Owning an electric vehicle offers several advantages, such as avoiding trips to the gas station and benefiting from zero emissions. Additionally, EVs often have lower overall maintenance costs and qualify for tax incentives, making the switch appealing for many. However, it’s important to note that not all aspects of owning an EV are cost-saving. In particular, auto insurance for EVs is generally higher, which is an added expense consumers should consider when evaluating a new vehicle. Let’s explore why insurance costs are higher for electric vehicles.
Higher Repair Costs
Electric vehicles often incur higher repair costs due to the specialized technology and the components they use. Repairs may require specific skills and parts that are not as widely available as those for gas-powered vehicles.
For instance, if an EV’s battery pack is damaged, the replacement cost can be significantly higher than replacing a fuel tank in a gas-powered vehicle. According to J.D. Power, battery replacement for a Tesla Model 3 can cost at least $13,000, whereas a fuel tank replacement for a typical gasoline car might only cost a few hundred dollars.
Specialized Parts and Equipment
EVs use unique parts such as electric motors, regenerative braking systems, and high-capacity batteries. These parts are generally more expensive and less readily available than traditional automotive parts. They are not off-the-shelf items; they’re typically special ordered with long wait times.
For example, an electric motor in an EV may be more costly than a combustion engine in a gasoline car. It is difficult to obtain precise numbers, but AAA says that an electric motor can cost “thousands of dollars.” A new gas engine may cost more, but unlike an electric motor, one can be rebuilt or replaced by a junkyard engine for a much lower cost.
Limited Repair Facilities
There are fewer repair shops and technicians qualified to service EVs compared to traditional vehicles. This scarcity can drive up repair costs.
A Nissan Leaf owner, for example, might have to take their car to a specialized dealer for repairs, whereas a Nissan Sentra owner can go to almost any mechanic, potentially saving on labor and parts costs. We compared these two vehicles because they’re nearly the same size. Also, the Sentra starts about $8,000 less than the Leaf, although the EV does come with a $3,750 tax credit.
Advanced Technology and Features
EVs often come with advanced technology and safety features that can be expensive to repair or replace. If an EV with advanced driver-assistance systems (ADAS) like automatic emergency braking or lane-keeping assist is involved in an accident, repairing these systems can be more costly than fixing the less sophisticated systems in a gas-powered car.
Higher Purchase Prices
The initial purchase price of EVs is generally higher than comparable gas-powered vehicles, which can influence insurance premiums. A new Tesla Model 3 ($38,990), for example, costs significantly more than a similarly sized Toyota Camry ($26,420).
Insurance premiums are often based on the replacement cost of the vehicle, so the higher purchase price of the EV leads to higher insurance costs. In this example, a Model 3 may cost upwards of 50 percent more to insure than the Camry.
Battery Risks
The large batteries in EVs pose unique risks, such as fire hazards, which can result in more costly claims. In the event of a severe accident, the risk of a battery fire in an EV might lead to higher claims compared to a gasoline vehicle, influencing the insurance premiums.
All these factors collectively lead to higher auto insurance premiums for electric vehicles compared to their gas-powered counterparts. While we’re not suggesting that buying an EV isn’t a smart decision for many, it’s important for consumers to be aware of the additional costs involved. Remember: the cost of insuring any vehicle is based in part on its replacement value. Even with heavy discounts, an electric vehicle is assessed at the cost before incentives kick in.
References
Hawley, D. (2023, February 2). How Often Do Tesla Batteries Need To Be Replaced?. J.D. Power.
Ulrich, L. (2023, August 24). Everything You Know About EV Repair Costs Is Wrong. Road & Track.
Whitman, V. (n.d.). AAA.
See Also — Managing Rising Auto Insurance Costs
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