As the number of electric vehicles increases in Canada, many drivers are asking if they are cheaper than gas-powered vehicles. In this article, we’ll examine the cost of electric vehicles vs. gas-powered models in terms of price tag, refuelling, maintenance/repair, insurance, and depreciation.
*Note: Only fully electric vehicles, or battery electric vehicles (BEVs), are featured in this article. Plug-in hybrid or hybrid vehicles were not analyzed.
Price Tag
In general, electric vehicles have a higher initial cost compared to their gas-powered counterparts. For example, a 2024 Tesla Model 3 can cost $53,990 MSRP, while a 2024 Toyota Camry starts at $34,551 MSRP. And according to the Canadian Black Book, the average EV cost in Canada comes to $73,000. These high prices have slowed EV adoption in Canada.
To increase EV sales, the federal government offers the Incentives for Zero-Emission Vehicles (iZEV) Program. Consumers can receive point-of-sale rebates of up to $5,000 for the purchase or lease of a zero-emission vehicle. Some provinces offer additional incentives as well, and in most cases, they can be combined with federal iZEV. When incentives are factored in, the sticker shock of an EV is significantly lowered.
Refuelling
According to a study by Vincentric, electric vehicles had lower fuelling costs compared to gas-powered vehicles. The EVs analyzed in their study on average had $19,353 in fuel cost savings. An owner of a 2022 Kia Forte will be paying roughly $1,149.31 in fuel costs per year. Meanwhile, a 2022 Kia Soul EV owner will be paying about $456.88 per year in fuel costs. One reason behind these savings is the relative price stability of electricity compared with the volatility of gasoline. However, calculating the refuelling costs of an EV is not as straightforward as it seems. There are several factors that influence recharging costs, such as:
- The EV’s make and model: Some EV models have greater efficiency
- Type of charger used: Level 3 charging fills up an EV faster but costs more than Level 2 charging.
- Time of day: This mainly applies to home charging. It will cost more to charge during peak hours (e.g., 4 p.m. to 7 p.m.) than off-peak hours (e.g., 7 p.m. to 7 a.m.). Some provinces offer special off-peak or time-of-use rates for lower charging costs.
- The billing system used at the charging station (time-based or by kWh consumed)
- Location: Provinces have different rates for electricity, which influences recharging costs.
- Charging behaviour: This relates to when and where drivers charge their vehicles. For example, charging at home is on average cheaper than filling up at a public station.
In short, EVs will have greater fuel savings than gasoline vehicles. However, the exact amount can vary widely depending on the above factors. You can use the fuel consumption ratings search tool from Natural Resources Canada to calculate the energy consumption cost of your EV.
Maintenance and repair
Electric vehicle reliability has been a widely debated topic. According to a survey by Consumer Reports, EV drivers experience 79% more issues with their vehicles compared to gas-powered vehicle owners. Some of these issues are minor, such as the media screen glitching out, to larger problems like the battery pack dying. However, according to the Vincentric study, EVs have greater maintenance cost savings, thanks to the electric motor having fewer components and moving parts. They do not need regular oil changes and experience less brake system wear thanks to regenerative braking. Thirty-four of the 40 EVs analyzed in the study had lower maintenance costs than their ICE (Internal Combustion Engine) alternatives. For example, the 2023 Hyundai Kona EV has yearly maintenance costs of $589.96. The regular 2023 Hyundai Kona has a yearly maintenance cost of $737.65 per year. This is almost a $200 difference.
In some instances, EVs will have higher maintenance costs. For example, replacing an EV’s battery can cost anywhere from $6,500 to $20,000 USD. There have also been stories of drivers paying $50,000 and $60,000 for battery replacements. It should be noted that battery replacement does not happen on a large scale, and chances are you will not even need to have it replaced throughout the course of ownership. But if you do find yourself in that situation, you will be paying a hefty sum. Tire replacement is another area where EVs have higher costs. Since EVs are typically heavier due to the battery, their tires wear out faster. Plus, most require special tires engineered to handle the extra weight. As a result, electric vehicle drivers pay a premium price for new tires. According to Kelly Blue Book, a new set of rims can cost you $150 to $300 per tire.
Insurance
At the moment, electric vehicles are paying more for insurance. Depending on the make and model, EV drivers can expect to pay anywhere from $50-$200 more per month. There are several reasons behind this. To start, the high price tag of an EV leads to higher insurance costs; the higher the value, the more expensive it will be to replace. Second, the cost of replacing an EV battery has caused some insurance companies to raise their prices. For example, ICBC, the main auto insurer in B.C., wrote off an EV as the cost to replace the battery would be equivalent to buying a new car of the same brand and make. Similarly in the U.K., a growing number of auto insurers are opting to write off EVs instead of footing the bill for battery replacement. Third, auto insurers do not have enough historical claims data to accurately calculate their rates. As the EV market becomes more established, insurance companies will have more data to draw from to calculate their rates.
Deprecation
Vehicles are known as depreciating assets. In other words, vehicles lose their value over time and with use. The general rule of thumb is a vehicle loses 20% of its value after the first year of ownership followed by 10% to 15% every year thereafter. Calculating depreciation can be tricky as several factors are in play, such as:
- The make and modal.
- The condition of the vehicle and how well it has been maintained.
- Supply and demand. For example, during supply shortages, certain used vehicles will retain their value as demand for them is higher.
- Customer experience.
- Distance the vehicle has been driven.
With that being said, used electric vehicles have a higher depreciation cost. A 2023 study by iSeeCars found EVs lost 49.1% of their value over a five-year period. In contrast, gasoline-powered SUVs and trucks depreciate by 41.2% and 34.8% respectively. For example, the Tesla Model S has a 55.5% rate over five years of ownership, which is a $60,145 difference from its MSRP. The high price point of electric vehicles contributes to the steeper depreciation. The federal and provincial incentives also motivate drivers to buy new electric vehicles, which lowers the demand for used EVs.
On a positive note, electric vehicles have become better at retaining their value in recent years. When first introduced, there was little interest in electric vehicles. As a result, demand was low and the value of used EVs plummeted. With the recent growth of EVs in Canada, demand has picked up, which has raised the value of used EVs. As long as the demand for EVs increases, the depreciation rate should fall as well.
Conclusion
Based on our research, electric vehicles on average are cheaper to own than gasoline vehicles in the long run. While sticker prices depreciation rates, and insurance costs are higher, these are largely offset by greater cost savings in maintenance, repair and refuelling. The Federal and provincial rebate programs also improve affordability. However, determining an accurate cost comparison between EV and gasoline vehicles is not always straightforward. As noted in this article, there are multiple factors that can impact ownership costs, such as driving behaviour and driving needs
If you would like to do your own cost comparison, the CAA has an online Driving Costs Calculator tool. The calculator lets you analyze the ownership cost of various gas, hybrid, and electric vehicle models. It also takes into account the province you live in, your annual driving mileage, and whether the vehicle is new or used. After entering your information, you will see the depreciation costs, maintenance costs, insurance costs, license & registration fees, and the monthly car payment. The total ownership cost is representative of owning or leasing the vehicle for five or seven years.
