The real costs of driving and insuring your electric vehicle

After the first successful battery-powered car appeared in 1890, electric cars became incredibly popular. By 1900, they accounted for one-third of all vehicles on the road Opens in a New Window.‍ ‍ ^{See note 1} But the discovery of crude oil in Texas and Henry Ford's super-affordable gas-powered Model T turned the tide against electrics. By 1935, they had all but disappeared from the road.

Interest in electric vehicles (EVs) has waxed and waned over the decades since. But now, there's no doubt: EVs are on their most dramatic rise yet. In May 2021, EV sales were up 429% from the year prior. The International Energy Agency projects that 14 million EV cars will be sold in 2023.

The benefits of going electric

What's driving this surge? More car manufacturers are developing electric vehicles, which means there's a wider selection to choose from, such as the Chevrolet Bolt EV, the Ford Mustang Mach-E, the Nissan Leaf, the Hyundai Ioniq and the Toyota Prius. But Tesla seems to be leading the charge.

EVs may also offer certain advantages over gas-powered cars. For one, EVs are typically more environmentally friendly than conventional cars. Since they're powered by an electric motor rather than combustion engines, they tend to have lower lifetime emissions, which means less impact on the climate.

But it's not just going green that draws drivers to electric and hybrid vehicles. EVs are becoming more affordable, and they may even help you save money in other ways.

You may see savings by not having to visit a gas station, but you'll want to consider your electricity costs for charging your vehicle. Also, because an electric powertrain has fewer moving parts, your maintenance cost per mile can drop by about 40%.

But what about that other budget consideration — auto insurance? Driving an electric vehicle can impact your auto insurance premium, but it may not. Here's what you need to know.

Cost to insure an electric or hybrid car

There are many factors that influence the cost of insurance, including the make and model of the vehicle, where you live and who's driving the car. Two other big factors include your insurance provider and the types and amount of insurance coverage you select.

Let's say you have two cars that are identical in every way except one's electric and one's gas-powered. All else being equal, it would probably cost a little more to insure the EV than the conventional car in most cases. Here's why.

It comes down to the cost of claims for electric or hybrid vehicles. And EVs may have components that are more expensive to repair and replace than their nonelectric equivalents.

This is primarily because of the car's battery pack. Even a small fender bender can cause irreparable damage to an EV's battery, which can cost $5,000 to $15,000 to replace or may even cause your damaged car to be considered a total loss.

Depending on where you live, it may also be hard to find a mechanic or repair shop equipped to fix electric vehicles. This can further add to the cost of claims and drive up your auto premiums.

But don't let that scare you. EV owners may save money on routine maintenance and repair costs. While electric vehicles have many of the same components as a standard vehicle like tires and air filters, there are fewer moving parts to maintain or replace on a regular basis.

And that adds up. Consumer Reports found that, by not spending the same on repairs and maintenance costs as a gas driven car, EV owners can expect to save an average of $4,600 over the life of the EV car Opens in a New Window.‍ ‍ ^{See note 1} All this said, a rise in rates is not guaranteed when you switch to an EV. In fact, some drivers find that their insurance doesn't change and could even go down. Here's how.

Discounts and savings for electric vehicles

Even if your premium rises initially with an EV, your final cost could be offset by special savings and discounts for hybrid and electric vehicles.

For example, some car insurance companies offer something often known as an "alternative fuel discount" or "green car discount," and the result is the same. You may save money.

You may also be eligible for significant federal tax credits for driving an all-electric or plug-in hybrid vehicle. Your state or local government may offer additional credits, rebates, discounts and other incentives.

Because they're often newer vehicles, it's also likely your EV will come with advanced safety features like blind-spot warning systems or parking assist capabilities that may qualify you for other auto insurance discounts.

Electric cars are here to stay, and that's good news for your car insurance costs.

While it's possible that driving green could cause a small increase in your auto insurance premium, odds are that'll change in the next few years.

Given the rising popularity of EVs, car manufacturers are investing more in improving the technology. They're also driving down the cost to manufacture them. As the number of hybrid and EV drivers increases, it's likely that vehicle repairs will become easier and less expensive, which may ultimately lower auto insurance rates.