In an age in which fuel prices flirt with all-time highs and climate change remains a persistent concern, electric vehicles (EVs) are becoming increasingly popular. EVs are not only environmentally friendly, but they are also cheaper to operate and maintain in the long run. However, buying an EV can be overwhelming, especially for first-time buyers. Shortly before starting my position at Arkansas Financial Group in April, I took the leap myself and purchased a new Chevy Bolt. It has been quite a learning experience, and I’m excited to share with you some tips if you are also thinking of getting your first EV.

Range anxiety is real but not as bad as you think.

Range anxiety is the fear that the vehicle’s battery will run out of charge before reaching its destination. While this is a valid concern, it’s not as big of an issue as many people think. Most modern EVs have a range of 200-300 miles, which is plenty for the daily commutes of most people. However, the range can drop significantly in freezing weather. This was analyzed in a recent study, and the data indicates that the degree of range loss varies substantially by EV make and model: https://www.recurrentauto.com/research/winter-ev-range-loss

Home charging is essential.

Because EVs take significantly more time to charge than it takes to fill up a traditional gas-fueled vehicle, you will want to be able to charge your EV at home. Most EV companies partner with separate companies that provide installation of EV-compatible equipment at home. Examples include Qmerit, which installs home chargers for Chevrolet, and Amazon Home Services, which works with Ford. If you have access to a free charger at work, even better. 

Public charging capacity is improving, but in 2023, leaves much to be desired.

If you enjoy taking lengthy road trips, the limited range of an EV, coupled with the extended time needed to “fill up,” can be an inconvenience. This is particularly a concern in Arkansas and neighboring states, which do not yet have the public charging infrastructure offered in other parts of the country. Tesla vehicles, which use a unique charging adapter that does not connect with other EV brands, boasts a network of “superchargers” that far exceeds the number of fast chargers offered to other brands. If you do not own a Tesla, you will likely need to plan your trip around lengthy stops at fast-charging stations. The good news is that plans are underway to install fast-charging stations at thousands of Wal-Marts and Sam’s Club stores by 2030. A recent article in Arkansas Business also details a plan from Entergy Arkansas to install 12 fast-charging stations along Interstates 30 and 40. However, with the present infrastructure, many households with two drivers prefer to keep one gas-powered vehicle for longer road trips.

Maintenance costs are significantly lower compared to gas-powered vehicles.

The Internal Combustion Engine (ICE) is a remarkable piece of engineering, but an electric vehicle is advantageous in its relative simplicity. One of the appeals of owning an EV is that there is no need to do periodic oil changes, engine tune ups, or replacing faulty spark plugs or timing belts. The most important maintenance need that comes up with an EV is battery replacement, and the cost of this can be significant. Generally, most EV batteries last around ten years before needing replacement. However, good driving and charging habits may potentially extend the life of the battery. 

Tax credits are a nice perk but shouldn’t drive your decision.

The Inflation Reduction Act, enacted in 2022, included a host of generous tax credits intended to expedite adoption of EVs by the public. I could create an entirely separate article regarding the details of these credits, but for now, here is a high-level overview:

New EVs and plug-in hybrid electric vehicles (PHEVs) qualify for a tax credit on sale of up to $7,500 if critical mineral and battery components are met. Earlier in the year, this credit was applied to all new EVs, but guidance from the IRS released in April 2023 reduced the number of vehicles qualifying for the full credit. The remainder, which includes models from BMW, Hyundai, and Rivian, still qualify for a $3,750 credit.

• If your income is too high (over $150,000 for single filers and $300,000 for joint filers), you are excluded from credit eligibility.
• Only cars with a list price of $55,000 or less are eligible. Vans, pickup trucks, and SUVs are subject to a higher limitation of $80,000. 
• Used EVs purchased from a dealer are eligible for a credit of up to $4,000, or 30% of the price of the vehicle, whichever is less. Only vehicles at least two years old are eligible.

However, when deciding if an electric vehicle is right for you, it is important not to allow a generous tax credit to give you tunnel vision. Instead, start by asking yourself if an EV is a good fit for your lifestyle, principles, and driving habits (and consider the trade-offs reviewed earlier). If so, then decide whether it is a sound financial move. As planners, we caution our clients not to let the tax tail wag the financial dog. In this context, that means determining the total cost of ownership of the vehicle. While EVs have very attractive tax incentives right now, these are offset at least partially by higher costs of purchasing. This has the potential to compound into higher insurance and financing costs. 

We are always happy to discuss with clients whether an EV is right for them, and to help run the numbers. Nothing makes us happier than seeing our clients use their hard-earned money to make positive changes that are tangible and improve their quality of life. 

© 2023 The Arkansas Financial Group, Inc., All rights reserved.

The Arkansas Financial Group, Inc. is a Fee-Only Financial Planning Firm located in Little Rock, AR serving clients in Arkansas and throughout the country.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The Arkansas Financial Group, Inc. [“AFG]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from AFG. AFG is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the AFG’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.arfinancial.com.

Please Remember: If you are a AFG client, please contact AFG, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.