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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 aim is to assist you make better financial decisions by providing you with interactive financial calculators and tools, publishing original and objective content, by enabling you to conduct research and compare information for free to help you make sound financial decisions. Bankrate has agreements with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this website are provided by companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may be listed within the categories of listing and other categories, unless prohibited by law for our loan products, such as mortgages and home equity and other home lending products. This compensation, however, does affect the information we publish, or the reviews that you see on this site. We do not cover the entire universe of businesses or financial offerings that could be open to you.
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7 min read published February 27, 2023
Written by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the ins and outs of securely taking out loans to purchase an automobile.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain confidence to control their finances by providing clear, well-researched information that dissects complicated topics into bite-sized pieces.
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It is a financial strain ownership, from the initial purchase until fueling up at the station, has reached record levels for drivers over the course of the year. While gas prices have crept down and a gallon cost $3.38 in February. 24 as per AAA -financing a vehicle gets more expensive . Drivers pay an average of $700 per month for new car financing, and $525 for vehicles used in the third quarter of 2022's fiscal year, . With steep costs to fill with fuel and pay for, and the constant worries about climate issues, many drivers are itching for another solution. You might be asking "Should I invest in an electric vehicle?" And you wouldn't be alone. Electric vehicle (EV) demand has jumped over the last few years, and TransUnion believes that the EV market share will reach . However, the cost upfront of electric vehicles might not be right for all drivers. Should I purchase an electric vehicle? The decision to purchase electric should be approached with the same care as determining the make and model of the next vehicle. For some, the convenience of having a low maintenance can make the price tag worthwhile. "From an entirely consumer experience standpoint, purchasing an electric vehicle is very positive," says Brian Moody who is executive editor at Autotrader. "In addition to that, driving in electric vehicles is extremely satisfying. It is quicker and more efficient, and electric vehicles come with interesting features such as the capability to heat the vehicle's interior before hitting the road." If there's no full electric car one, a hybrid or plug-in model could be more efficient than gas-powered models and being kinder on your wallet than an EV. As Moody explains, these tend to carry a lower price tag as well. They "function in the same way as an electric car in the daytime, consuming gas only for lengthy trips." This can be a viable option for people who want to drive electric but not prepared to commit to a full-time commitment. The market for electric cars has seen great innovation over the last two years and will continue to expand. Although upfront costs have historically been high, they're dropping as more options become accessible and established brands move into the electric car market. The U.S. auto market is moving towards electric vehicles. Record-high gas prices could have helped propel EV sales. Electric vehicles accounted for 5.7 percent of new car registrations in Q2 2022 according to . This may not sound like a lot, but it's a notable improvement in comparison to the 1.5 percent share that electric vehicles accounted for in the second quarter of 2018. The growing demand for electric vehicles has resulted in improvements in financing options, including and tax credits. This increased market is among the main reasons to consider buying an electric vehicle. While Tesla is currently the most popular choice, TransUnion predicts the luxury model will be a minority of the market share by 2025 because of the influx of new and mainstream brands that are entering the market. Moody shares a similar perspective regarding vehicle availability. "It used to be true that there were only a handful of very small or very expensive electric vehicles. Although EVs tend to be more costly as a whole but some models are less expensive. For instance, there is the Kia EV6 and Chevrolet Bolt." The Nissan Leaf is another cost-effective EV option. EV drivers have almost the same credit profile as those who drive luxury vehicles. Satyan Merchant the senior vice president and automotive business leader at TransUnion has noticed a growing the popularity of EV financing, which has a direct influence on the entire automotive finance market. The study by TransUnion for 2022 found that out from the 3 million consumers between 2019 and 2021 who took out new traditional and EV loans the majority of EV-related borrowers had nearly identical credit profile to those who own high-end cars. Those driving mainstream EVs were able to get an average score for credit of 775 and fell into the prime category. Also, they had an APR average of 2.8 percent. This is less than the median APR that was 4.9 percent for all new cars for people with credit in the prime category. The low average APR for electric vehicles isn't only due to the high credit ratings of these motorists. They are also making . The study also revealed motorists were much more likely begin their research . In reality, more than one-third conducted online research on vehicle models and makes. Merchant says, "Our research clearly shows that buyers of electric vehicles have great credit risk profiles, but this group also has varying preferences, including a larger desire to shop around for financing options via digital channels." This larger appetite will likely be reflected in new options for EV financing, as well as an expansion of available vehicles expected over the next few years. Options for eco-friendly financing are increasing. The growing marketplace for electric vehicles also brought about improvements in financing. Although consumers can borrow or use for their electric vehicles, lenders specifically for EVs are becoming more popular and provide drivers with a tailored experience through . Alex Liegl, CEO of Tenet, explains the company's efforts with EV financing and the company's goal to make climate investment an easy decision. The Tenet method "gives customers the ability to manage their upfront investment costs and to save the cash for down payment to be used for other expenditures," Liegl says. Additionally you can also choose a deferment option that transfers an entire quarter of the purchase cost to one final payment at the closing of the term of financing. This allows for smaller monthly payments and an easy financing experience- but a large amount may be due at the conclusion. The goal, Liegl says, is to "help customers fully enhance their lives through making environmentally sustainable home improvements easier to afford, such as the installation of solar panels, battery backup and electric vehicles, smart appliances and much more." Other companies, like , serve as a marketplace for loan prequalification directly connected with incentives for EVs and green loans offered throughout your region. According to its website, drivers can save up to $200 per month on their monthly electric vehicle loan payments. Do EVs have lower costs over the life of their lease? Then, is an electric car worth it? The positive feelings that come when you drive a car that is better to the planet isn't always the only reason people are turning to electric cars. It also has the potential to save money. While it's true that gas accrued while driving, in certain cases driving electric can be more affordable overall. According to a survey conducted in 2020, drivers of electric vehicles saved an average of and repairs throughout the duration of ownership, according to Consumer Reports. This is due to the different methods of maintenance and upkeep of EVs. These vehicles do not require oil maintenance and have a simpler powertrain. Drivers of battery-electric vehicles and plug-in hybrid vehicles paid only 3 cents per miles over the course of their vehicle's life, compared to 6 cents per mile for traditional vehicles. But driving electric isn't completely positive. CNET, an affiliate of the Red Ventures company, reported on a 2021 study by We Predict that found . While it is true that drivers can avoid the additional cost associated with , like oil changes and routine inspections, EV parts are much more expensive when it comes time for repairs. This means that the longer maintenance hours logged combined with the costlier replacement parts may result in electric cars being the same, or more expensive as driving gas-powered vehicles. Furthermore, electric vehicles are able to operate be more efficient than the traditional gas-powered option due to the speed of technological advances, although the current demand for EVs helps to stabilize prices at the moment. How to finance an electric car The procedure of financing an electric car is fairly similar to that of a traditional gasoline-powered car. It is crucial for you to take the exact steps that you would normally follow, in addition to understanding available terms and understanding the importance that the credit rating and past have to carry. As previously mentioned that driving electric vehicles also carry potential state and federal benefits you don't traditionally have access to. One of these is , an incentive worth $7,500 for new, qualified plug-in or fuel cell electric cars. New in 2023, you might also be able to claim an federal tax credit . The car can't be bought for more than $25,000. If it is eligible, you can claim a credit for up to 30% of the purchase cost, with a maximum of $4,000. Both federal tax credits come with income restrictions and vehicle requirements, so be sure you and your potential future EV meet the requirements before you dive in. In addition, you may get a state tax credit depending on the state you live in. Questions to ask yourself before purchasing an electric vehicle or operating an electric vehicle comes with an additional number of demands that you may not have encountered before. Take a look at 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 reports the range of 2021 model year vehicles that have possible ranges of between 405 and 405 miles. It is likely that drivers will be able to manage lower levels of "range anxiety" as their vehicles get up to speed with technology available. It is advisable to assess your needs by factoring in your typical commute and expected leisure activities. 2. Do I need to consider leasing before purchasing an electric vehicle? "Leasing an electric vehicle can be a great way to get a taste of ownership in an electric vehicle," Moody says. is typically less expensive in a month-to-month arrangement and generally comes with a guarantee. If you are on the decision of driving electric you should consider leasing one to test the feeling and the driving experience. 3. Do I have access charging stations for my vehicle in my neighborhood? Even though the Electric Vehicle Council found that about of EV drivers can charge at home, many drivers do not have the luxury of having a Level 2 charger. That's okay. Many EVs now have the option to charge using any outlet that is electrical, but it might take all night or more to achieve a full charge. That said, you might require a quicker charge at times. There are many EVs take about 45 minutes to reach the 80 percent capacity of their batteries at a fast-charging station. To find out the locations you could be able to obtain a faster charge look up , which maps out charging stations nearby. Double-check that any charging stations that you are planning to frequent will work with your vehicle you're looking at. You should consider an electric vehicle when looking for your next vehicle If you're wondering, is an electric vehicle worth the investment? Like any other luxury vehicle, EVs can carry higher upfront costs, and drivers need an excellent credit score to benefit from lower interest costs. However, as the market grows with more middle-tier choices pop up, more drivers can reasonably look into electric alternatives. Are you one of that 36 per cent of Americans who are considering electric? Moody suggests aiming at the sweet spot, buying lightly used -- something that falls in the 3-to-5-year range -- to benefit from a lower cost and a decent amount of warranty protection.
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Authored by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ways and pitfalls of taking out loans to purchase the car they want.
Edited by 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 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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