This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Electric Cars: The Right and Wrong Reasons for Buying

NEW YORK ( TheStreet) -- The purpose of this article is to sort out some of the main arguments for and against electric cars.

For reference and clarification, by "electric" I hereby mean both pure electric cars and those accompanied by an on-board generator, such as the Chevrolet Volt or the upcoming BMW i3. Basically, any car that plugs into a wall in order to store energy in a battery that will (help) drive the car.

1. "Electric cars save money on gasoline."

Duh! Sure they do. But how much? Anything worth writing home about? Let's take a simple mathematical example. Consider the alternative if you are pondering buying an electric car. This alternative purchase could reasonably be a regular Toyota Prius, which can be had for \$25,000.

The average American drives 12,000 miles per year. The Prius yields 50 miles per gallon. That's 240 gallons per year. Multiply by \$4 per gallon and you have \$960 per year.

Let's stop there for a minute. Ponder that number -- \$960 per year. That's the maximum you can save, assuming your cost of electricity is zero.

How much are you willing to spend upfront in order to save \$960 per year? \$5,000? \$10,000? What's your payback calculation?

\$960 per year is not nothing, but how large a percentage of your annual spending budget is it? I buy two lattes a day at my favorite coffee shop. They're \$3.75 apiece, or \$7.50 a day. Multiply by 360 days, and you get \$2,700 per year. Whoops! There went your best-case, electric-car gasoline savings, multiplied by three.

2. "Electric cars save money overall."

Now you're talking. Electric cars may save you money outside of spending on gasoline. Specifically, you can save money on service and maintenance.

The calculations here are complex and depend heavily on assumptions. For starters, many new gasoline cars have free service for two or three years.

That said, in many electric cars you don't have any oil changes, transmission issues, timing belts or spark plugs to worry about. Even in range-extenders such as the Volt, here are fewer of them. Clearly this will save the electric car owners serious money over a car's lifetime.

After the initial "free service" period, whether one year or three years or longer, how much should one assume for service for a used car, per year, that's being driven 12,000 miles per year? I would say the minimum is \$600 per year, but at least over time it is likely to average a lot more. Some pay thousands per year in car service, for a 5- to 30-year-old car.
1 of 3

Check Out Our Best Services for Investors

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
• \$2.5+ million portfolio
• Large-cap and dividend focus
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
• Buy, hold, or sell recommendations for over 4,300 stocks
• Unlimited research reports on your favorite stocks
• A custom stock screener
Stocks Under \$10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
• Model portfolio
• Stocks trading below \$10
14-Days Free
Only \$9.95
14-Days Free

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
• Diversified model portfolio of dividend stocks
• Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
• Model Portfolio
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
• Access to Jim Cramer's daily blog
• Intraday commentary and news
• Real-time trading forums
Only \$49.95
14-Days Free
14-Days Free
SYM TRADE IT LAST %CHG
AAPL \$93.09 -0.57%
FB \$117.72 -0.29%
GOOG \$700.24 0.65%
TSLA \$211.04 -5.20%
YHOO \$36.95 2.60%

Markets

 DOW 17,637.36 -13.9 -0.08% S&P 500 2,049.02 -2.1 -0.10% NASDAQ 4,717.8970 -7.742 -0.16%