My Garage

Does that EV actually cost more? A look at the psychology of sticker shock.

Does that EV actually cost more? A look at the psychology of sticker shock.

A major stumbling block for potential EV buyers is the high up front cost compared to gas-powered vehicles, but a closer looks shows it is not quite as high as some think.


Imagine you’re shopping for a new SUV. You’re shown prices for two very similar models, one gas-powered and the other electric. However, the EV costs $20,000 more than the gas-powered version. Do you immediately write the EV off as being too expensive?


Many Canadians would, but it turns out most of us shouldn’t. According to a study by Clean Energy Canada at Simon Fraser University, EVs are proven to cost the same or less to own over time relative to their gas-powered counterparts. In this case, the study assumed eight years of ownership, driving 20,000 kilometres a year.


The psychology of pricing is an influential part of the car-buying process, and Canadians love a good deal. But our innate drive for instant gratification and “good deals” is posing some problems in the global push for EV adoption, says Dr. Markus Giesler, a consumer sociologist and professor at the Schulich School of Business at York University in Toronto.

“We think that because of initial financial hurdles, we are worse off,” says Mr. Giesler. “In actuality, time matters greatly – but that’s something we’re conditioned not to consider.”  That, he says, is “a huge problem” for EV adoption.


A major stumbling block for EV would-be buyers is the higher up-front cost – something that, for many Canadians, means higher borrowing costs and higher credit score thresholds.


Indeed, a gas-powered car might be cheaper on the surface with a lower monthly amount – but it can be more expensive to operate over time. When it comes to EVs, there are several important factors to consider when calculating the total cost of ownership.


One is that gasoline is more expensive to use per kilometre than electricity. Natural Resources Canada says a Ford F-150 Lightning EV owner will spend $894 to drive 20,000 kilometres in a year, as opposed to a gas F-150 4x4 owner’s $3,025.


Another factor is maintenance. According to the federal Canada Energy Regulator, EVs cost 70 per cent less to maintain. EVs don’t need oil changes, spark plugs, drive belts or the same type of transmission service that gas vehicles do. And while some drivers may be worried about replacing an expensive EV battery, research shows they may outlast the cars they power.


And, advertised prices for EVs don’t always include the available rebates.


Every Canadian can access a $5,000 federal rebate on the purchase of an EV or plug-in hybrid (PHEV) with an electric range of 50 kilometres or more within certain price thresholds. (The rebate gets pro-rated for leasing and financing terms under 48 months.)


Individual provinces and territories – namely, Quebec, BC, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon and Northwest Territories – offer additional incentives that can be stacked on top of the $5,000 from the federal program, pushing total savings to $10,000 or more.


Yet, many Canadians aren’t aware of these potential savings, according to a September 2023 survey performed by Abacus Data for Electric Mobility Canada.


Of the 1,500 Canadians surveyed, fewer than one-quarter knew that charging an EV costs less than fueling an equivalent gas-powered vehicle. As well, the majority of respondents were not aware that EV purchase rebates exist. And fewer than 10 per cent knew that more than 40 EV and PHEV models are priced below the industry average of $45,000–$50,000 for light-duty vehicles once rebates are applied.


Daniel Breton, chief executive officer of Electric Mobility Canada, says he was surprised to find a majority of respondents in his home province of Quebec – which offers $12,000 in combined EV rebates – were not aware these incentives are available. “I was shocked, honestly,” he says of the Abacus survey results. “[This is] in Quebec, where there has been a rebate for more than 10 years.”


The mental block on EVs can be, at least in part, solved with some education.


When non-EV owners were asked at the start of the Abacus survey if they’d consider an EV as their next vehicle, just under 43 per cent said yes. At the end of the survey, when asked to consider what they’d learned, 63 per cent said they would consider an EV. And that is after just 15 minutes of education.


Car dealerships and other players in the automotive industry have an opportunity to educate the public, not only on EVs’ specs and performance, but also their longer-term maintenance costs, says Mr. Giesler of York University.


For drivers who take the time to do the math themselves, the benefits can be significant.


Ravi Chadha, a real estate agent in Coquitlam, B.C., says he compared a gas-powered Genesis GV70 to a Hyundai Ioniq 5 EV when he needed a new car in 2021. He chose the electric car because of its cost benefits.


After factoring in B.C.’s $9,000 in purchase rebates plus the money he’d save on fuel and maintenance, he correctly calculated that an EV would be more convenient and cost him less to operate. Mr. Chadha is now on his second EV, a Genesis Electrified GV70, using it mainly to drive to meet clients and show homes.


“You really need to define how you’re going to use your vehicle‚” he says. “Is it a commuter vehicle, is it something you’re going to be using for towing, for long distance? You have to figure out all those angles before you go out there and shop.”


These kinds of calculations are becoming less daunting as EV prices come down, owing to lower battery costs. Tesla has already reduced some prices, and a study by Goldman Sachs Research expects battery prices to fall 40 per cent by 2025 versus 2022 benchmarks.


In the meantime, Mr. Breton says the key to helping more Canadians get over the initial sticker shock and consider whether an EV might be more cost-effective long-term is simply to get the word out.  He says, “We have to educate people on the fact that, in the end, [electric] vehicles are not as expensive as people think.”

Categories: EVs