Does buying an electric vehicle make financial sense?
Does buying an electric vehicle make financial sense?
An electric vehicle is charged in Ottawa on Wednesday, July 13, 2022. THE CANADIAN PRESS/Sean Kilpatrick
Electric cars have become increasingly popular as a more environmentally friendly alternative to traditional combustion engines. While there are many benefits to electric cars, the question of whether they are a good financial choice in Canada is still up in the air.
Although electric cars can cost more upfront, they may offer long-term financial benefits due to lower operating costs and government incentives. Below, I’ll break down some of the main pros and cons of investing in an electric vehicle, so you can determine if it’s the right choice.
Are there any tax breaks or incentives for having electric cars in Canada?
This past December, the government of Canada passed a federal mandate to increase the total supply of electric vehicles in the country. This mandate will require auto importers and manufacturers to meet a certain sales quota for new electric or zero-emission vehicles, as follows:
20 per cent by 2026
60 per cent by 2030
100 per cent by 2035
In other words - by 2035, all new vehicles sold in Canada must be zero-emission vehicles. For now, this means electric vehicles. However, some auto manufacturers are also pursuing alternatives, such as vehicles powered by hydrogen-powered fuel cells.
To support this, the federal government and provincial governments are offering incentives and tax breaks for EV owners, including:
Up to $5,000 in tax rebates for buying qualifying zero-emission vehicles. To be eligible, the manufacturer's suggested retail price (MSRP) must be less than $55,000 for passenger vehicles and less than $60,000 for station wagons, pickup trucks, SUVs, minivans, vans or special purpose vehicles. For passenger vehicles with higher-priced trims, the MSRP must be less than $65,000. For station wagons, pickup trucks, SUVs, minivans, vans or special purpose vehicles with higher-priced trims, the MSRP must be less than $70,000.
Since the technology is relatively new, though, there have been some hiccups, and not every EV is a reliable investment.
Currently, the Tesla Model 3, Nissan Leaf, and Kia EV6 are the most reliable electric cars, according to Consumer Reports.
Advantages of an electric car
Electric cars have several notable advantages over combustion-powered vehicles, including:
Lower fuel costs. Charging an EV in your home or at a charging station is typically cheaper than fuelling a combustion engine with gasoline or diesel. The cost of electricity also tends to be more stable than the cost of petroleum products.
Fewer moving parts. EVs have fewer moving parts than combustion vehicles. You don’t have to worry about drive belts, alternators, oil changes, complex cooling systems, fuel delivery systems, and other systems that must be constantly serviced in combustion vehicles.
Tax breaks. Purchasing a new EV can garner you a $5,000 federal tax break. Several provinces also offer their own provincial tax breaks for purchasing a new EV.
Quicker acceleration. Electric motors are capable of faster acceleration, compared to combustion engines, which can improve your overall driving experience.
Disadvantages of an electric car
Unfortunately, EVs also come with their fair share of disadvantages, including:
Limited range and long charging time. Most EVs cannot drive more than 300-400 km on a single charge, so they’re not a great choice for long road trips. Often, charging can take several hours or longer. The Tesla Supercharger network is an exception, allowing users to get about 320 km of range in 15 minutes.
Poor cold weather performance. EVs are powered by lithium batteries, which can often be fickle in Canada’s extreme winters. Battery life, range, and power distribution may not always be consistent.
High upfront cost. Although EVs are gradually becoming more affordable, they’re still more expensive than combustion-powered vehicles.
How long do electric cars last?
Since EVs are relatively new, there’s no conclusive data on how long they last. However, most estimates claim that EV batteries should be able to last between eight and 15 years, depending on their usage. Canada’s extreme climate will likely contribute to batteries dying quicker.
That being said, Tesla is currently working on designing a battery capable of lasting up to 1 million miles (1,609,344 km). So this could change very quickly.
Aside from replacing the battery, though, EVs require very little maintenance. Most issues involve common wear-and-tear items, such as tires, brakes, sensors, and switches.
To facilitate faster addition of zero-emission vehicles, the government is investing heavily to help support Canada’s EV infrastructure.
The government is investing in 50,000 EV charging stations throughout the country, offering increased tax rebates to those who’ve purchased a new EV, and investing in Canadian EV manufacturers.
As long as the government continues to provide support to reach its goals, then Canada’s EV infrastructure could support widespread adoption by its target date of 2035.
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.
Do you have a question, tip or story idea about personal finance? Please email us at dotcom@bellmedia.ca.
Correction
This article has been corrected to include the accurate manufacturer's suggested retail prices (MSRP) associated with the federal government's incentives for purchasing zero-emission vehicles. Rebates offered by the governments of British Columbia and Quebec have also been corrected. The number of charging stations across Canada has also been corrected.
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An electric vehicle is charged in Ottawa on Wednesday, July 13, 2022. THE CANADIAN PRESS/Sean Kilpatrick
