Time to Go Electric?

I’m talking about cars. We are finally at the point where battery electric vehicles are developing a solid used market, even while manufacturers are dropping the prices and upping the quality of new vehicles. At the same time, we are currently experiencing a drop in gas prices.

We are going to perform this analysis from a primarily financial perspective. We will look at the monthly cost and the total cost. There are 4 groups of interest: New EV, used EV, new ICE, and used ICE. We could double this number to 8 if we want to also consider future developments, but I will just look at the situation today in this article.

There are also a large number of choices within each group. I will take a convenience approach and choose a best-in-breed representative vehicle from each group, based on financial rather than holistic characteristics. The internal combustion engine group will include consideration of hybrids. My choices are as follows:

  • NEV – 2015 Chevrolet Spark.
  • UEV – 2011 Nissan Leaf.
  • NICE – 2015 Nissan Versa.
  • UICE – 2009 Mazda Mazda6*

*I’d be happy to go with a 2008 or maybe even earlier, but this was the earliest model I could find good cost data for.

We will look at 5 and 10 year costs as the minimum and maximum total costs. In other words we are assuming you will own a car for 5 to 10 years. Cost includes purchase price, fuel, maintenance, and repairs. We will also look at a 5 year with resale, where we substitute depreciation for purchase price, considering that the car may be resold. The 10 year simply doubles the 5 year costs except purchase price.

5 Year:

  • Spark: 27000 + 2821 + 3176 + 1340 = 34337
  • Leaf*: 14000 + 2821 + 3883 + 1494 = 22198
  • Versa: 14000 + 7596 + 3831 + 1209 = 26636
  • Mazda6: 8000 + 10354** + 5332 + 2663 = 26349

*Costs other than purchase price for this model year were unavailable. Those prices are unrealistically low for 2011 because we substituted costs for the 2013 leaf, which can be found here.

**Mazda6 fuel prices are based on Virginia prices, but VA prices today are about 3 cents per gallon less than the national average, which is negligible.

5 Year with Resale:

  • Spark: 18759 + 2821 + 3176 + 1340 = 26096
  • Leaf*: 6550 + 2821 + 3883 + 1494 = 14748
  • Versa: 8295 + 7596 + 3831 + 1209 = 20931
  • Mazda6: 4000 + 10354 + 5332 + 2663 = 22349

*Annual depreciation for 2011 leaf is estimated as equal to the fifth year depreciation rate of the 2013 leaf.

10 Year:

  • Spark: 27000 + 14674 = 41674
  • Leaf: 14000 + 16396 = 30396
  • Versa: 14000 + 25272 = 39272
  • Mazda6: 8000 + 36698 = 44698

Conclusion

Years ago a Mazda6 was hailed as the fuel efficient and cost-effective choice for the masses. Today, buying a used Mazda6 is so fuel inefficient that it ends up being more expensive than a brand new pure electric if you look at it over a 10 year horizon.

Purchasing a new hybrid might be a happy medium, in particular if you are only going to keep it for about 5 years, but if you want a car that you are going to keep for a while you really can’t beat the brute savings from fuel offered by an electric vehicle.

According to cars.com, the source of most fuel data, fuel is based on “current prices,” which is about $2.15 per gallon right now. Mazda6 fuel cost originated from another source, but is comparable. I don’t think the 5-10 year average cost of gas will go below $1.50 but it could go back over $3.5. While the actual costs may vary, I think the pattern shown with the given estimates will hold or become even more pronounced. That is, gas will continue to be a major cost for traditional cars and an advantage for electrics to a degree equal to or greater than what is shown here.

However, depreciation is a large concern for new electric vehicles and used electric vehicles may not make it 10 years.

To minimize risk and maximize expected value, I would advise purchasing a new hybrid and selling it 5 years, then purchasing a used electric at that time. Purchasing a used electric may hold the best value, but it is also a risky endeavor and I think the expected value is lower when accounting for the risk of the need for catastrophic repair.

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