Stop wasting money on fuel- EV economics explained

Being an environmentalist while driving a diesel SUV is like going to McDonalds for the salad.

Now I’m not going to pretend to be a tree hugger – I do like burning wood as much as the next guy though! To state that you ‘stand’ for anything is like putting a big target on your back labelled ‘hypocrite’ – because sooner or later someone’s going to spot you contradicting your beliefs when you think no one’s looking. There’s wisdom in being quiet about your charity.

Our vehicles, next to our homes, can be one of our biggest expenses. The fact that electric vehicles are good for the environment will sell these cars, to a certain point but to go the distance there needs to be appeal to even the most ardent narcissist among us. The economics of EV ownership need to be there to lead to mass adoption. I drive an electric vehicle because the performance is awesome, and it saves me time and hassle with less maintenance – yep, it’s also cheap to run. So here’s my attempt to bust a myth around EV’s: ‘It’s just too expensive!’

Now, two ways to handle this: For those of you that like to get into some detailed analysis, check out this tool that EECA have built which will allows you to compare the cost of almost any vehicle you want. Compare a Nissan Leaf to a cheaper petrol equivalent or go all the way up to a Tesla compared to BMW if you want. They break down everything including depreciation and servicing costs.

For the benefit of those of us who appreciate just the bullet points, check out this brief illustration which shows how the fuel savings only, if applied to servicing a mortgage top up, may already make electric vehicles cheaper than petrol equivalents (calc is available upon request courtesy of Michael Young).

Assuming:

Fuel cost: $2.40 per litre, consumption rate of 10 litres per 100kms, 120,000 kms driven will cost $28,800.00

Electricity cost: $0.28 per unit (kWh), consumption rate of 16.6 kWh per 100 kms, 120,000 kms driven will cost $5,600.00

Assuming it takes 10 years to drive 120,000 kms, the cost to fuel an electric vehicle costs $193.33 per month less than the petrol vehicle in this simplified example.

So…what would happen if you took the savings, and borrowed against the value of your home with the view to repay it within 10 years? Well, you’d be able to borrow $18,227 at 5%.

Most assume electric vehicles are expensive. That’s a true statement if you look at the purchase price in many cases for sure. You realise with a bit more digging though, that the savings in petrol alone (not to mention maintenance!), are significant. At the end of a 10 year period the cost of a $30k petrol hatchback could be similar to that of a $48k Nissan Leaf.

And yes, you’ll save on trips to the petrol station (10 minutes once per week), trips to the mechanic ($1k per year), and my new favourite one – depreciation! Once it’s clear that EV’s are cheaper and higher performance, what happens to the value of that brand new petrol car that you just bought, 3 years from now?

Your home could unlock the funding you need to go electric right now. We’re keen to chat further about how we can help you here, so give us a call!

By |2018-10-30T07:12:00+00:00October 24th, 2018|Finance, Interest Rates, Mortgages|

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