The difficulties of financing EVs and how to overcome them

Electric vehicles are much more environmentally friendly than gas-powered vehicles, but unfortunately they are much harder on your wallet. The average price of an EV in July 2023 was $53,469, according to Kelley Blue Book, while the average gas-powered vehicle only cost about $48,334. That’s a difference of more than $5,000.

This is actually an improvement over years past, but it’s still a problem for many drivers. Fortunately, some smart strategies can help you fit an EV into your budget.

Buy used

There aren’t as many used EVs available as used gas powered vehicles, but more are starting to appear as EVs become more popular. You may be able to find some by visiting local used car dealers. You can also check online sites like Carvana to see what their inventories look like.

You’ll probably still pay more than you would if you bought a used gas-powered vehicle, but you’ll save a lot compared to buying a new EV. Be sure to give the car a thorough inspection and test drive before you agree to buy it so you know what you’re signing up for.

Take advantage of tax credits

The federal government offers tax credits of up to $7,500 to buyers of select new EV models and up to $4,000 to buyers of select used EVs. But to qualify for the credit, cars must meet certain criteria, including final assembly in the U.S. and a certain percentage of critical minerals and battery components mined or processed in the U.S. or a U.S. free trade agreement partner. You can check to see which models qualify for tax credits.

Before 2024, drivers who claimed EV tax credits had to wait until they filed their tax returns for the year to claim that credit. But starting now, drivers can apply this credit at the point of sale, effectively reducing their purchase price. The dealer will help you take care of this when finalizing your offer.

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Consider a green car loan

Some banks and credit unions offer green car loans aimed at EV buyers. They are similar to traditional auto loans in that they use the vehicle as collateral. But they usually offer lower interest rates. This can make your monthly payments a little more affordable than with a traditional loan.

Check with your local financial institutions to see if any offer green car loans. Also compare some online providers. It won’t hurt to get estimates from a few of them to get an idea of ​​what you’ll be paying. Don’t just look at monthly payments. Also consider closing costs and how much you’ll pay in interest over the life of the loan.

Shop for auto insurance

Car insurance is usually higher for EVs because they are more expensive cars. Shopping around is critical for drivers looking to keep their insurance premiums low.

It is best to compare quotes from several top insurance companies before purchasing a policy. Some insurers even offer discounts on EVs and hybrid vehicles, so it’s worth checking them out.

Wait for it

If owning an EV is still not feasible for you, even after considering the steps above, you may need to wait to buy one. But that’s not necessarily a bad thing. Technology tends to become more accessible over time, and we’ve already seen this happen with electric cars. Waiting even a year or two will likely open the door to more affordable options. In addition, interest rates on auto loans may drop, which could make EV financing even cheaper.

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