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If you’re planning to buy a new electric car, you’d better be prepared for some sticker shock—not when you buy the car, but when you sell it.
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Electric cars are more efficient than gasoline or diesel vehicles, and they save serious money—a few hundred to a few thousand dollars a year, depending on the vehicle type—using electricity from the grid versus fuel from the gas station. They cost less to maintain and repair, too. But all that money saved—even including the $ 7500 federal EV tax credit that will sweeten your first year—won’t counter the worst thing to befall most EVs: horrendous depreciation.
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Electric vehicles lose more than $ 5700 per year, on average, over the first five years. That’s about $ 28,500 off their original price compared to an average of less than $ 3200 a year or $ 16,000 over five years across all vehicle types.
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In this year’s edition of its Your Driving Costs study examining the true cost of vehicle ownership, the American Automobile Association (AAA) separated out hybrids and electric vehicles (EVs) for the first time, and the electric-vehicle results were a noteworthy finding. While hybrids and EVs both came back with lower than average operating costs, the high depreciation made EVs cost more than hybrids over the five-year/15,000-mile-per-year projections of the study.
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AAA uses a proprietary formula to calculate total operating costs per mile and then combines that with per-day/yearly ownership costs to arrive at total driving costs. The operating costs are where EVs show their strength. Fuel costs remain one of the most attractive operating-cost benefits of electric vehicles; maintenance and repair costs are another. Based on a national average electricity cost of 12.6 cents per kilowatt-hour, electric vehicles cost a measly 3.7 cents per mile on average to power—the least of any vehicle category, and a small fraction of the market average of 10.3 cents per mile. Maintenance, repairs, and tires are another advantage for electrics, at 6.6 cents per mile—less than the 7.0-cent-per-mile figure for hybrids and well under the fleetwide 7.9-cent-per-mile average.
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Workarounds: Buy Used or Lease New
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“Although electric vehicles can have higher upfront costs, lower fuel and maintenance costs make them a surprisingly affordable choice in the long run,” said John Nielsen, AAA’s managing director of automotive engineering and repair, in a release. “For even lower costs, car shoppers can avoid high depreciation costs by selecting a used electric vehicle.” That’s the flip side of the depreciation story—the second or third owner of an EV is really the one saving money, although most of the EVs available as used cars have a more limited range than the latest models.
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Another option for those who want a new EV is to lease. Especially if you’re in California, Oregon, or one of the eight other ZEV-mandate states, you’re likely to find bargain lease deals—built around highly subsidized resale values and often with some incentives baked in—that can result in monthly payments under $ 200 for some EVs.
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But it’s those same incentives that are, at least in part, to blame for EVs’ depressed resale values. Anil Goyal, senior vice president of automotive valuation and analytics at Black Book, pointed to those, plus low gas prices, decreasing sticker prices as the technology scales up, and the lack of easy charging infrastructure as among the many issues that push values downward more steeply for EVs.
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Range anxiety remains an issue, too. “The newly released Chevrolet Bolt EV [which has a 238-mile range] is forecast to perform significantly better than its lower-range electric competitors,” said Goyal. “Black Book residual values predict that the resale value of a 2017 Bolt EV will be twice that of a 2017 Nissan Leaf but will continue to be lower than gasoline-powered competitors.”
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- Tesla Aside, Resale Values for Electric Cars Are Still Tanking
- If the U.S. Government Nixes the $ 7500 EV Tax Credit, Then What?
- Tesla Model 3: Review, Photo Gallery, Specs
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Tesla continues to be the exception, for the flip side of many of those same reasons. Tesla, with long driving-range ratings for its models, less (if any) dependence on incentives, and a well-developed network of Supercharger hardware—as well as perks like over-the-air updates—does better on resale value than its gasoline competitors.
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Yet you won’t find Tesla in AAA’s results. The organization doesn’t include what it considers luxury models in the study. AAA noted that, while the Tesla Model S and Model X fall into that category, the Model 3 doesn’t, and it will be included in next year’s results.
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