Is EV worth it? An in-depth look (and math)

Quite recently, I’ve decided to get solar panels and battery as part of my own household journey to electrification. I am a spreadsheet and details person, so my decision for installing solar went through many weeks of research and comparison.

The next logical step in the electrification journey is to switch to an electric vehicle (EV). But before that, it’s crucial to evaluate the market and determine if it’s a worthwhile investment. Let’s delve deeper into the cost comparison between EVs and traditional petrol (ICE) cars.

Update in mid-2024

I’ve added some details into the caveat to about FBT exemption for EVs. Salary packaging an EV under novated leasing can be a great way to save money, especially if the retail price falls under the LCT threshold.

Many EV manufacturers are lowering their prices to compete, making some models more affordable. While some, like Polestar, remain expensive, the BYD Atto 3 (their 2023 price was used in this post) is now reduced by around $3,000. This makes buying an EV more attractive compared to before, and with price speculated to come down as the tech matures more, expect more price to come down further.

Another option is to consider a used or second-hand EV. There are now more EVs on the market due to the initial salary packaging craze a few years ago that has lapsed. This could mean significant savings, if you are comfortable with a pre-owned vehicle.

Before we begin

Now, a couple of caveats first before I delve into the nitty-gritty maths, that some other articles might simply ignore or disregard in their comparison:

• I will be comparing similar-sized cars, not similar-priced ones. EVs are often more expensive than petrol cars at the same size, which means you will get a bigger petrol car for the same price, and bigger petrol cars tend to have bigger engine and thus more fuel consumption.
• For the petrol (or ICE) car calculation, I will be using the numbers from our own usage patterns and cost. For the EV calculation, I will be using the company’s published information with some concessions and minor adjustments where it make sense. This hopefully will make a more accurate and realistic comparison.
• The cars I will be comparing is 2023 Honda HR-V (base model), and BYD Atto 3 (standard range model). This is because I have experience with Honda HR-V (with regards to actual running costs), and the BYD Atto 3 is the most similarly sized vehicle that’s a bit more recent and more affordable.
• Some of the site I used to source the data is constantly changing with new values (eg. new interest rates, etc) or in some cases it’s a comparison site that shows recommended product. In this scenario, I will simply link to the screenshot of the data rather than directing to the site.
• As at 2024, there is an FBT exemption for zero and low emission vehicles, meaning that when done under novated leasing (or salary packaging) and the retail price of the vehicle is under the LCT threshold, the total cost of ownership of EV can be significantly less, sometimes up to 30% or more depending on your annual salary range and the kilometres driven. However since the calculation can be complex and not everyone has access to salary packaging, this is understandably not included in the comparison.
• This comparison was made under the assumption that you will be buying EV under a personal car loan or financing. I have not made the savings comparison against paying EV outright through mortgage offset (and the opportunity cost).

With that out of the way, let’s delve into it.

Comparing cost per km driven

One of the most asked question when considering an EV is, how much mileage can you get out of it, and how much do you expect to pay? It’s worth to note that on average EV have got less mileage per full charge, compared to similarly sized petrol car at full tank.

The average fuel price in Australia for October 2023 is about $2 per litre of fuel. For Honda HR-V with around 40L fuel tank capacity, it costs about $80 for a full tank, and whilst the official Honda website says it should be able to reach 600km and more, in actual driving conditions this is closer to 500km before the need to refuel. This means that you have the price of $0.16 per km driven.

The average electricity cost in Australia is a bit more difficult to determine as different states have different price points. Based on the figure from Canstar for October 2023, we can average it to be around 32c per kWh (I’ve screenshot the figures as the article might get updated as time goes). The official BYD website claims that it can drive up to 410km at full charge based on NEDC, but further research seems to indicate that NEDC overestimates, and some actual figures put it at around 350km at full charge.

For BYD Atto 3 (standard range) with the battery of approximately 50kWh, it costs $16 to fully charge the car, and bringing the price to $0.045 per km driven. It is also worth noting that in some states, there is an additional charge for EV per km driven and that other states are also looking into implementing similar scheme. Fortunately the Australian High Court has just deemed it unconstitutional to charge this, otherwise there’s an extra $0.028 per km added.

Comparing driveaway price and financing

It is no secret that the cost of EV is much more expensive than a similarly sized petrol car. Sure there are government incentives that will help to bring the cost down, but at the end of the day, the base cost is still much higher which means that it will have a higher repayment. Note that these prices are true as of October 2023.

For Honda HR-V, it is very easy to get the ballpark for a driveaway price as Honda has transitioned to a fixed price model back in 2021, meaning that their prices are exactly the same across the board. At the time of writing, the price for Honda HR-V (base model) is approximately $36,700 driveaway, and I’ll bump it up to $37,000. Punching in those numbers to a car finance calculator with 5 years repayment and average of 6% interest (screenshot) yields to a repayment of $715 per calendar month.

The situation is different with BYD Atto 3, as there are government incentives as well as different state stamp duties. For this calculation I will exclude the government incentive (as it can be removed at any given time). At the time of writing, the pricec for BYD Atto 3 (standard range) is approximately $50,850 for VIC, and I’ll bump it up to $51,000. This means with the same calculation of 5 years repayment and average of 6% interest, it will cost $985 per calendar month.

Comparing running costs (excluding fuel/charge)

There’s also the running costs that needs to be considered, such as maintenance, insurance, and registration. I’ve excluded fuel and charging costs, as they have been explained before. For insurance I will be using RACV as I do not want to have to enter my details to an insurance comparison site, and will be quoting a comprehensive insurance price.

Maintenance is one of the thing that is touted that EV should have less maintenance. While this is true for Tesla, it’s not always the case for every EV manufacturer. Further, maintenance schedule can vary each year. For this reason, I will be averaging the cost of the first 5 year of maintenance.

For Honda HR-V, the comprehensive insurance cost $1803 yearly (screenshot), with the yearly registration cost of $876.90 (VicRoads). Fortunately Honda have a capped price servicing for the first 5 years at $199 per year. This brings the total to $2,881.90 per year excluding fuel.

For BYD Atto 3, the comprehensive insurance cost $1,783 yearly (screenshot), with the same registration cost less the discount for EV totaling $776.90 (EV registration discount). BYD has their own service schedule and pricing, averaging around $276.80 per year for the first 5 years. This brings the total to $2,836.70 per year excluding charging cost. I’ve excluded the road user charge as it has been added to the cost per km driven.

It’s worth noting that BYD also has a fixed price servicing of $189 per year for the first 5 years, for drivers with low kilometres. Whilst this does bring the cost down to $2,748.90 per year, the difference is very marginal and would instantly be negated if the EV registration discount gets removed.

Bringing it all together

Now that we’ve got some numbers, it’s time to put them all together. On average, Australians drive 12,000km to 15,000km per year (Australian Bureau of Statistics). If we use the numbers before and plot them into a spreadsheet table, we will get the following:

While electric vehicles (EVs) offer the advantage of lower fuel costs, their initial purchase price is typically higher than comparable ICE cars. This can make the decision to switch to an EV a complex one. For drivers who travel a substantial distance each year, typically around 25,000 to 30,000 kilometers or more, the long-term savings from fuel costs can outweigh the higher initial investment in an EV. Additionally, certain financial incentives, such as salary packaging, can make owning an EV more affordable.

The goal of this post is to thoroughly examine the financial aspects of owning an electric vehicle (EV) and determine whether it’s a cost-effective choice compared to an ICE car. While long-term ownership of an EV can potentially result in significant savings due to lower fuel costs, it’s important to consider the initial investment and potential future expenses, such as battery replacements (although manufacturers are now coming with long warranties).

It’s worth noting that many EV owners plan to replace their vehicles within 3 to 5 years, rather than keeping them for an extended period. This suggests that immediate financial savings may not be the primary motivator for purchasing an EV. If you’re considering an EV, it’s advisable to evaluate your individual needs and preferences, as well as the financial incentives available in your region, to make an informed decision.

Is EV worth it? At the end fo the day, the best reason to buy an EV is because you want one, not just for the potential savings. Consider the savings as a welcome bonus, and not the main motivation of owning one. This way, you won’t be disappointed if the cost savings aren’t as significant as you expected.