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Electric Vehicles – Now’s the Time to Plug-in to Savings

Posted on July 18, 2013 by
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Fiat 500eStrange. Spacy looking. Star Trek type of ride. Darn-right ugly. That sums up the perceptions many have had of electric cars in the past. The attempt of producing electric cars that the public would embrace never caught hold in the past. Carmakers, like GM, temporarily poured money into projects but then pulled the plug as they continued to make money hand-over-hand on gas-powered cars. Electric cars were looked at as experimental and a waste of investment money. They were science projects gone bad, particularly due to lack of proper marketing, production costs, and lack of corporate excitement. Not so anymore.

With the combination of higher gas prices, an environmentally conscious public, newer technology (especially in batteries), and government regulations and incentives, automakers are taking a serious approach now to producing electric automobiles that are more practical and appealing. Electric cars come in all sizes and models, from the cute and sporty Fiat 500e to the luxurious 4-door Tesla Model S. In fact, there are SUVs, pickups, vans, and even motorcycles like the ones from Zero Motorcycles. It is very easy today to find an electric car that meets your lifestyle and needs. In this article we point out many of the benefits along with some potential drawbacks when considering going electric.

Low Maintenance

Service centers at dealerships hate electric cars. One can argue that one major reason why car manufacturers never pushed to produce electric vehicles for the masses is because they would take a hit in profits from servicing electric vehicles at dealerships. But with new competitors such as Tesla that don’t rely on profits for servicing their vehicles, automakers have to make a decision to compete or risk being left behind.

Service charges to see a mechanic at dealerships and shops will cost you substantially less to almost nothing. Most electric cars just need tires rotated, washer fluid filled, and battery levels checked. By going electric instead of gas, here are some of the items you can kiss good-bye to:

  • No transmission issues such as cables adjustments, fluids, and gear slippage
  • No oil filters to replace
  • No engine oils to remove and replace (oil companies hate this)
  • No valve adjustments
  • No spark plugs or “tune ups”
  • No timing belts to break or replace
  • No need to synchronize idle speed and throttle
  • No fuel filter or hoses to replace
  • No exhaust system to fix or smog
  • No need to fill at a gas station. Just plug in and charge at your home while you sleep. Charging your vehicle costs a fraction compared to gas.

Other Considerations: At some time in an electric car’s life, the batteries will need to be replaced. Currently, batteries are costly and run in the thousands to replace. It is estimated that many batteries will last 10 or more years. The question is how much will the battery cost to replace in 10 or so years from now. We can only estimate. With advancements in battery technology and increased production, we can expect the cost to go down and battery quality to improve.

Affordability

Ford Focus ElectricAt first glance, the cost of a new electric car is usually significantly higher than that of its gas equivalent. But when you look at the incentives such as tax credits and rebates, the costs could potentially come down as much as $10,000 or more making electric vehicles just as affordable as gas ones.

For example, let’s compare the new Chevy Spark gas and electric models. A gas-powered Spark with an automatic transmission has a sticker price of about $16,000. A similar equipped electric Spark sells for around $27,000. However, you can get up to $10,000 back later by taking a federal tax credit at tax time for $7,500 and a $2,500 rebate from the state of California (check with your individual states on any rebates). After taking advantage of tax credits and rebates, your electric Spark is now costing you only $1,000 more than the gas version ($16,000 gas model vs. $17,000 electric model). Add the savings on routine maintenance and gas costs compared to gas-powered engines and you’re now ahead of the game.

Electronic cars have been coming down in price in recent years due to increased production and advancement in battery technology. As more people demand electric cars and automakers ramp up production, expect the prices to come down even further.

Caution: Be aware that not all taxpayers will qualify to get the full $7,500 on an electric car (or $2,500 on an electric motorcycle). To get the full federal credit on your tax return you need to have at least enough calculated tax (after all other deductions and credits have been taken). Don’t expect to hear this key detail from the car dealerships for various reasons. You need to do your own math (or check with a tax professional) before shopping.

If you expect your tax return to be similar to last year’s return, you can get a good idea what your credit amount will be. Look at your prior year return on line 55 (line after total credits), Form 1040. The amount calculated on line 55 would be your credit amount (up to $7,500 per car). Keep in mind that any unused credit expires and cannot be carried over to next year’s tax return. If your tax situation this year changes that results in a different return outcome compared to last year, you should speak to a tax expert to estimate how much credit you can take on an electric car.

Performance

Tesla Model SFast – Today’s electric vehicles are just as fast or faster than gas-powered ones. Newer electric cars have a much more responsive acceleration time compared to older electric vehicles due to the improvements in torque production. However, top speed depends on how big your battery is. Many electric cars may not match the top speed of gas-powered cars as a result; nonetheless, most electric cars should have plenty of power to reach or surpass posted speed limits on our highways.

Dependable – Generally, electric cars are more dependable, as there are fewer moving parts, fewer hoses and belts to replace, and the motors are simple by design. Worrying about a blown head gasket or an overheating motor is out of the question. Also, there are usually no transmission gears or clutches that can break down.

Quiet – Another advantage of the electric car is that it’s very quiet. Most people who have never driven an electric car are startled when they come to a stop. The first reaction is restarting the engine because when the car isn’t moving, the engine is literally off. It doesn’t idle like a gas engine. Quiet is nice, especially for people who live near busy streets or freeways.

Practical – For some, this may be a sticking point that will prevent you from considering going electric. You will not always be able to simply jump into an electric vehicle and take off and go on a faraway trip. This is because batteries are limited at the range they can go before needing a charge. Most cars can go from 60 to 110 miles before the battery is totally empty. Higher-end electric cars like the Tesla S, can go over 200 miles on a full charge. Once you deplete the battery, you cannot recharge in three minutes, similar to the time it takes to refill a gas-engine vehicle. This is because the batteries could take considerable time to recharge, some as much as 8 to 12 hours on an empty battery. There are some electric cars that have a quick charge to help extend the range.

However, given the limited range on a fully-charged battery, the range should be sufficient for daily driving for most drivers. It is estimated that over 90% drive less than 40 miles a day. Most drivers average only 27 miles a day. With the exception of long trips such as vacations or visits to see family and friends out of town, an electric car should fulfill most people’s driving needs. Also, you can charge your electric car at home overnight thus reducing the need to ever stop and recharge during the day (unlike gas-powered cars that can only be refilled at gas stations). If you need to drive further, people with electric cars need to consider options such as car rentals, borrowing a gas-powered car from a friend or family member, or keeping a 2nd gas-powered car in the garage as back-up for those longer trips. One automaker, Fiat, addresses this concern by giving electric car buyers free car rentals with every purchase that can be used anytime for three weeks per year for three years.

Other Considerations

Cleaner Air – Trade local emissions for cleaner air. By going electric, you don’t worry about emissions spewing out of a tailpipe that harm the air quality. More gas-powered cars on the road mean more air pollution.

Less Dependent on Oil – Big oil and gas companies hate electric cars, as electric cars do not need gas refills or engine oil changes. The more people go electric, the less we are dependent on oil and gas. Owning an electric car is almost a no-brainer, especially if you already have solar panels or plan to add them to your home, as recharging the battery may cost you next-to-nothing.

Status Symbol – Smart, cool, caring, and sexy. These are some of the word people may use to describe drivers of electric cars. When you own an electric car, people notice. You can be one in the forefront for change that people look up to as a role model by garaging the old gas-powered car, and at the same time, be zipping around in a sleek and sex-e electric car.

Summary

The electric car isn’t just coming, it’s here and getting better. Electric cars might not be for everybody, but for over 90% of drivers an electric vehicle will be just fine. With huge credits and rebates, there is definitely an incentive to seriously consider purchasing a plug-in electric vehicle, as they are just as competitive (or more so) against a conventional internal combustion engine vehicles. Better reliability, performance, and lower maintenance costs compared to gas-engines make an electric car extremely appealing. The plug-in electric cars that are being produced, like the ones from Telsa Motors, Fiat, Nissan, and GM seem to be sparking an appeal with the public. In fact, the Telsa S won the “Car of the Year” and “Automobile of the Year” awards by Motor Trend and Automobile magazines, respectively, beating out other gas-powered engines for the honors. Taking advantage of the credits and rebates will be more than enough to sweeten the experience of buying one.

Vincent Mangiapane, EA
Federal Analyst, Taxbrain

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