Owning an electric vehicle is cheaper than owning a gasoline-powered vehicle.  The reasons are simple. Here’s why:

Gasoline costs 8 to 11 times more than electricity to travel the same distance
Maintenance on an Electric vehicle is minimal

In 2009, Elon Musk, the CEO of Tesla Motors wrote, “The ownership cost of Model S, if you were to lease and then account for the much lower cost of electricity versus gasoline at a likely future cost of $4 per gallon, is similar to a gasoline car with a sticker price of about $35,000.”  We’re already paying $4 per gallon today.  Gasoline prices are likely to go up, and with that increase in price at the pump, so does the affordability of a Tesla automobile.  If the average of gasoline is $5 per gallon within the next 5 years, then owning a Tesla Model S, will be comparable to owning a $30,000 gasoline car.  But if you’re the type of person that hangs on to your car for 7 or even 10 years, you’ll be saving much more.

Teslanomics: The Economics of owning an EV


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In the table below, cost of ownership is estimated for the purchase of new 2011 and 2012 Land Rover and Tesla Model S.  The purpose is to compare your estimated cost of ownership for 5 years to a Land Rover vehicle you may potentially buy, to that of a Tesla Model S.   Here cost of ownership is calculated by adding the following:

Adding the estimated 5 year cost of fuel, cost of maintenance, cost of repairs, and the loss of value (depreciation) of the vehicle gives us our estimated operating costs for a vehicle after a 5 year period.  Our sampling of numbers is obtained using Edmund’s TCO (True Cost of Ownership) Calculator.  At this time, we are unable to account for insurance cost differences because we don’t as of yet have insurance data for the Tesla Model S since manufacturing for the Tesla S doesn’t being until mid-2012.  We also are not accounting for differences in taxes and fees since those vary too much from state to state and we are estimating costs on a sample of data for only 1 zip code in Los Angeles, California.  Also, we are not accounting for potential finance charges.  You may add these on your own to adjust your own comparisons.  

Depreciation is displayed in the “DEP” column.   The MSRP (Manufacturer Suggested Retail Price) is listed too for reference only.  The “SAVINGS” column reflects how much you would save in a 5 year period by purchasing a Tesla Model S instead of the Land Rover on that line. 

If you were to sell your Land Rover, you’d get about the price you paid, minus that loss of value (depreciation) within a 5 year period.  For the purpose of this comparison, we used 50% depreciation for the Tesla Model S suggesting that the Model S would lose half of its value after 5 years.  We think, however, that the loss of value for the Tesla Model S will be less because these cars, with their low maintenance and their cheap cost for fueling, will be very desirable in the used car market (as observed today with the used market for 2003 Toyota RAV4 EVs) while the resale value of gasoline-based vehicles will continue to diminish over time as they become less desirable.

Please note, this calculation does not take into account differences in insurance costs and real maintenance and repair costs since we don’t know what those are as of yet for the Tesla Model S.  It does not take into account taxes and registration fees nor cost for financing;  so it does not reflect all potential costs.  Also, these estimates are based on pricing in Los Angeles.  Repair, maintenance, and fuel costs in different parts of the country will vary somewhat.  This will, however, give you a great perspective on difference in costs of ownership on a high percentage of overall potential costs.  The list of Land Rovers are only for the most basic revisions of each with no options.  To see a more specific version of the car you are looking for and/or to get more details on financing and insurance and to get cost of ownership that reflect the zip code you live in, please visit Edmunds TCO.

Please use this as a guideline only.  By reading this, you acknowledge that not every possible scenario has been factored into these estimates since some data is unknown and depreciation and fuel costs are speculative based on past depreciation data and on forecasted fuel costs.  Actual depreciation and actual fuel costs will be unknown until the time comes.  Any decision you make to purchase a Tesla Model S, you understand that you do at your own discretion.



5-Year Cost of Ownership: Tesla Model S vs Land Rover

Can you afford a Tesla or...?

Can you afford NOT to buy a Tesla?
Tesla cars at face value, are by no means cheap.  The Tesla  Roadster, Tesla Motors’ first car is an expensive and highly desirable toy for those who can afford it.   It has a base price of $109,000 US before incentives.  But if you’re in the market for a sports car like a Porsche 911, then a Tesla Roadster is a better choice, because it can save you money in fuel because the cost per mile using electricity is 8-14 times cheaper than gasoline!  The longer you hang onto the car, the more potential it has for savings.  If you drive 15,000 miles per year, you could save as much as $13,000 in gasoline over 5 years.  But if you can afford a Porsche 911, what you save in gasoline may be of no concern to you.  However, the time you DON’T spend at the pump will definitely be a nice perk.  How you help the environment may be, however, a more worthy cause.  Unfortunately, this is a beautiful car that few can afford.

But don’t despair; Tesla has a new roomy more affordable gorgeous sedan coming out in mid-2012 that’s priced just for you.  It is the Tesla Model S.  It costs roughly $57,000, but after Federal Incentives, the cost is just below $50,000 (your state or city may offer incentives that reduce it even further).  If that amount seems to rich for your budget, I’ll show you why it may not be and why the next  lower-priced gasoline-fueled car you plan to buy, is likely to cost you around the same or even more!  As long as you can come up with the cash or the financing for it, this car, The Tesla Model S, can actually be cheaper to own than many other less expensive vehicles.

The Tesla Model S is a luxury car that can be compared to a BMW 5 Series.  But buying a Tesla Model S instead of a BMW 5 Series will save you a significant amount of money during your ownership, that is, depending on how long you hang on to it.   Even if you were to buy a more traditional 6 cylinder car like the Chevrolet Impala or Toyota Camry, you would still save money, thereby affording you a significantly nicer luxurious car at a very discounted price.  Read on...

Let’s look at 3 very different cars: The Chevrolet Impala, a standard American car, The BMW 528i, a popular German car, and finally the Toyota Camry, a Japanese car which seems to be one of most popular in the USA.  The Impala gets a combined (FWY/city) 22 mpg, while the Camry will net a combined 25 mpg, and the BMW 528i yields 27 mpg.  

Let’s do the math.  Gas today, costs roughly $4.00 per gallon. According to the Federal Highway Administration, the average yearly miles driven for age groups 20-54 is roughly 15,000 miles.  If you are a male, its closer to 18,000  For females, its about 12,000.  (P.S... the more you drive, the more you save).  So let’s use the 15,000 mile per year average for now.   In the table below you can see the cost of fuel alone on each of these vehicles.  Please note: these are based on today’s gasoline price of roughly $4.00 per gallon.

In the United States, based on the average cost of electricity, to charge up the Tesla for a range of 160 miles, the cost would be $3.00.   That’s 1.8 cents per mile.  Thus, 15,000 miles x $.018 = $270 per year!  Yes, you read this right; it’s $270; no, this is not a misprint.   

At $4.00 per gallon, if your gasoline-based car is averaging 25mpg, then you are paying 16 cents per mile in fuel costs.  That’s 8 times higher!  If your car gets 15mpg, then your fuel costs are 26 cents per miles; 14 times higher!

But for how long would you keep a car?  That varies from driver to driver, however a 2009 Wall Street Journal article cited a J.D. Power survey that revealed the average car trade-in occurred after 6.2 years of ownership.  Collision repairers have identified though that the average age of vehicles on the road today is nearly 10 years.  A new survey even confirmed that consumers with vehicles 10-years-old or more will keep their cars another five years on average.  

So lets base our calculations on vehicle ownership for a 5-year as well as a 10-year period.  The table below reveals that fuel costs after 5 years and 10 years are 8.3 to 10.5 times higher for these 3 cars vs electrical recharging costs to travel the same 15,000 miles in a Tesla Model S.  But this assumes that the price of gasoline stays the same for the next 5 and 10 years. That is unrealistic.

We can safely assume that gasoline prices will go up in next 5 and 10 years. Analysts forecast oil prices to double in less than 10 years, that is, by 2020.  That would make gas go up another $4.00 and thus cost $8.00 per gallon within less than 10 years.  So lets estimate gasoline to go up half of that, $2.00 within the first 5 years.  Gas would then be $6.00 per gallon.  The average price of gas during that 5 year period would be the average of the current price, $4.00, and the final price at the end of 5 years of $6.00.  Thus the average price over the 5 year period would be $5.00 per gallon.  The average price of gas during a 10 year period would be the price between the current price of $4.00 and the future price of $8.00.  Thus the anticipated price would be $6.00/gallon on the average over a 10 year period.

Although analysts anticipate electrical costs to remain the same due to expanding use of renewable energy sources, lets assume the same percentage price increases for electricity.

Cost of vehicle ownership can be measured by adding the cost of fuel+vehicle depreciation (loss of car value)+insurance+repairs+maintenance+sales tax+registration fees+financing.  However, lets examine the bulk of these costs during time of ownership and use.  To do so, we need to calculate the following:

Tesla Model S is a new car, so how do we anticipate what the resale value might be in 5 years and in 10 years, that is, how much will the car depreciate or how much value will the car lose?  One hasn’t been sold 5 or 10 years ago since it’s new, so how can we speculate what we might be able to sell it for 5 or 10 years after we purchase it?  

To find that answer we look at Toyota, since they manufactured both the  RAV4-EV (an electric vehicle) as well as the Prius (a hybrid) long enough ago to give us an idea of what the resale value could be on alternative fuel cars.  In looking at the Prius, we find that the depreciation rate (the cars value after years) is the same as similar gasoline-only powered cars.  However it comparing it with the Toyota RAV4 EV, the depreciation rate is slower. The RAV4-EV is still cheaper to fuel than the Prius, so lets base the depreciation on the average of the two.  The RAV4 EV sold originally for $42000 minus a $9000 California grant (which decreased to $5000 in 2003).   In 2006 a RAV4 EV sold on eBay for $67,300!  That was because in 2006 there were no other EVs on the available or soon to be available  Today, one in good shape can fetch $$13,000, so that’s a 60% loss of value, but that’s  after 10 years!  According to Edmunds TCO (True Cost of Ownership), they anticipate a loss of 60% also on a Prius, but in 5 years.  So let’s anticipate a very conservative 50% loss on the Tesla Model S after 5 years.

We see that within 5 years, the operating costs of the BMW exceeds the Tesla Model S by 40%, over $16,700.  The Impala and Camry, however, end up with about the same operating cost.  However, all of these savings have the potential of being even higher since the Tesla requires significantly less maintenance than a gasoline-powered car, but that may be a wash, since the Tesla will have a higher insurance rate since it is a more expensive car.   Nevertheless in the case of these 2 cars, for close to the same costs within a 5-year span, you end up with a much better, higher caliber, environmentally beneficial car for the same investment in the long run.

As you can see, the savings really pick up if you own the car for longer.  Over a 10 year period, your savings can range anywhere from almost $10,000 to 34,000 on these 3 cars. We’ve assumed a 70% amount of depreciation for 10 years on the Tesla Model S.  50% depreciation for 5 years and 70% for 10 years may be excessive considering that ultimately as gas goes up in price, so will the desire for cars that don’t use gasoline.  However, while approaching 10 years with an EV you’re also close to needing replacement batteries.  Recently on a Teslamotors.com forum, it was estimated that the cost of the 160 mile battery pack today, might be as much as $20,000.  However, with the steady 8% decline in costs of lithium-ion technology, and with the advancement in battery technology, by the end of that 10 year period, your real replacement costs should be closer to $10,000 or less.  By that time, however, you may be paying an estimated $8.00/gallon for gasoline, and even a Toyota Camry will use $4800/year in fuel.  So you’d recover that cost in a short 2 years.  

Within 5 or 10 years, your gasoline-powered car may lose even more of its resale value as alternative fuel cars increase production and gain popularity.  So gasoline powered cars may sell for even less in years to come than what current historical sales records forecast today.   

Please feel free to use this as a guideline only.  Not every possible scenario has been factored into the true cost of ownership such as Insurance because until the car is first sold, we won’t know how insurance costs differ from for the Tesla Model S, as compared to other vehicles.  Also, future gasoline prices and depreciation on the Tesla Model S is purely speculative and the true cost of gasoline at that time as well as the residual value of the vehicle won’t be know until the time comes.http://www.fhwa.dot.gov/ohim/onh00/bar8.htmhttp://www.fhwa.dot.gov/ohim/onh00/bar8.htmhttp://online.wsj.com/article/SB123188569970778793.htmlhttp://online.wsj.com/article/SB123188569970778793.htmlhttp://www.bodyshopbusiness.com/Article/84101/survey_confirms_consumers_intend_to_keep_cars_longer.aspxhttp://www.edmunds.com/tco.htmlshapeimage_7_link_0shapeimage_7_link_1shapeimage_7_link_2shapeimage_7_link_3shapeimage_7_link_4shapeimage_7_link_5

Land Rover vs. Tesla Model S