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Is this the right time to invest in electric vehicles? 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 choices by offering you interactive financial calculators and tools as well as publishing original and objective content. We also allow you to conduct your own research and analyze data for free and help you make sound financial decisions. Bankrate has agreements with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site are from companies that pay us. This compensation can affect the way and where products appear on this website, for example the sequence in which they be listed within the categories of listing and other categories, unless prohibited by law. This applies to our loan products, such as mortgages and home equity, and other products for home loans. But this compensation does have no impact on the information we provide, or the reviews that appear on this website. We do not include the entire universe of businesses or financial deals that could be available to you.
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7 min read Published on February 27, 2023.
Written by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the ways and pitfalls of taking out loans to purchase a car.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to take control of their finances through providing precise, well-researched and well-researched content that break down complicated topics into bite-sized pieces.
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The financial burden of ownership starting from the first purchase until fueling up at the station, hit record highs for drivers over the course of the year. Although gas prices have climbed down to $3.38 in February. 24, according to AAA -the cost of financing a car gets more expensive . Drivers pay an average of $700 per month for brand new vehicle financing and $525 for used vehicles in the third quarter of 2022’s calendar, . With steep costs to fill with fuel and pay for, plus the constant worries about climate change, many motorists are itching for another option. Perhaps you’re asking “Should I invest in an electric car?” And you wouldn’t be alone. Electric vehicles (EV) sales have jumped in the past few years and TransUnion predicts that the EV market share will increase to . However, the cost upfront of an electric car could not be suitable for everyone. Do I need to buy an electric vehicle? The decision to purchase electric should be approached with the same care that you would selecting the model and the maker of the next vehicle. For some, the ease of low maintenance will make the expensive price tag worthwhile. “From a strictly consumer experience viewpoint, buying an electric vehicle is extremely positive,” says Brian Moody the executive editor of Autotrader. “In addition, the driving experience of electric vehicles can be very enjoyable. Acceleration is more brisk and electric cars come with amazing features, like the ability to heat up or cool down your vehicle’s interior prior to hitting roads.” In the event that you are you don’t have a fully electric vehicle, a hybrid or plug-in model is more efficient than traditional gas models while costing less than an EV. According to Moody explains, these typically have lower costs in addition to being able to “function as an electric car for everyday use with gas being used only for long journeys.” This can be a viable option for people who want to drive electric, but aren’t ready to commit fully. The electric car market has seen a lot of innovation in the last two years, and is expected to continue to grow. Although upfront costs have historically been prohibitive, they’re decreasing as more options are made available , and traditional brands are dipping into the electric car market. In the U.S. auto market is changing to electric. Record-high gasoline prices could have helped boost sales of electric cars. Electric vehicles accounted for 5.7 percent of new car registrations in Q2 2022, according to . This may not sound like a lot, but it’s a notable rise over the 1.5 percent share that EVs represented in Q2 2018. This growing interest in electric vehicles has led to advancements in available financing as well as tax credits. This increased market is among the top motives to think about buying an electric vehicle. Although Tesla currently dominates the market, TransUnion predicts the luxury brand will lose its market share by 2025, due to the influx of new and more mainstream makes coming into the market. Moody offers a similar outlook regarding the availability of vehicles. “It used to be true that there were just one or two small or expensive electric vehicles. Although EVs tend to be more costly in general but some models are less expensive. For example, Kia EV6 and Chevrolet Bolt. Kia EV6 and Chevrolet Bolt.” The Nissan Leaf is another cost-effective EV option. EV drivers have almost identical credit profiles to those who drive luxury vehicles. Satyan Merchant Senior Vice President and chief of business for automotive at TransUnion has noticed a growing the popularity of EV financing, and an ensuing impact on the automotive finance market. The study by TransUnion for 2022 found that, of the 33 million people between 2019 to 2021 who took out new traditional and EV loans the majority of EV-related borrowers had nearly identical credit profile to those who own luxury vehicles. The people who drove regular EVs were able to get an average credit score of 775 and fell into the category of prime. They also had an average APR of 2.8 percent. This is less than the median APR which was 4.9 percent for all new cars for people with credit in the prime category. The low average APR for electric vehicles isn’t only because of the credit profiles of these drivers. They are also making . The study also showed the drivers are more inclined to begin their journey . In actual fact, more than one-third conducted online research on vehicle types and makes. Merchant explains, “Our research clearly shows that electric vehicle buyers have great credit risk profiles. However, this group also has varying preferences, such as a higher desire to shop around for financing options via digital channels.” This larger appetite will likely be reflected in new choices for EV financing combined with an increasing number of vehicles that are available in the coming years. Alternatives for environmentally friendly financing are increasing. The growing market for electric vehicles has also resulted in advances in financing. While it is true that consumers can borrow or use for electric vehicles, EV-specific lenders are becoming more popular and provide drivers with a tailored experience through . Alex Liegl, CEO of Tenet, discusses the company’s efforts with EV financing and its aim to make climate investing an easy decision. The Tenet method “gives customers the ability to manage their upfront investment costs and save down-payment cash to be used for other expenditures,” Liegl says. In addition you can also choose a deferment option that transfers one quarter of the purchase cost to one final installment at the end of the financing term. This allows for lower monthly payments and an easy financing experiencehowever, a substantial amount might be due at the conclusion. The purpose, Liegl says, is to “help customers fully enhance their lives through making green home improvements more affordable, including installations of solar panels and battery backups and smart appliances, EV charging and much more.” Other organizations, like the ones listed above , serve as a marketplace for loan prequalification directly connected with incentives for EVs and green loans that are available in your state. According to its website, consumers can save up to $200 each month on monthly EV loan payments. Do EVs have a lower lifetime cost? Therefore, is an electric car worth it? The satisfaction that comes from driving a car that is more sustainable for the environment isn’t the only reason people are turning towards electric vehicles. It also has the potential to reduce costs. Although it’s true that gas accrued during driving, in some situations, driving electric could be more affordable overall. According to a survey conducted in 2020, drivers of electric vehicles have saved on average and repairs over the lifetime of ownership as per Consumer Reports. This is due in part to the distinct differences in upkeep that come with EVs. They don’t require oil changes and use an easier powertrain. Those driving battery-electric vehicles and plug-in hybrid vehicles spent only 3 cents per mile over the lifetime of the vehicle as opposed to 6 cents per mile for conventional vehicles. However, driving electric isn’t all positive. CNET is an affiliate of the Red Ventures company, reported on a study from 2021 by We Predict that found . While it is true that drivers do not have to pay the cost associated with , like oil changes and routine inspections, EV components are more costly when it comes time for repairs. This means that more maintenance hours logged combined with the costlier replacement parts may result in electric cars being just as, or pricier more expensive than driving gasoline-powered vehicles. Furthermore, electric vehicles are able to operate accelerate faster than gas-powered cars because of technological advancements however, the present demand for EVs has helped keep prices in check at the moment. How do you finance an electric vehicle process of an electric vehicle is fairly similar to the traditional gasoline-powered car. It is important to follow the same procedure you typically would, and understand the terms available and the importance that the credit rating and past carry. As previously mentioned, driving electric also carries the potential for state and federal benefits you don’t typically be able to access. One of these benefits is an incentive worth $7500 that applies to new, certified plug-in and fuel-cell electric vehicles. If you buy a new vehicle in 2023, you might also be able to claim a federal tax credit . The car can’t be bought for more than $25,000. If the vehicle is eligible, you can claim a credit for up to 30 percent of the sale price, capped at $4,000. The federal tax credits are both accompanied with income restrictions and vehicle requirements, so make sure you and your future EV meet the requirements before you dive in. Beyond that, you might get a state tax credit depending the location you reside in. You should ask yourself these questions prior to buying an electric vehicle Owning or operating an electric vehicle has its own set of needs that you might not have dealt with before. Consider these questions. 1. What is the range of the vehicle? It is crucial to know the distance that your car can bring you — for both your normal commute as well as your daily travel. Energy.gov lists the range of 2021 model year vehicles that have possible ranges of between 405 and 405 miles. It is likely that drivers will deal with lesser “range anxiety” as their vehicles get up to speed with available technology. However, it’s important to evaluate your needs , taking into account your typical commute and expected leisure activities. 2. Do I have to consider leasing before purchasing an electric car? “Leasing an electric vehicle can be a great way to try out the waters of electric car ownership,” Moody says. is typically less expensive on a monthly basis and typically comes with a warranty. If you’re on the fence about driving electric and are considering leasing one, see if you like the feel and experience. 3. Are I able to connect vehicle chargers in my area? While the Electric Vehicle Council found that about of EV drivers recharge at home, many drivers do not enjoy the convenience of installing the Level 2 charger. That’s okay. Many EVs are now able to charge at any electrical outlet, however it might take all night or longer to get an entire charge. However, you may require a quicker charge at times. Many EVs take about 45 minutes to reach the 80 percent capacity of their batteries at an outlet that is fast charging. To determine where you might be able to obtain an earlier charge, check out , which maps out charging stations close to. Check that the charging stations you plan to frequent are compatible with the car you’re considering. Consider an EV when shopping for your next vehicle Is the electric car worth it? As with other luxury vehicles, EVs can carry higher cost upfront and require a strong credit profile to take advantage of the low rates of interest. But as the industry grows as more options for mid-tier vehicles spring up, more people can reasonably consider an electric option. Are you among the 36 percent of Americans who are considering electric? Moody suggests that you look at the sweet spot, purchasing a used model that is something in the three to five-year range to benefit from a lower cost and an adequate amount of warranty protection.
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Authored by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely taking out loans to purchase the car they want.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to manage their finances through providing concise, well-researched and well-written information that breaks down complicated topics into bite-sized pieces.
Auto loans editor
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