Economics of Electric Cars

Electric cars are the future. Depending on your situation, they are also the present.

Our Nissan LEAF is our primary car. We also have a gas car that we literally only use if we are driving out of town or if we have a scheduling conflict and need to be in two places at once. The gas car will be replaced by a Tesla Model 3 in 2017 or 2018. We carpool in the LEAF and do all of our driving in the LEAF. We use fuel stabilizer in our gas car because it sits for months at a time.

Our annual commute comes to about $29 per year in electricity. What you may pay in a week for gas, we use in a year for electricity. There is also virtually zero maintenance.


In gas cars, you typically want to be in the highest gear you can while traveling at the lowest speed that doesn’t lug the engine. This usually gets you the best MPG, which will be similar to advertised highway MPG. You get the worst MPG in “city” conditions – low speed and stop and go.

Electric cars love stop-and-go traffic or low-speed cruising. The best possible conditions to get the maximum range, which would far exceed official EPA fuel economy figures, is cruising at a steady speed under 40 mph.

In a gas car, if you leave the car in gear and take your foot off the throttle, the engine keeps spinning at a high RPM (higher than idle at least). In an electric car, the same thing happens. But instead of the motor just spinning away, it becomes a generator and recharges the battery. This is called regenerative braking. It is about 85% efficient and it does recapture a lot of energy. When you stop a gas car, your kinetic energy is converted to heat energy through friction of your brake pads and your tires on the road. It is lost forever as far as your car is concerned. With an electric car, a ~85% of your kinetic energy is converted back to potential energy stored in your battery. Imagine your gas tank refilling every time you use the brakes. That’s what happens in an electric car.

Drag and heat/AC are the biggest drains on an electric car’s battery. Remember that the faster you go, your drag increases at an increasing rate (squared). In other words, traveling at 80mph produces much more than twice as much drag as traveling at 40mph.

The numbers

The bottom line is suburban driving in my LEAF averages about 4.5 miles per kWh (based on 25,000 miles of data), but highway driving with the heater on is more like 3.5 miles per kWh. My driving is in the Dallas-Fort Worth area. Lots of 35-50mph suburban driving. On the highway, we are either cruising at 65 or stop and go in a traffic jam.

If you drive 15,000 miles per year at 4.5 miles per kWh, that will take 3333 kWh of electricity (15,000 / 4.5 = 3333). As I write this article, the benchmark price of electricity in Dallas-Fort Worth is $0.116 per kWh (energy + delivery charge).

$0.116 x 3333 = $386.63 per year of retail electricity cost

$386.63 / 15,000 miles = $0.0258 per mile

Average car sold in 2016 gets 24mpg.

24 x $0.0258 = $0.6192

Gas would need to be $0.6192 per gallon to compete with an economical electric car in terms of fuel cost. Even if you get 55mpg in a Prius, that comes to 55 x $0.0258 = $1.419 per gallon to break even on fueling cost. But with a Prius, you still have all the maintenance baggage of a gas car – oil changes, belts, brake pads (rarely used in electric cars – usually “engine braking” regeneration), spark plugs, O2 sensors, rusting exhaust systems, catalytic converters, brake fluid, oil filters, fuel filters, air filters, transmission fluid, on and on and on. Electric cars have brake fluid, brake pads (rarely used, long-lived), 1-speed transmissions, coolant for the battery, tires. The maintenance schedule is literally “rotate the tires”, “inspect for missing bolts”, “change brake fluid”.

Some day the battery will have to be replaced. Reputable electric car makers such as Nissan and Tesla offer good warranties. For the LEAF, if the battery drops to 70% capacity during the first 100,000 miles, you get a new one for free. Later model LEAFs seem to have quite durable batteries. Tesla has an unlimited mile warranty that lasts for some certain number of years. The data so far for Teslas is quite positive as well.

The price of batteries is coming down very quickly. By the time we need to refurbish our battery, I expect it will be a lot less expensive than the types of overhauls required on 100-200k mile cars.

But you said $29 per year!

I did say that. I have solar panels and the cost of our electricity actually comes out to around $0.033 per kWh (based on out of pocket cost divided by expected output over 25 year warranty period – should last longer, though). For 15,000 miles per year, that comes to 15,000/4.5*0.033=$110 per year. Our carpooled annual commute is actually closer to 4000 miles, so it looks like 4,000/4.5*0.033=$29.33 per year.


Electric cars are NOT for everyone. But they are perfect for some.

You really want your own garage to charge at home. You do not want to have to charge at charging locations all the time. If you can’t charge at home you will have a bad experience.

If your commute is 100 miles round trip in the snow, electric cars are not for you unless you get a Tesla, Bolt, or plug-in hybrid. EPA range/fuel economy is based on a sloppy driver and cars like the LEAF advertize ~85 miles of range. When brand new, driving very carefully, I was seeing 125 miles of range. With age, this is now more like 108-115, and that is based on suburban driving with moderate weather (not blasting the heater). Highway range for me is more like 85. Blast the heater on the highway and it’s more like 75.

You don’t need a fancy charger, but it helps

In the first several weeks of owning the LEAF, I just charged on a regular wall outlet. That gets about 4 miles of range per hour of charging. If your car will be home long enough to recharge from your commute, you’re fine. I happened to win a 220v charger from a drawing (~$300 retail) and paid an electrician (~$300) to install it. That charges 15-20 miles of range per hour. That means we can drive hundreds of miles on the weekend or a lot more during a weekday. For example, driving the normal commute, errands on the way home, plug in for an hour or two while getting ready to go back out that night and we are full. On the weekend we may go to brunch, errands, visit grandma, go home, top off, go back out that night across town. No problem.

Perfect fit

I would say any 2-car household with a private garage where one person commutes less than 60 miles round trip should own an electric car. You will save a ton of money.

They are cheap

Ignore naysayers who say electric cars are expensive. You can buy a used late model LEAF for $6,000-10,000 in most markets today. I’m talking 2 to 3-year-old cars that you don’t even have to worry if the owner skipped oil changes since they are borderline maintenance free.

2 Replies to “Economics of Electric Cars”

  1. I would be interested to see long term battery degradation data on the Nissan fleet. Tesla fleet shows about. 10% degradation in the first year and then practicallyrics no degradation at all until a currently unknown time. This is mostly due to Lithium Ion batteries working best when staying about 30%. For example, my 80 mile round trip commute down in a 200+ range vehicle should result in me never getting below 30%, therfore limited degradation. In comparision, put me in an 85 mile range EV on my high speed highway commute and it might be expected that long term life of the battery could be effected by having the battery run low on a daily basis.


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