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Is now a good time to buy electric? Considerations when financing an EV Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by offering you interactive financial calculators and tools as well as publishing original and objective content, by enabling users to conduct research and analyze data for free and help you make informed financial decisions. Bankrate has partnerships with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site come from companies who pay us. This compensation can affect the way and when products are featured on this website, for example for instance, the order in which they may appear within the listing categories and other categories, unless prohibited by law for our loans, mortgage, and other home lending products. But this compensation does affect the content we publish or the reviews that appear on this website. We do not contain the entire universe of businesses or financial offers that may be open to you.

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7 min read published 27 February 2023

Authored by Rebecca Betterton Written by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the ins and outs of securely borrowing money to purchase a car.

The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain confidence to take control of their finances with concise, well-researched, and clear information that dissects complicated topics into bite-sized pieces.

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Financial burdens of ownership starting from the first purchase to fueling up at the station, hit record highs for drivers in the last year. Although gas prices have climbed down — a gallon averaged $3.38 on Feb. 24 according to AAA -the cost of financing a car is becoming more expensive as . Drivers pay an average of $700 per month for new vehicle financing and $525 for vehicles used in 2022’s third quarter, . With steep costs to fill up and finance, along with the ever-present concerns about climate issues, many drivers are looking for a new option. Perhaps you’re asking “Should I buy an electric car?” And you wouldn’t be alone. Electric vehicles (EV) demand has jumped in recent years, and TransUnion estimates that the market share of EVs will grow to . However, the cost upfront of an electric car may not be the best choice for everyone. Do I need to buy an electric car? The choice to buy electric is one that should be considered with the same care as selecting the model and the maker of the next vehicle. For some, the ease of having a low maintenance can make the cost of the price worth it. “From a strictly consumer experience standpoint, purchasing an electric car will be extremely positive,” says Brian Moody the executive editor of Autotrader. “In addition, the driving experience of electric vehicles can be very enjoyable. The acceleration is faster and electric cars have cool features like the ability to heat up or cool down your vehicle’s interior before you hit on the highway.” And, if there’s no full electric car and a hybrid model could be more efficient than gas-powered models and saving you money as compared to an EV. As Moody says, these tend to carry lower costs and “function like an electric car on a day-to-day basis, consuming gas only for long journeys.” This makes them an option for people who want to drive electric but who aren’t yet ready to commit fully. The market for electric cars has seen great innovation over the last two years and is set to continue growing. Although upfront costs have historically been high, they’re descending as more options are made accessible and established brands move into the electric car market. In the U.S. auto market is moving towards electric vehicles. Record-high gas prices could have helped boost sales of electric cars. EVs made up 5.7 percent of all new vehicle registrations in Q2 2022 according to . That may not seem big however it’s an impressive increase from the 1.5 percent share that electric vehicles accounted for in the second quarter of 2018. This growing interest in electric vehicles has led to advancements in available financing such as tax credits and tax rebates. This market expansion is among the main motives to think about buying an EV. While Tesla currently dominates the market, TransUnion predicts the luxury brand will fall of the percent of market in 2025, due to the influx of new and mainstream brands coming into the market. Moody shares a similar perspective when it comes to the availability of vehicles. “It was once the case that there were only one or two tiny or extremely expensive electric cars. Although EVs tend to be more costly as a whole but some models are less expensive. For instance Kia EV6 and Chevrolet Bolt. Kia EV6 and Chevrolet Bolt.” The Nissan Leaf is another cost-effective alternative to EVs. EV drivers share almost identical credit profiles to those driving luxury Satyan Merchant, senior vice president and automotive business leader at TransUnion, has seen increasing popularity in EV financing and a subsequent influence on the entire auto finance industry. The study by TransUnion for 2022 found that out of the 33 million customers between 2019 and 2021 who originated new EV and traditional vehicle loans The majority of EV borrowers shared almost identical high-credit profiles as those who drive high-end vehicles. The people who drove conventional EVs held an average score for credit of 775, falling in the top category. The average interest rate was 2.8 percent. This is lower than the average APR of 4.9 percent for all new cars that are available to those with a prime credit score. The high average competitive APR for electric vehicles isn’t solely due to the high credit ratings of these motorists. Buyers are generally also making . The study also showed the drivers are more inclined to start their . In fact over one-third of them conducted online research on vehicle models and makes. Merchant explains, “Our research clearly shows that consumers of electric vehicles have great credit risk profiles. However, they also have varying preferences, such as a higher appetite in shopping around for financing of vehicles through digital means.” This increased demand is likely to be evident in new choices for EV financing as well as the increase in the number of vehicles available within the next few years. Options for eco-friendly financing are expanding This growing market for electric vehicles has also brought about improvements in financing. While it is true that motorists can use or borrow for electric vehicles, lenders specifically for EVs are growing in popularity and offer drivers with a tailored experience by offering . Alex Liegl, CEO of Tenet, discusses the company’s work in EV financing and the company’s goal to make climate-related investment an easy choice. The Tenet method “gives customers the freedom to manage upfront investment costs and also save money from down payments to be used for other expenditures,” Liegl says. Along with this, there is a deferment option that shifts a third of the price into one final payment at close of the financing. This allows for smaller monthly payments and an easier financing experiencehowever, a significant amount may be due at the end. The aim, Liegl says, is to “help customers fully transform their lives with electricity by making environmentally sustainable home improvements less expensive, such as installations of solar panels and battery backups and electric vehicles, smart appliances and much more.” Other companies, like , serve as a marketplace for loan prequalification, which is directly tied to incentives for EVs and green loans available within your particular state. According to their website, consumers can save up to $200 each month on monthly EV loan payment. Are EVs able to have a lower lifetime cost? Then what makes an electric car worth it? The positive feelings that come from driving a car that is better to the planet isn’t always the only reason people are turning to EVs. Additionally, they can reduce costs. While it’s true that gasoline is used up during driving, in some cases driving electric can be less expensive in the long run. According to a survey conducted in 2020, electric car owners have saved on average and repairs over the lifetime of ownership as per Consumer Reports. This is due in part to the different methods of upkeep that come with EVs. They do not require oil changes and use more efficient powertrains. Drivers of battery-electric vehicles and plug-in hybrid vehicles paid only 3 cents per mile during the lifetime of the vehicle, compared to 6 cents per mile for traditional vehicles. But driving electric isn’t completely rosy. CNET, a Red Ventures company, reported on a study conducted by We Predict that found . Although it’s true that drivers are able to avoid the additional cost associated with maintenance, such as oil changes and basic inspections, EV components are more expensive when it comes time for repairs. This means that the longer maintenance time and higher-priced replacement parts could make driving electric the same, or more expensive as driving gas-powered vehicles. Additionally, electric vehicles can be driven accelerate faster than traditional gas-powered vehicles because of the speed of technological advances however, the present demand for EVs has helped maintain prices. What is the best way to finance an electric vehicle procedure for financing an electric vehicle is fairly similar to that of a traditional gas-powered vehicle. It is important to follow the same steps you normally would, as well as available terms and understanding the weight that your credit scores and your history have to carry. As previously mentioned, driving electric also carries potential state and federal benefits that you would not normally have access to. One of these is , an incentive worth $7,500 that applies to new, certified plug-in or fuel cell electric cars. If you buy a new vehicle in 2023, you could also get a Federal tax credits . The vehicle cannot be purchased for more than $25,000. If it is eligible you may claim tax credits of up to 30% of the purchase price, which is capped at $4,000. Tax credits for federal residents come with income restrictions and car requirements, so you need to make sure you and your potential future EV are eligible before you begin. Beyond that, you might be able to claim a state tax credit depending on where you live. You should ask yourself these questions prior to buying an electric vehicle Owning and operating an electric vehicle is a different number of demands that you might not have dealt with in the past. Consider these questions. 1. What is the range of the vehicle? It is important to check the distance that your car can get you — for your daily commute and for your traveling habits. Energy.gov provides the average range for 2021 model year vehicles with the potential to cover between 405 and 405 miles. Fortunately, drivers will likely deal with lower levels of “range anxiety” as vehicles catch up with the latest technology. But it is wise to assess your needs , taking into account your normal commute, as well as your expected leisure activities. 2. Do I have to rent before buying an electric vehicle? “Leasing an electric vehicle could be a good option to try out the waters of ownership in an electric vehicle,” Moody says. The cost is typically lower on a monthly basis and generally comes with a guarantee. If you are on the side of electric vehicles, consider leasing one to test the experience and feel. 3. Do I have access to car chargers in my region? Even though there is evidence that Electric Vehicle Council found that the majority of electric vehicle owners charge up at home, many drivers don’t enjoy the convenience of installing a Level 2 charger. That’s okay. Many EVs can now be charged to charge from any outlet that is electrical, but it could take the whole night or longer to get a full charge. However, you may need a speedier charge at times. Many EVs take around 45 minutes to get to 80 percent battery capacity when you use a fast-charging station. To determine the locations you could have the chance to receive a faster charge take a look at this map that shows charging stations nearby. Check that the charging stations you plan to use can be used with the car you’re considering. You should consider an electric vehicle when looking for your next vehicle Is an electric vehicle worth the investment? Similar to other luxury vehicles, EVs can carry higher cost upfront and owners must have a strong credit profile to take advantage of low interest rates. However, as the industry expands and more mid-tier options come up, more people can reasonably consider an electric option. Are you among those who comprise 36 percent Americans thinking about electric? Moody recommends aiming at the sweet spot, buying lightly used — something that falls in the 3-to-5-year range to enjoy a lower cost and an adequate amount of warranty protection.

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Writen by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the ins and outs of securely using loans to buy the car they want.

Editor: 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 control their finances by providing concise, well-researched and well-written information that breaks down complex topics into manageable bites.

Auto loans editor

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