An unpleasant truth about EVs is that they almost always have higher retail prices than their internal combustion engine (ICE) counterparts. In the first quarter of this year, there was a 42% gap in the average price of an electric car vs. a gas car.
The biggest gap in MSRPs, according to Edmunds price data, was 58.5% in the popular and relatively crowded compact SUV category. The average fully electric model, with a starting MSRP of $53,048, was a wallet-draining $17,326 more than the average of $35,722 for a gas-burning compact crossover.
The smallest gap was for large pickups: 18% at $76,475 for electrics versus $64,784 for ICE vehicles.
The price gap remains
EVs cost more to build than internal combustion engine vehicles of similar size and with similar features. That's been a fact since the dawn of the modern EV age, back in 2011.
Pundits promise that the gap will narrow and ultimately disappear. EV volumes will increase, bringing economies of scale into play. Battery technology will improve, making batteries less costly. Increasingly stringent air quality rules will require increasingly complex and costly emissions technologies for ICE vehicles, making them ever more expensive.
All that is true, but the timing is a big question mark. For the past three years, despite increasing EV sales, the price gap between electric and gas cars has remained fairly stable.
A note: We're talking MSRP — manufacturer's suggested retail price — and not actual transaction prices, which can include negotiated discounts, sale prices and dealer markups, along with factory incentives and federal, state and local tax breaks for EVs and plug-ins. Prices also include the destination and delivery charges levied by almost every automaker. High-performance versions and exotics aren't included; hybrids — conventional and plug-in — are in the internal combustion engine category.
It's not all about MSRP
Most shoppers tend to focus on the monthly payment or initial price of a vehicle rather than the total cost of ownership. That electric truck may have a higher MSRP but can end up being the smarter buy once fuel, maintenance and repairs, insurance, and available incentives are figured in.
For EV shoppers, the lease vs. purchase decision also is critical, said Jessica Caldwell, Edmunds' executive director of insights. Only a handful of EVs qualify for a cost-reducing federal clean vehicles incentive when purchased, but all qualify for the full $7,500 when leased.
If all EV transactions were leases, the average price gap after applying the federal incentive would be slashed by almost 50%.
Interest costs, too, are important and shopping for lower-interest financing can be as critical as shopping by MSRP. Edmunds offers loan rate and loan payment calculators that can show you how much you'll pay over the life of a loan at various interest rates.
Time will tell
The final factor in determining whether an EV will be cheaper than a gas car is the length of ownership. EV savings build up over time.
Someone who keeps a car for just a few years might not see those savings erase the purchase premium of an EV. A person who keeps a car for several years almost certainly will.
A recent total cost of ownership study comparing projected seven-year costs of the five most popular gas cars of 2023 and their closest electric counterparts found that in every case, the EV would save money despite its higher purchase price. The study, released earlier this year by the Natural Resources Defense Council and performed by Atlas Public Policy, found that savings ranged from just over $100 to just under $11,000.
Lots of luxury
The gap in the average price of an electric car vs. a gas car is as big as it is right now largely because carmakers tend to put their newest and best technologies in their most expensive models first. That means there are more luxury- and premium-level EVs than entry-level models, skewing average EV prices higher.
Americans bought 266,343 EVs in the first quarter of 2024. Luxury and premium trims — the bulk of them Tesla models — accounted for an impressive 72% of the total.
Vive la différence
To get a better idea of price differences, let's look at top-selling ICE and EV models in the various size classifications for the first quarter of this year.