Do higher gas prices mean it’s time to buy a hybrid or electric car?

With gas prices on the rise, you may be considering switching to a hybrid or electric car to reduce fuel costs. However, there are several factors, both financial and non-financial, to consider when deciding whether that move makes sense.

Hybrid vs electric

Wondering what the key differences between a hybrid and electric car are? While a hybrid car can run on both electricity and gas, an electric car runs solely on electric power. Furthermore, the electricity in hybrid cars is produced by its own internal battery, while fully-electric cars have to be manually charged in order to drive. Hybrids are also not able to rely solely on their electric power, so driving one requires using gas (just less of it).

From a purely financial perspective, a hybrid will be similar to driving a regular gas-powered car with a very good fuel economy. On the other hand, electric cars offer an entirely new way of fueling up.

Financial factors to consider

Purchase price

Cars are a major purchase, and buying an electric car to save on fuel is not a decision to make lightly. If you already own a gas car, the fuel savings of a hybrid or electric car might not be enough to justify the purchase. Determine how much you’re paying for your current car, then run the numbers in our auto loan calculator to see the price difference.

On the other hand, if you’re in the market for a new car anyways, this could be the perfect time to make the switch. While hybrid and electric cars tend to be more expensive than their gas counterparts, the amount you’ll save on fuel throughout your new car’s life could make up for that increased entry-cost.

Fuel costs

This is, of course, the big factor that is causing many people to consider switching to a hybrid or electric car. Keep in mind that your exact fuel savings will change over time, as gas prices and the cost of electricity are constantly fluctuating. Your location also plays a role, with the average price of both fuel sources varying significantly depending on where you live.

The source of your electricity will also play a role. Public charging stations will almost always be more expensive than charging at home. However, the latter requires purchasing your own charging station, which will likely run hundreds of dollars. While that initial cost may sting, it may pay off in the long-run.

Maintenance and repair costs

As any car owner knows, maintenance and repair costs have the potential to eat a huge chunk of your budget. What may be less obvious, though, is the fact that electric cars often have reduced maintenance costs. Ditching gas also means ditching oil changes and many other costs associated with maintaining a traditional engine.

Keep in mind that typical maintenance and repair costs will be different for every make and model, so be sure to compare your options.

Rebates and tax credits

In order to combat the negative environmental effects gas cars produce, some government entities are offering incentives for consumers that make the switch. These incentives can put thousands of dollars back in your account for purchasing a qualifying electric car.  The exact amount you may be eligible for will depend on both your location and what car you purchase. Between federal, state and local rebates, you could save a pretty penny.

So, how much do you save with a hybrid or electric car?

It depends! The amount you’ll save is based on a combination of all the factors listed above and will vary based on your own individual needs and use. The main takeaway is that there is no clear answer or “winner” between gas, hybrid and electric cars. Like many things in personal finance, the answer is personal!

Non-financial factors to consider

Ability to charge

While gas stations are everywhere, electric car charging stations are not as widespread. If you live in or frequently travel to locations with limited charging stations, owning an electric car may be impractical. Of course, you can also charge electric cars at home, but that often isn’t an option for apartment dwellers.

Electric cars also tend to have a shorter range when fully charged compared to a full tank of gas. Additionally, charging an electric car takes significantly longer than refilling a gas tank. If you take long road trips frequently, a gas car will likely be more convenient.

The kind of car you need

While gas-powered cars come in all shapes and sizes, the same can’t be said for hybrid and electric cars (yet). If you just need something to get you from point A to point B, you’ll have plenty of options to choose from. Those who, for example, need to transport their family in a large van or need a truck to haul large objects may be out of luck for now.

Technological advancement

Electric cars have come a long way since their initial debut on the public market, and they’re still improving at a rapid pace. Likewise, fuel efficiency on gas cars has dramatically improved. If you aren’t ready to decide quite yet, it’s worth keeping tabs on new developments within the auto industry. Even if you decide it doesn’t make sense to buy a hybrid or electric car right now, that calculation could easily change in the next few years.

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Looking to buy a car? Here are some more articles that may help you through the process:

• The pros and cons of buying vs leasing a car
• Should you buy a new or used car?
• How to score the best price on a new car