Most people don’t do the math based on one road trip. It’s daily driving and whether they have the ability to charge at home that are the main factors. Also whether solar panels are available to offset home electricity costs.
In SoCal, 60+ mile daily roundtrip commutes are common. Abundant sunshine year-round makes solar panels popular on many roofs. That may not be the case in other climates.
We have one EV and one gas car. We use the EV most of the time as we do have solar panels on our house. We pay very little in electricity each month and most months zero in gas. As a bonus we have battery storage and maintain power during a grid outage. Of course there was the initial capital investment, but we pulled the trigger when there where healthy government incentives offered, which have expired now.
At least where I am, there is still increasing interest in both solar power and EVs, even without the incentives. I do think EV sales will pick up from here as there is no clear end to this war.
The people who are most price sensitive to gas surges typically will have the hardest time affording a new car, charger, etc. And solar panels would be an even greater upfront cost. (Plus, that’s not even a realistic option for people who rent or don’t plan to stay long enough to recoup.)
I used my road trip example, because the gas crisis is a temporary situation. Most people drive on average 15k miles a year, according to insurance data. The Iran situation won’t last a year.
Financing is readily available for both options, and most solar installers offer a lease option instead that can relocate with you. The actual installation of the level 2 EV charger at home was modest, $300.
Historically when gas prices have surged people have traded in for smaller and more fuel efficient autos and I don’t expect this time to be different, except those fuel efficient options have more variety than just trading down to a small econo-box. Though that will still be the best option available for those who live in dense apartments/condos where solar panels are not practical, and EV charging is not likely available at the home base.
Folks who focus on monthly payments are suckers, unfortunately. Those people will be taken for a ride, as often happens. Total cost of ownership/leasing is what matters, and as I mentioned, people who do the math will be able to make better decisions. EVs depreciate faster than gas cars as well.
I agree but many don’t follow that approach and simply focus on monthly payments.
Also depreciation is not a real expense people consider when purchasing, unless the car will be used for business purposes. Even then depreciation expense is a flat cost over the expected life of the asset, so the rate of depreciation is not as relevant.
As a result, many people are actually financially upside down on the car they currently own. Hard to get out of such circumstances. And car makers have actually screwed up overall, making cars so expensive that many folks can’t afford the payments. Auto makers have actually said they’re going to make more basic cars because of that. But that kind of adjustment takes time to unfold.
Well, we’ll see what happens but I don’t think car sales are driven by depreciation at all, and of course it’s not relevant at all for those that lease their cars (which is typical for people who like to drive newer cars and trade in every 2-3 years).
Of course these are not the folks that are the brightest at personal finance but many people are not and their decisions show that. Which is why people end up upside down on a car (or a home) loan in the first place.
Lastly resale value is not only based solely on depreciation, which is an abstract accounting concept. The care, condition, mileage, and history of the car (Stolen? Flooded? Accident History?) are more impactful factors.
When people are upside down, that means if they want to switch cars, they have to come up with thousands to get out of the car they have. For people who are most price sensitive to gas prices, they’re often unlikely to be able to switch, even if they want to.
When switching cars, the resale value will automatically be a potential consideration, so it doesn’t matter whether someone wants to consider it or not — the market will force it. And depreciation of even a perfect condition car the moment you leave the lot is significant.
@Smiley I just went to fill up the car to find our local Tesco petrol station completely closed. Further down the road at Sainsburys they were closing off pumps, including the one I used after I had filled up.
Thanks @Maggie8K and @Felinelover for the EV analysis. I am currently in the market for a new car, albeit in the Australian market. A bit different here with uptake increasing and many options to choose from. I have been concerned regarding the rapidly changing technology but hadn’t considered leasing. I can afford to buy outright but checking out the leasing is a good idea. And I hope your predictions regarding the length of war are correct Maggie, but just this morning I saw it compared to the Boer war so ……
Good luck! We’ve been very happy with our EV. They are flat out fun to drive, quiet with nearly instant power.
In the next few years we’ll likely drop down to one car and it will be an all-electric. Even putting costs aside, they are more fun to drive and very little maintenance involved (really just tired and brakes - no oil or fluid changes, spark plugs, etc).
We’re thankful we purchased a PHEV last year with a range of 60k & it just happens to be the distance I require to get to a certain run spot, gym, errands or the rugby. I fuelled up a few weeks ago & aiming not to for a while.
I’m still planning on visiting fam up in Canada no matter how expensive the flight is!
The closures are reportedly being caused by panic buying and not shortages caused by what’s happening with the war against Iran, that might take a little longer to take effect. Brits no longer seem to be able to Keep Calm and Carry On.
And my two cents on the evolving battery technology. The battery technology is evolving but one thing that’s become clear in the US market: the charging infrastructure matters, and that is the real limiting factor. That will change, expand, and upgrade at a slower pace, and has now consolidated (at least in the US) around Tesla’s NACS charging standard. While there are adaptors for CCS (Europe’s standard), most US automakers have now cut deals with Tesla and are shipping their new EVs to charge at Tesla superchargers.
So I guess my point is, it’s going to take far longer to figure out the charging infrastructure let alone update it for newer battery technologies. And we don’t need to latest/greatest anyway - the range we have suits us fine, we would not pay extra for 500+ miles of range as we need to stop well before then anyway for bathroom breaks on road trips. We only need our home charger for daily driving and have done long cross country road trips with no issues at all. When we’re eventually ready to upgrade in 5-6 years to a new EV my guess is the charging infrastructure will still look as it does today.
I didn’t speculate on the cause of the shortages, just stated the facts. Panic buying is unfortunately a frequent outcome these days. Not everyone has the ability to identify reliable sources of information.
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