When Will Electric Cars Be Affordable?

Electric cars are the newest technology when it comes to automobiles. But as with any new tech, prices for early adopters tend to be high and, once production costs stabilize, prices will eventually fall to a level that more people can afford. This leaves potential EV buyers with the question "When will electric cars become affordable?" The answer depends on your definition of "affordable" since this metric will differ based on your financial situation. But you can also look at it from a battery pricing and retail price perspective in which electric cars are simultaneously still unaffordable to most but also less expensive than they've ever been. It's these factors that make it difficult to pinpoint an exact price point an electric car needs to reach in order to be affordable to everyone.

That said, we're going to dive deep into the current state of electric car pricing, give our own definition of affordable, and make an educated guess as to when we'll see EV prices fall.

The average transaction price of a new electric car in April 2023 was $64,029, according to Edmunds data. Plug-in hybrid electric vehicles fared a little better, with an average transaction price of $59,258. Compare either of those figures to the average transaction price for a traditional gas-powered vehicle, which was $47,664 in the same month. Interestingly, the average transaction price for hybrid vehicles was the least expensive, at $39,347. The price gap between electric vehicles and gas-powered vehicles is still very wide and remains a barrier to many people.

But if you look at it from a battery cost perspective, the data shows the opposite. According to the U.S. Office of Energy Efficiency and Renewable Energy, EV battery costs have dropped by nearly 90% since 2008. It attributes that decline in cost to "improvements in battery technologies and chemistries, and an increase in manufacturing volume." In this sense, the most expensive part of an EV is the most affordable it has ever been.

For now, the vast majority of EV owners are middle-aged, have a college degree, make more than $100,000 a year, and own more than one vehicle, according to a 2021 study from the Fuels Institute. Most EV owners also live in single-family homes and are able to charge their EV in their garage or driveway.

These characteristics obviously aren't representative of most people in the U.S. When you look at the median (meaning the halfway point) wages of full-time and salary workers, weekly earnings were about $1,100 in the first quarter of 2023, according to the U.S. Bureau of Labor Statistics. Assuming 52 weeks of work, this would translate to $57,200 a year. In this scenario, buying an electric car at the average price of $64K would cost more than a year's salary in over half the households in the U.S. We would never advise someone to buy a car with a price greater than the person's annual salary. In this scenario, the average electric car is not affordable to the average person.

While the average price remains above $64,000, the good news is that a number of EVs are priced well below that. These options open the door to affordability for a lot more people. With this in mind, we've gathered a list of electric cars that are selling below $64K. We're using average transaction prices as they reflect what people are actually paying for vehicles, and they can fall above or below MSRP. Note that this list reflects a snapshot in time. It is subject to change as more vehicles enter the market or prices fall on existing models. You won't find Tesla models on this list even though some models may qualify because the automaker does not share its transaction data.

*Certain low-volume EVs, such as the Mazda MX-30 and Subaru Solterra, should qualify for this list but we don't currently have sufficient data to include them.

**This list reflects data from the month of April 2023.

While EV battery prices have fallen dramatically over the years, they remain the most expensive part of the vehicle. Until battery manufacturing costs and overall prices drop to a level more on par with gas-powered vehicles, EVs are likely to remain unaffordable to many Americans.

That said, as electric cars begin to sell in greater numbers, the production costs will naturally fall and that drop should be reflected in retail prices. We're already seeing a number of EVs that have been out for a while fall in price due to increased competition. The Tesla Model 3, for example, sold for roughly $50,000 when it was initially released in 2017. Fast-forward six years, and the starting price for the Model 3 is about $41,630 with destination charges. Similarly, the Chevrolet Bolt had an average transaction price of $42,017 back in 2016. Five years later, the Bolt price has fallen to an average of $30,994. And while the Bolt is being discontinued after the 2023 model year, the upcoming Chevrolet Equinox EV will step in to take its place with an estimated starting price of about $30,000.

In this sense, electric cars are getting more affordable every year. But since there are more vehicles to choose from, you're going to see a wider spread in pricing. For now, it is possible to purchase an EV for as little as $30,000 to more than $200,000 on the high end. J.D. Power, a consumer research firm, has created an EV Index that looks at a number of market factors and tracks when EVs will achieve price parity with traditional gas-powered vehicles. The company gives EVs a current score of 89 out of 100 in the affordability category. When the score hits 100, the affordability of electric cars should be about the same as for comparable gas vehicles. Through this lens, we're nearly at the finish line of EV affordability, though it is unclear just how long it'll take to cover the final stretch.

Stick to lower-priced EVs or alternatives: They may not be the flashiest to show off, but inexpensive electric cars offer all the benefits of driving an EV at a fraction of the cost of a premium alternative. Vehicles such as the Nissan Leaf, Chevy Bolt and Hyundai Kona Electric are strong candidates that are more affordable and still fun to drive.

If these cars are still out of your range, we recommend taking a look at plug-in hybrid vehicles. They offer the benefits of both electric and gas cars while costing thousands less than a comparable EV. If your daily commute is less than 30 miles or so and you can plug in every day, you may not have to refuel at a gas station for months.

Take advantage of tax credits and rebates: There are a slew of tax credits and rebates available at the state and federal level to the savvy buyer who puts in the work to find them. We have an article that gets into the details of the revamped federal EV tax credits and the U.S. Department of Energy maintains a list of state incentives that can save you even more. In 2024, the federal tax credits can be applied as a direct discount on the price of the EV, making them instantly more affordable.

Consider used EVs: It has long been the case that buying used can save you money over buying a new car. The same applies to used EVs as well. There are pros and cons to buying a used EV, but as long as you know what you are getting into, it should be safe to do so. Additionally, if you purchase from a dealership and the EV costs less than $25,000, it should be eligible for a $4,000 federal tax credit.