Can an Electric Car Really Save You Money? It Depends on Where You Live

Matt Posky
by Matt Posky

The automotive industry’s gradual shift toward electric vehicles is primarily influenced by global fuel economy mandates. A happy side effect is that consumers benefit from having access to vehicles offering better overall efficiency. This translates into lower running costs and some real savings — once EVs come down in price.

However, there are instances where it might still be cheaper to run a plain Jane internal combustion unit. A new study from the University of Michigan’s Sustainable Worldwide Transportation group explores exactly how cost-effective electric vehicles are and how fuel efficient an internal combustion model would need to be to become the cheaper alternative. The answer, as it turns out, has a lot to do with where you live.

For example, in a state where both gasoline and electricity are expensive, you might be better off sticking with a petroleum-based solution. Calculating the average annual miles driven by everyone in the United States, report authors Michael Sivak and Brandon Schoettle broke down the cost in each state to run both a BEV and a ICE vehicle for a year, based on current energy and fuel prices.

For Hawaii, they determined it would cost a driver $1,509 in gasoline and $1,106 in electricity to travel the same distance. However, that’s if the internal combustion model operated at the mean national efficiency rate of 25 mpg. The break-even point was 34.1 mpg, at which point the ICE would begin saving a motorist money. Considering there are already a bevy of budget-minded compact cars capable of achieving that, EVs may not be an ideal alternative for those residing in America’s 50th state.

In California, where fuel is expensive and electricity is cheaper, a gas-powered car needs to achieve 60.6 mpg or better in order to be cheaper to operate. In Michigan, where both gas and electricity are relatively affordable, the break-even point drops to 52.1 mpg.

On a national scale, the average annual fuel bill for an ICE vehicle comes in around $1,117, or just $485 for an electric. That means a gasoline-powered car needs to get 57.6 mpg or better to offset the cost benefit of driving a battery-powered vehicle. This is all contingent on prices staying the same, however. Were EVs to suddenly put excess strain on the energy grid, electricity prices could go up — lowering the break-even point. Likewise, higher fuel prices would have an inverse effect.

[Source: HybridCars] [Image: Volkswagen Group]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • IBx1 IBx1 on Jan 12, 2018

    I remember doing some math about picking up a fleet-used 1st gen Volt, looking at the cost per mile. Cool thing was, at $0.10/kWh and $2.50-$3.00/gal, it cost the same to drive each mile that was purely electric as it did when it was purely gas. At an assumed 42mpg on the Volt, that was the crossover point with my electric rate in Houston, meaning any car that got more than that mileage on gas would have cost less to drive per mile.

    • HotPotato HotPotato on Jan 13, 2018

      Most cars aren’t going to give you 42 mpg in the city, nor at 75 mph. So compared to an average car, sounds like electric would usually be cheaper. I know, I know, PIATA (Prius is always the answer).

  • Stingray65 Stingray65 on Jan 12, 2018

    Remember that 50 cents per gallon of gasoline is tax in the US (about 20% of the total price), and any serious expansion of the EV fleet will without any doubt lead to some sort of taxation on EV mileage whether it is an electricity tax or an actual tracking of mileage. Thus the EV fuel cost advantages will be at least 20% lower if EVs get a similar level of "fuel" taxation as ICVs. Since all EVs except the Tesla are small city cars, it is also unfair to make a comparison with a 25mpg ICV, when a fairer comparison would be with a 36 mpg Civic or Fit, which again would eliminate all or most of the fuel cost advantages. Many such comparisons also assume the use of the cheapest electricity such as off-peak rates and/or no use of fee for electricity charging points, when the reality is about 20% of EV recharging is not at home and probably more than that is during peak rate hours, and thus the more use of "expensive" electricity the smaller the saving. But as many commenters have already stated, even the most optimized EV fuel savings will be dwarfed by the much higher EV depreciation and in some case insurance costs, and higher purchase prices, and cost of fast home rechargers. Most "fair" comparisons put the payback period for EVs in comparison to comparable ICVs at beyond the average length of vehicle ownership (at best) to never.

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    • Stingray65 Stingray65 on Jan 13, 2018

      @mcs Nothing wrong with buying a car because you like the way it drives. Driving pleasure is what sells most GTIs, M3s, and 911s, and I know that many EVs are nice driving vehicles. The problem I have with EVs is the same problem I would have if governments were giving people thousands of dollars to buy 911s, because I don't believe that is a good use of my tax dollars. If the "driving pleasure" or "fuel economy" or "greenness" isn't enough of an incentive to buy the vehicle, I don't see why the government needs to help out a rich person to buy the vehicle no matter what the power source is. I also think it is a bit ridiculous to criticize people that would rather have a reasonably priced larger truck or SUV rather than and "overpriced" EV city car or "wildly overpriced" Tesla sedan. If you are willing to pay market price for your Leaf, i3, or Tesla because of the driving pleasure, more power to you, but I shouldn't need to contribute to your fun.

  • Golden2husky Have to say he did an excellent job on the C7, especially considering the limited budget he was given. I am very happy with my purchase.
  • Marty The problem isn't range; it's lack of electricity in multi-unit building parking. All you need is level 1 - a standard 120v wall socket - and if you're plugged in 10 hours overnight you get 280 miles per week or more. That's enough for most folks but you can use public charging to supplement when needed. Installing conduit circuits and outlets is simple and cheap; no charge stations needed.
  • 2manyvettes Tadge was at the Corvette Corral at the Rolex 24 hour sports car race at the end of January 2023. During the Q&A after his remarks someone stood up and told him "I will never buy an electric Corvette." His response? "I will never sell you an electric Corvette." Take that Fwiw.
  • Socrates77 They're pinching pennies for the investors like always, greed has turned GM into a joke of an old corporate American greed.
  • Analoggrotto looking at this takes me right back to the year when “CD-ROM” first entered public lexicon