EV Update: More Choices, Better Batteries, but Still Pricey
Last updated October 19, 2023
Click below to listen to our Consumerpedia podcast episode on the electric vehicle market.
The U.S. finally has a robust market for electric vehicles (EVs), with most major automakers now offering models that are stylish, roomy, and fun to drive. Although there are now about 100 EV models on the market, high prices remain a deal-breaker for many drivers.
Can You Afford an EV?
Many EVs are luxury models that command premium prices: In August 2023, the average selling price for an EV was $59,752, according to Edmunds; that’s nearly $12,000 higher than the average purchase price for all new cars. And few EV manufacturers are offering buyers incentives such as low-interest financing or cash rebates.
As of September 2023, only a handful of all-electric vehicles had price tags below or near $40,000. Among them:
- The 2023 Chevrolet Bolt starts at $26,500, minus the federal tax credit of up to $7,500 for those who qualify.
- The Nissan Leaf starts at about $28,000, but so far doesn’t qualify for the tax credit.
- MSRP for the base model of GM’s all-new 2024 Chevrolet Equinox EV is around $30,000.
- Fisker, a startup based in California, was selling its all-new Ocean Sport EV for $37,500.
- For 2023, Hyundai’s Kona starts at $33,550 and its Ioniq 5 and Ioniq 6 models start at about $41,600.
- The starting price for Volkswagen’s 2023 ID.4 is $39,000.
- The 2023 Tesla Model 3, the least expensive option offered by the company that sells the most EVs in the U.S., starts at $40,240, before factoring in any possible savings from the federal tax credit.
Industry analysts expected a larger variety of affordable EVs on the market by now. But because automakers can sell all the luxury EV models they can produce, and because those high-end vehicles are more profitable, manufacturers continue to focus on them.
Another reason for high price tags: The cost to produce rechargeable batteries hasn’t dropped as much as expected. “The prices for the raw materials are coming down a bit now, finally, and that should help,” said Paul Eisenstein, an editor with automotive website Headlight.News. “But it’s going to be a while before we see a lot of vehicles in the mainstream segment.”
When determining the true cost of an EV, in addition to purchase price, consider tax rebates and other incentives, electricity rates in your area, and how much you drive.
Check with your utility company to see if it offers a discount for installing an at-home EV charger or lowers its rates if you charge during certain times of day. And find out if the automaker provides free access to high-speed public chargers, as some now do.
A plug-in hybrid may be best for those who live in rural areas with few public chargers available and drive long distances. With this option, vehicles run on batteries first, switching to gas only when they run out of juice.
The U.S. Department of Energy (DOE) Alternative Fuels Data Center has a vehicle cost calculator to help you crunch the numbers.
More Info from Consumer Reports: Will an Electric Car Save You Money?
Tax Incentives Can Help…
Federal, state, and local tax credits, incentives, and rebates can drive down the cost of an EV or plug-in hybrid as well as help pay for home charging equipment.
At the federal level, the Inflation Reduction Act of 2022 now governs tax credits on new and used EVs. The law aims to make zero-emission vehicles more affordable, and increase auto and car battery manufacturing jobs in the U.S.
“The rules are more complicated than before,” said Ronald Montoya, senior consumer advice editor at Edmunds.com. “The biggest change is the requirement that the final assembly of eligible vehicles must occur in North America.”
There are also “significant eligibility limits on both the price of the vehicle and the income of the buyer,” Montoya said. “If either figure is too high, you will not qualify for the tax credit.”
Here are the highlights of the requirements to qualify for the federal tax credit:
- Final vehicle assembly must take place in North America.
- MSRP for a new SUV, van, or pickup cannot exceed $80,000.
- MSRP for sedans and other qualifying vehicles cannot exceed $55,000.
- There are now income caps based on the buyer’s modified adjusted gross income (MAGI) and tax status. The MAGI cannot exceed $150,000 for individuals, $300,000 for joint tax returns or surviving spouses, and $225,000 for heads of households.
Starting in 2024, it will be easier to get the federal tax credit. Buyers will be able to receive their credit from the dealer at the time of sale, rather than waiting until they file their next tax return.
Many states and some municipalities also offer tax credits, rebates, and other incentives to EV buyers, including help paying to install home charging equipment. The DOE maintains a searchable database of programs.
More Info from the IRS: Credits for New Clean Vehicles Purchased in 2023 or After
…But Many EV Models Still Don’t Qualify for the Federal Tax Credit
In September 2023, only 22 models qualified for the new-vehicle federal tax credit, including five Tesla models; Chevrolet’s Blazer, Bolt, Equinox, and Silverado; a Rivian SUV and truck; Ford’s F-150 Lightning and Mustang Mach-E; and the Cadillac Lyriq. The number of eligible vehicles will likely increase as more automakers and battery manufacturers move production to U.S. assembly plants.
The maximum federal tax credit of $7,500 is based on two factors associated with the car’s battery. Each is worth $3,750:
- Critical minerals. Forty percent of the critical battery minerals—lithium, cobalt, manganese, nickel, and graphite—must be sourced in the U.S. or in a country that has a free-trade agreement with the U.S. The percentage increases every year, to 80 percent in 2027. Minerals that come from batteries recycled in the U.S. count towards the requirement.
- Battery components. At least 50 percent of the battery components (based on value) must be made or assembled in North America. The requirement increases each year until 2029, when 100 percent of battery components must be made or assembled in North America.
For low-income families and those who don’t live in urban areas there’s also a federal tax credit that will pay 30 percent of the costs (up to $1,000) to buy and install a home charger.
Consider Buying Used
Inventory is limited, but the used EV market is growing. Because prices for used cars have risen dramatically in the last few years, be prepared for sticker shock. (On the other hand, higher values for all trade-ins can help reduce the final purchase price.)
The average price for a used EV in the second quarter of 2023 was $41,630, according to Cox Automotive, the parent company of Kelley Blue Book. That’s down almost $2,000 from the first quarter of the year, but significantly higher than the average listing price for all used vehicles in May 2023, which was $27,256.
Some used EVs now qualify for a federal tax credit of up to $4,000 if the vehicle was sold by a dealership (not by an individual), the car is less than two years old, its sales price is $25,000 or less, you meet income requirements ($75,000 MAGI cap for individuals and $150,000 MAGI for married couples), and the vehicle meets several other criteria; visit the IRS website for details. Unfortunately, very few used EVs for sale right now meet all conditions required for the tax credit.
Because most manufacturers provide eight-year or 100,000-mile warranties on batteries, most used EVs still have that protection. And, so far, EV battery packs have proven very reliable, according to auto experts at Consumer Reports.
More Info: Kelley Blue Book’s tips for buying a used EV
Range Anxiety Still a Problem
Batteries for the latest EVs provide significantly better range—about 300 miles per charge, on average. A few top-of-the line models can get 400 to 500 miles per charge. By comparison, the 2011 debut version of the Nissan Leaf could go only 70 miles between charges.
The lack of chargers in some parts of the country can also be a deal-breaker. The percentage of people who say they were “very unlikely” to consider an EV for their next purchase went up in each of the first three months of 2023, according to a June 2023 report from J.D. Power, hitting 21 percent in March. The main factors for this dampening enthusiasm were price and lack of charging stations.
Charging stations are being added across the country, but so far only about 60,000 of them are available, according to the DOE. Federal tax dollars provided by the Inflation Reduction Act are speeding up that rollout, but it will be years before the work is done.
In the future, finding a charger should be easier, as Ford, GM, Rivian, and Volvo have announced plans to adopt Tesla’s proprietary charging connector. As of September 2023, Tesla reported it operated 17,700 Supercharger stations in its U.S. network, the bulk of the country’s fast chargers.
Are Electric Vehicles Reliable?
It’s too early to determine whether new models are reliable. But some EVs have been around long enough (for example, the Nissan Leaf and the Tesla Model 3) to answer this question.
The reliability of electric vehicles has increased over time, said Alex Knizek, manager of auto testing & insights at Consumer Reports’ Auto Test Center, but some manufacturers have had problems with their new models.
Some of the reliability issues aren’t mechanical, with the motors, batteries, or charging systems, Knizek told Checkbook. It’s often “just regular stuff,” like paint and trim, or issues with technology, such as infotainment systems, Knizek said.
Consumer Reports has always advised against buying a new model the first year it’s available because of the uncertainty involved. The same advice applies to EVs, Knizek told Checkbook.
Should You Lease an EV?
Because, in the long run, leasing usually means paying more for your ride than purchasing it, most consumers should avoid these short-term financing arrangements. But because EV battery technology is rapidly changing, and long-term reliability data don’t exist for new models, leasing might offer an advantage.
Consumer Reports suggests another possible reason to lease: Dealers or leasing companies can get a $7,500 commercial credit from the IRS for models that may not qualify for a credit when purchased by an individual.
If the leasing company is willing to share some of that money with you as a discount, that would reduce the total vehicle price and lower your monthly lease payments. Ask about that—and check the contract to make sure the dealer applied the credit without increasing the price of the car, CR advises.
Related from Checkbook:
- Why Car Prices—Both New and Used—Keep Going Up
- Used-Car Certifications Often Not Meaningful
- Used Cars Often Sold with Dangerous Defects
Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He has been protecting consumers for more than 40 years, having covered the consumer beat for CBS News, The Today Show, and NBCNews.com. You can also find him on Facebook, Twitter, and at ConsumerMan.com.