EV ownership still pays off long-term despite end of federal tax credits, experts say

Congress has eliminated federal tax incentives for electric vehicles, ending a $7,500 credit on new EVs and up to $4,000 on used ones before a Sept. 30 deadline for qualifying purchases. Even without the credits, transportation researchers and consumer advocates say electric vehicles remain financially and environmentally superior over the life of the car for buyers who can afford the higher sticker price.

The loss of the credits removes what advocates described as a critical affordability bridge for lower- and middle-income Americans, who will now face the full price gap between electric and gas-powered vehicles — a gap Kelley Blue Book data puts at roughly $9,000 for new cars.

Congress eliminated federal tax incentives for electric vehicles Thursday when it passed a sweeping tax and spending bill, ending a $7,500 credit on new EVs and up to $4,000 on used ones. As MSI previously reported, buyers have until Sept. 30 to qualify for the credits before they expire — after that date, purchasers face the full price difference between electric and gas-powered vehicles without federal help. Read: Congress ends EV tax credits; buyers have until Sept. 30 to claim them

According to Kelley Blue Book data, the average new electric vehicle costs roughly $9,000 more than the average new gas-powered car in the United States. Used EVs cost about $2,000 more than comparable gas-powered models on average. The credits had been designed to narrow that gap.

“That’s really disappointing because … they’re just a really great way to reduce transportation energy cost burden,” said Ingrid Malmgren, Senior Policy Director at Plug In America, a nonprofit advocacy group. Without the incentives, she said, electric vehicles will become unaffordable to many lower- and middle-income Americans.

Long-term savings persist without the credits

The higher sticker price does not erase the economic case for EVs over the life of the vehicle, Malmgren said. Electric vehicles carry lower fuel and maintenance costs than gas-powered cars.

“Quickly you’ll end up paying less than a gas car because it costs much less to fuel, and it needs almost nothing for maintenance,” Malmgren said. EVs have fewer moving parts than gas-powered vehicles and require less frequent servicing.

A 2020 study published in the academic journal Joule found that the average American EV owner saves $7,700 in fuel costs over a 15-year lifespan compared to a gas-car driver, using a typical mix of public and private charging. The study found that EV drivers in every state save money on fuel under typical driving and charging conditions. It did not account for the purchase price, maintenance costs, or tax credits.

In a best-case scenario — home charging during off-peak hours in Washington state, where electricity is relatively affordable — the study found that fuel savings could exceed $14,000 over 15 years.

EVs remain cleaner than gas cars even in coal-heavy states

Transportation researchers said the environmental advantages of electric vehicles survive the removal of the tax credits — and hold even in states that depend heavily on coal for electricity.

Manufacturing an EV typically produces more pollution than manufacturing a gas-powered car. But that gap closes quickly once the vehicle is on the road. After about 15,000 miles — slightly more than the average American drives in a year — the total lifecycle emissions of an EV and a gas car even out, said Peter Slowik, U.S. Passenger Vehicles Lead at the International Council on Clean Transportation. Every mile after that widens the EV’s environmental advantage.

“They are a no-brainer,” Slowik said. “Electric vehicles are already inherently so much more efficient.”

By the end of a car’s useful life, average EV emissions are roughly half those of the average gas car, according to the U.S. Department of Energy. A 2023 analysis by Yale Climate Connections found that an EV in West Virginia — one of the most coal-reliant states in the country — still pollutes 31% less than an equivalent gas-powered car.

The efficiency gap drives the difference. The Tesla Model Y and Tesla Model 3, the two most popular EVs in the U.S., can travel more than 100 miles on energy equivalent to one gallon of gasoline. Compared to a vehicle achieving 25 miles per gallon, that is four to five times more efficient, Slowik said.