Are you among the 36 percent of Americans considering electric? Moody recommends aiming at the sweet spot, purchasing used and lightly used anything in the 3-to-5-year range to get a better price and a good amount of warranty coverage.
Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers with the details of borrowing money to purchase a car.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers gain confidence to take control of their finances through providing concise, well-researched and well-written information that breaks down otherwise complex topics into manageable bites.
Auto loans editor
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