What Kind of Car Should You Buy?

Upfront Costs: Buying or Leasing

Numerous factors determine the up-front cost of a new car: size, category, features, options, drivetrain, powertrain, and the all-important decision to buy or lease.

• Gas Vehicles: According to KBB's 2017-2018 figures, the average cost of a new vehicle ranges from about $20,000 for compact cars to $55,000 for midsize luxury sedans.
• Hybrid Vehicles: Cross-category averages are difficult to come by, but you may be able to find compact gas-electric hybrids for as low as $22,000 MSRP. High-end models exceed $55,000 MSRP. In general, expect to pay a slight premium compared to gas-powered cars.
• All-Electric Vehicles: According to the International Energy Agency, all-electric vehicles' average list price hit $50,000 in 2016 — a substantial premium to gas and gas-electric vehicles. This figure is skewed by high-performing luxury models from Tesla and BMW, and should fall as mass-market options such as Tesla's Model 3 and Chevrolet's Bolt hit dealerships in 2018.

Fuel Costs and Availability

Your vehicle's annual fuel costs depend on its efficiency rating, mileage, and prevailing fuel costs.

Gas-powered vehicles are beholden to the underlying cost of gasoline, which is tied closely to the price of oil. Citing 2016 data, Plug-in America pegs the average sales-weighted gas-powered vehicle efficiency rating at 25.3 miles per gallon. At $2 per gallon and 12,000 miles driven, that's an annual fuel cost of approximately $949. At $3 per gallon and 12,000 miles, it's approximately $1,423.

All-electric vehicles' operating costs are tied to electricity prices, which depend on the local generation mix. Most utilities generate power from sources including coal, natural gas, oil, wind, solar, and hydropower. Natural gas has supplanted coal as the largest single source of electricity across large swathes of the U.S. — a financial boon for electric and plug-in hybrid vehicle owners. According to Plug-in America, 2016 charging costs for electric vehicles were $432 per 12,000 miles driven.

Upkeep and Repairs

Electric car maintenance is a double-edged sword. According to CNBC, electric vehicles have only 20 moving parts. Traditional internal-combustion vehicles have about 2,000 moving parts. Since moving parts are susceptible to wear and tear, this means lower ongoing repair and maintenance costs — electric vehicles don't require upkeep like periodic oil changes.

The catch is that electric vehicle batteries are very expensive. If your car's battery wears out, you'll need to consider if it makes more sense to purchase a new vehicle altogether.

Tax Incentives

Certain buyers may qualify for tax incentives when they buy or lease environmentally friendly vehicles. According to Energy.gov, the IRS offers federal tax credits on plug-in and all-electric vehicles ranging from $2,500 to $7,500 per vehicle. These credits can dramatically reduce the net cost of your next electric vehicle purchase.

Buyers remain eligible for these credits "until 200,000 qualified EVs have been sold in the United States by each manufacturer, at which point the credit begins to phase out for that manufacturer," per the Department of Energy. As of 2018, no manufacturer has cleared this threshold.

Additionally, some states offer electric vehicle tax credits and rebates that range from $500 to $5,000 per Tesla. However, these credits are subject to change so check with your state for up-to-date information.