The costs of owning an electric car
In terms of the evolution of EVs, We are far past the stage of putting them in the corner and labelling them a fad. They are now mainstream in many places around the world. Consider this: New Zealand is likely to surpass Australia in EV sales with 6545 sold last year, compared to Australian sales of 6718, a country with a population 25 million versus New Zealand’s five million.
EVs are very appealing on many fronts, but there are still critics who argue that electricity from dirty coal-fired power stations are required to create EV’s.
A recent study conducted at Eindhoven University of Technology in the Netherlands showed that when CO2 was considered in the production and charging of a Tesla Model 3 versus a diesel Mercedes-Benz C-class 220d, the Tesla produces 91 grams of CO2 per kilometre versus the Mercedes at 260 grams.
I’m a financial adviser and serious car enthusiast: here’s my appraisal of the situation.
From a financial perspective, EVs have been a difficult proposition until recently with the high purchase cost being a big hurdle for many to overcome. However, options are widening and costs are falling so you can now be behind the wheel of EV for less than $50,000 (or $299 per week on a subscription basis as discussed further on).
When thinking about depreciation, did you know that your EV is likely to depreciate less than your petrol beast? A US study from iSeeCars found that Tesla’s most popular and affordable vehicle, the Model 3, tops the list in terms of lowest depreciation of any car in the first 12 months of ownership, with average depreciation of 5.5 per cent versus the 25.2 per cent average of all new cars. Of course, Teslas are expensive with a base Model 3 setting you back around $80,000 in Australia.
More locally, the RACV found that the ongoing cost of electricity/fuel, tyres and servicing was lower with a Tesla Model S compared to a petrol powered Toyota Camry. The Tesla costs 11.41 cents per kilometre to operate versus the Toyota at 17.1 cents.
However with a new car price of $150,000 for the Tesla S versus $35,000 for the Camry, after everything else is factored in such as financing costs and depreciation, the total cost of the Tesla S comes out to $510 per week versus $198 for the Camry.
If you want the most cost effective EV, RACV advises it is the Hyundai IONIQ with an average cost of $193 per week based on driving 15,000km per year and a 60 per cent assumed drop in value after five years.
For those who prefer to dip their toe in the water rather than commit to a purchase, there is a new subscription based service offered by Australia’s largest electricity company — AGL.
For an $800 set up fee they will install an EV charging station at your home and for an ongoing cost of $299 per week, you can get a Hyundai IONIQ or a Nissan LEAF. Registration and insurance costs are covered in that weekly fee, as well as roadside assistance and tyres. You just have to pay for electricity.
AGL promise to change the car to a newer one every six months subject to availability. Being a subscription based model, it operates on a week-to-week basis and the $150 cancellation fee ceases to apply after six months.
Remembering that the total ownership cost of a Hyundai IONIQ is $193 per week if you were to purchase one on finance, paying $299 per week on a “hand the keys back when you’re done” basis could be relatively attractive. Less attractive is AGL’s offer on the Tesla 3. The subscription cost is $599 per week which is almost double the estimated cost of $320 if you were to purchase one yourself using finance.
Just as people waited a few years before buying their first plasma television, the first generation of EVs have passed and the current generation have better technology, less problems and are sold at a lower price. New subscription models will be tempting for those not ready to purchase just yet.
James Gerrard is principal and director of financial planning firm
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We know electric cars are on the way with $74.5m in incentives announced by the federal government in the budget. This includes grants for businesses to upgrade their power supply to enable electric vehicle (EV) fast charging and encourage them to adopt fleets of EVs rather than traditional fuel engine vehicles.