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ChooseFI | Financial Independence Podcast
The FI Case for Electric Vehicles | With Chris Terrell | Ep 530
01:11:01
Chris Terrell shares his personal journey with electric vehicles (EVs) and discusses the financial implications of owning one. Highlighting key incentives like the Inflation Reduction Act and the benefits of home charging, the conversation delves into...
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- [00:00]
A
Hello and welcome to Choose a Phi. Today on the show, we have our good friend Chris Terrell back here on Choose a Phi. He was on episode 429 talking about five frugal hobbies and episode 439 talking about adjusting to life after Fi before you actually get there. And he's just a good friend of mine. He's a great guest and he really prepared something wonderful for us today. So this is a thorough analysis of electric vehicles. Chris has actually purchased two EVs in the last basically 24 months or less. And he's done a real significant amount of analysis. I've seen him post on Facebook. I'm friends of his, obviously, and he is just trying to educate people. And I think that's what's so fun about our community is we have really passionate, brilliant people who do the research and figure it out for themselves and then want to talk about it and bring it to all of us. As we've talked about from literally episode one of Choose a vi, this is the ultimate crowdsourced personal finance show, and this is the perfect example of that. I think you're really going to enjoy this episode. And with that, welcome to choose by Chris, my friend. It is good to see you. It's funny. I am. I'm seeing you much more frequently recently because you and I have been working out together a couple times a week, which has been a lot of fun.
- [01:17]
B
It's been fantastic. Although I am quite sore from this on more than one occasion.
- [01:22]
A
Yeah, a couple times. But, yeah, it's been fun. I obviously, I had Dean Turner on the podcast podcasts a couple times now, and I've just talked so highly about this program and it was cool that, you know, we connected about it and just decided to work out together and it makes it a heck of a lot more fun. I've talked about how I just walk around the gym for an hour, essentially, and work out for 15 minutes, but now I get to chat with you every. Every time. So it's pretty darn cool.
- [01:44]
B
Yeah, I. I know we're not talking about strength training today, but I'm just going to pile onto the yes, this is something that you need to be doing. And you and I have a little bit of an age difference. I'm in my late 50s now, and I think it's important to do it as you age to keep up with your health.
- [02:02]
A
Yeah, wholeheartedly agree. So, yeah, that'll be another talk show for sure. But yeah, so today we're talking about cars and specifically electric vehicles, which I know, you have jumped into. You've purchased a couple of them over the last couple years and I've seen your posts on Facebook and I know you are really interested in chronicling this. And I think talking about the benefits and potentially any downsides that you see, but also just trying to raise awareness, I think is actually the biggest thing. Because frankly, Chris, like, I consider myself fairly up to date on a lot of things and there are just a lot of holes in my knowledge in terms of is an electric vehicle even for me, is this something I should consider? What, like, it's the unknown unknowns that I just have no sense of. And I know how analytical you are and how much you've jumped into this. So we're going to spend a lot of time talking about that and maybe, just maybe we'll talk a little bit about. I actually have purchased a couple of cars over the last 12 months because my daughter is now of driving age. So that was an interesting thing. And actually my 2013 Honda Civic just was not a great car. And I actually wound up buying a used car to replace it. And it's interesting how it ties together with how you purchase some of your EVs. So I think we'll be able to weave this into a pretty interesting episode for a lot of people. So why don't we get started with you? So talk to me about, I guess, your starting point for EVs and how, I mean, we're talking to the financial independence community. This is the smartest community around. Where should we even begin if we're thinking about, hey, it's probably time to get a new vehicle in the next year or two? Like, should EVs be top of mind at this point in 2025?
- [03:43]
B
Right. I think that's a great place to start. The reason why I think it's a great time to talk about it now is because I feel like that as a nation, we are shifting from EVs becoming something for the early adopter set to the easy adopter set. And what I mean by easy adopters is people who are well positioned to get an electric vehicle, and not because of the cost, but because it works for them. And we're going to get into some of those details. But what that often looks like is you have a gas car in the driveway as well. This is going to be your second vehicle. This is a car you're going to be using around town. Most importantly, this is a car that you're going to be charging from home because that's where the real savings come into play. And EVs are much, much more affordable now than they were five, six years ago, when there were very few used EVs on the market. And almost everything was brand new and almost everything was very expensive. And from a choose FI perspective, for myself personally, I've been interested in EVs for years, and they never, ever made financial sense for me. Going out and buying a $50,000 Tesla was just going to set my FI date back by such a big degree that I could never justify the cost for, frankly, a car. But within the last year, Robin and I have bought two EVs. We bought a 2023 Chevy Bolt, and we bought a 2021 Tesla 3 to replace our other vehicles. And they were pretty darn good purchases at the end of the day, and they were surprisingly affordable. So that's why now is such a good time to be talking about EVs. And when I first bought my first EV, I discovered two things. One, there were a lot of things about EVs that I didn't appreciate not owning. One, even though I had done a lot of research. And two, everyone I talked to that did not own an EV really had no concept of how the things even worked. So I saw there was an opportunity there to chronicle, like you said on Facebook, all of the things that I was discovering, all the pros, some of the cons, and why I became. I just started describing myself as an evangelist. I'm fully, fully in support of EVs. But we're also going to talk today about a couple of things that make EVs not a great fit for some people. So I want to come at this from. Let's give your listeners information about EVs that makes sense from an FI perspective.
- [06:27]
A
Nice. Yeah, I love that. And while you might call yourself an EV Angelus, you are one of the most discerning people I know. So this is not for anybody listening. This is not somebody who's just a dyed in the wool Elon Musk fan or one of these, you know, crazy people or anything like that. Chris has done a lot of rigorous analysis, or clearly I would not have him on the podcast talking about this. So, like you said, you've been following evs for a number of years, but it didn't make sense for you. And I think that that's what's so interesting when you talk about, like, the $50,000 EV. And I think back to the days when, like, the Toyota Prius or something, or like the early days of the hybrids, where it was just unsophisticated people just kind of being frustrated at the price of gas. So they would spend $15,000 extra on a. Whatever the early hybrid it might have been, even been before the Prius, I'm not sure precisely, but $15,000 more. And like, I was shaking my head, I'm like, you will never, ever in a million years make that money up. It's inconceivable you'd have to drive this car for a million miles. It was something absurd like that. But yet people make rash emotional decisions when it comes to their money. I mean, we know that just as a. Oh, I could say that as a blanket statement having. Having done choose a vie for eight years now, people make emotional decisions when it comes to their money. And I think, in fairness, there's some positivity around that emotional decision when it comes to electric vehicles, because many people think they're doing something good for the environment, et cetera, et cetera. So I'm not saying that this is coming from a bad place by any means, Chris, But I think people don't look at the numbers like you did. And I think that's what's so interesting about your arc, is seeing, hey, I'm interested. The numbers make no sense to. Okay, I'm still very interested. And the numbers finally reach that threshold where it makes sense, and then maybe then some.
- [08:12]
B
Right, Exactly. And I think the best way to detail that is to talk about how I purchased my 2023 Chevy Bolt EUV. So in 2022, the inflation rejection act had passed, and I knew that there was a $7,500 rebate that could be had a federal tax credit, actually, on new EVs that qualified. And the Chevy Bolt EUV was one of those cars. I was reading headlines about how EVs were, quote, piling up on dealer lots because these things could not move. What wasn't being said in those articles was The Chevy Bolt EV. And Chevy Bolt EUV was the hit car of 2022 from the EV side. The reason being was it's a very nice car, but it was also very affordable. It was one of the first cars that were not $50,000. With the federal tax rebate, you could get this for under $30,000, which made it very enticing. The problem, they were selling like hotcakes. So I was looking around the Richmond area, could not find one. And then finally, a Chevy dealership reached out to me and said, hey, Chris, we have one in stock. Would you like to come take a look at it? I said, I Certainly would. And I went to the dealership and everything looked good. And I was crunching the numbers. I still wasn't there. And then the young lady presented me their offer, and their offer was $4,000 over invoice, over invoice, over invoice. And why were they doing this? Because they could. They knew that they had the hot commodity and people were willing to pay for it, which flew completely in the face of these things are piling up on people's parking lots. So While the Ford F150 Lightning may have been a difficult sell because it's about $100,000 and not a lot of people are going to fill that market, the Chevy Bolt was, in fact, incredibly practical for some people, and they were going like crazy. Bottom line, I was not willing to pay somebody's $4,000 of a retail. I went home and consoled myself to the two Mazdas we still have in the driveway. My family has been driving Mazdas for 33 years.
- [10:26]
A
Wow.
- [10:26]
B
As we enter 2025, this is the first year I will not have a Mazda in the driveway since 1991. So you mentioned that I am an evangelist, but I've been driving gas cards for decades, and I love Mazdas, but they feel like anachronisms now. Now that we've got it. Anyway, Fast forward to 2023. One of the organizations that dove in big on EVs was Hertz Rental Cars. They bought a ton of Teslas and they bought a ton of Chevy bolts, and it was not a good fit for them. So they had a fire sale starting in late April of 2023, and it went from no bolts being available on the market to suddenly my local dealership in Richmond having three dozen bolts on the parking lot, all at one time, all being sold at fire sale prices.
- [11:23]
A
Wow. And these were all rental cars?
- [11:26]
B
Yeah, they're all rental cars. Yep. So if EVs are so great, why would Hertz be so anxious to get rid of them? The answer with the Chevy Bolt is the Chevy Bolt is a terrible rental car. It just makes no sense whatsoever. It's a great car, but it doesn't charge as fast as a Tesla. And if you're renting a car, do you really want to figure out how to charge it? For a lot of reasons, it doesn't make sense. And I could see why Hertz wanted to get out of this game and get out of it quickly. So we went to the Hertz dealership, and there they were. There were a whole bunch of them. We got to choose the One we wanted. We ultimately purchased a 2023 Chevy Bolt EUV with 14,000 miles and change on it for $20,840.
- [12:12]
A
Oh, my goodness.
- [12:13]
B
That did not include the $4,000 rebate that is available for some models. The reason why is to get that rebate, it has to be 2 years old. And we're going to go over those rebate numbers later in the episode. At that point, we had our first ev, we started driving it, and I'm falling in love with this. Within the first month or two, I'm realizing I never, ever want to buy another gas car ever again. So that brings up one of those first points is if you've only driven gas vehicles like I have for four decades, why the sudden switch? Gas vehicles are such an anachronism when you compare them to EVs. Think about it for just a moment. To propel a gas vehicle, you have to do the following. First thing you have to do is you have to pump a lot of liquid out of the ground. Then you take that liquid and you ship it to a place somewhere on one of the coasts where is refined into a different liquid. After it's refined into a different liquid, which, by the way, changes with the season, then that liquid has to be trucked to your local gas station, where you then pump anywhere from 15 to 30 gallons of highly flammable liquid into a tank underneath of your car. And then with a fuel pump, slowly but surely pump that liquid into a engine where controlled explosions create power that drive the wheels. Oh, and by the way, now that you have these controlled explosions, what are you going to do with the exhaust and what are you going to do with the heat? So you have to have a separate system just to manage the heat, your cooling system, and you have to have a separate system just to manage the exhaust, which is your exhaust system, which includes a very expensive catalytic converter, which is often stolen because of the rare metals involved with it. You would never, ever design this from scratch again, because with an ev, all you do is power the battery. The battery instantly provides torque to the wheels. Done. That's it.
- [14:19]
A
Okay.
- [14:20]
B
The one other very interesting thing about EVs compared to gas vehicles is that when you are going down the road at 70 mph in a gas vehicle, you have a lot of energy that has to somehow be contained to slow your car down. And what you do is you use a hydraulic braking system, which turns that energy into heat, and that heat dissipates. And eventually you have to replace brake rotors and brake Pads. With electric vehicles, when you let off the gas, the engine is what does the braking. And that excess energy is reconverted back into electricity and goes into your battery. Most people that drive EVs don't use the brake pedal at all or use it very, very sparingly such that while they also have hydraulic brakes, they're almost never used.
- [15:13]
A
Really?
- [15:14]
B
Yeah.
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A
Okay.
- [15:14]
B
Yeah. And that's something very different to get used to. When you drive an ev, you're using one pedal and one pedal only. And you know, I've been driving gas cars for 40 years and most of them were clutches. I was used to using three pedals, a clutch, a brake, and a gas pedal and some combination thereof. And once I realized, wait a minute, I only have to use one pedal, I don't ever want to go back to a clutch again.
- [15:37]
A
Yeah, that's interesting. So I've heard about this one pedal driving before and it doesn't intuitively make sense to me. I think this is what you said before. Like there are lots of things you didn't appreciate before owning one. And I know, like the way that I drive, I'm not exactly a hypermiler as it used to be called, but. But I try to get the best gas mileage I possibly can. So I'm always using the contours of the road. And this is on my regular internal combustion engine car. I'm always using the contours of the road to either gain some acceleration or really slow myself down. So I'm braking as infrequently as possible, actually using the pedal, but just letting sometimes hills slow me down as I'm approaching traffic lights and things like that. So that's just like a numbers geek having fun with driving. But you're describing this as an integral part of the actual driving experience on an ev.
- [16:25]
B
Yeah. And you know what? That fun game never goes away. And in fact, it gets better because one of the things that an EV does is it tells you exactly how much energy you're using in real time. Whereas with your gas powered vehicle you have an idea of what your miles per gallon are and you usually, you can do that math when you do your next fill up, you can do that hypermiling is if you want to use that phrase. And I'm very familiar with it and I did all the exact same things you did with that. And yeah, you gamify how efficient can I use this battery? It does make you drive like a grandma sometimes. But frankly, the way people drive today, driving like a grandma isn't Necessarily the worst thing. I trust zero drivers out there today. I just assume they're all looking at their phones.
- [17:11]
A
Yeah, no, that's certainly fair. And, and also the way you described traditional cars, there are so many parts, there are so many systems, there's so many things that can break constantly. Yeah, right. Like, I don't want to jump ahead of where you're going, but. But that just jumped off the page to me in terms of the way you're describing that versus, I'd be curious, like a side by side comparison of an internal combustion engine car with all these systems versus an EV and how that stacks up. So I don't know if that makes sense now, Chris, or if we, if we punt that for later in the episode.
- [17:43]
B
Well, I think we can tease a little bit of it out in that if you are in the FI world, and chances are you might have to bring up your 2013 Honda Civic. That Honda Civic would now be 12 years old going into 2025. And it's at the age where things are going to need to be replaced. Radiators, catalytic converters, exhaust systems, all these sorts of things, starters, alternators, things that after 12 years you would expect to start breaking. And these are all expensive repairs. And so one of the big selling points of EVs is there's just a lot less to break. They are much, much technologically simpler vehicles in that there are less parts, they are more technologically advanced while being simpler at the same time. The internal combustion engine car is a miracle of modern technology, but you would never build it again. It's amazing to me that Honda and Toyota and Mazda build cars that are so freaking reliable, but everything breaks over time. And there is a very, very lucrative market for fixing old cars because they're just going to break over time.
- [18:57]
A
Yeah. So, right. Just quickly, I've heard friends of mine who have EVs kind of flippantly say, and I don't know whether this is actually true or not, but flippantly say, like, oh, yeah, the only thing I'll ever need to replace are tires. Again, I don't know how much of that is true and how much is just boasting, but nevertheless, I suspect there's some truth to it.
- [19:14]
B
Anecdotally speaking, I know people that have never had to do anything outside of basic maintenance to their vehicle. And basic maintenance does not include brakes. There's just so little to go wrong on these vehicles. I think that for people who don't own an ev, the biggest point of concern is the battery, because the battery is several thousand dollars if you have to replace it, and that's going to be your most expensive repair. And now that the data is in, over the course of well over a decade now of vehicles being out there, Tesla launched in 2008. At this point, Tesla is now is entering its 17th year. So there are Teslas that have been on the road 10, 12, 14 years and they're discovering now that the batteries actually last a really long time. So when I'm reading in the comments section, when I do a ton of research on EVs, yes, you're right, people are pretty flippant about it. But the overall experience is there's just less stuff to break. It's a simpler car. You're going to be paying less for repairs over time. I think that's 100% true.
- [20:26]
A
Okay.
- [20:26]
B
You will, however, pay more for tires over time if you are heavy on the accelerator because these cars have so much torque compared to gas engines. That is easy to bark tires. It is easy to wear them out quicker. However, I found driving mine that I'm not seeing significantly different wear. If I drive it like a. I'm just going to say normal person, you know, don't launch from the line over and over and over. Yeah. If you want to spend more on tires, go ahead and do that. It is a very fun experience to hit the accelerator pedal on an EV and see just how quickly you lurch down the highway compared to your ice car.
- [21:08]
A
Chris is wild. I remember Brian Feroldi, who a lot of listeners will know quite well. He came to visit me here in Richmond one day and he had a Tesla and he's famously a Tesla stock owner and such. So he had a Tesla and I could not believe how fast that thing accelerated. It was just, it was extraordinary. I'd never seen anything like it when.
- [21:28]
B
We test drove one in 2022. My wife likes to drive a little more aggressively than I do. I'm just going to leave it there. And as we pulled onto the on ramp to get on the interstate, she hit the accelerator and she literally rocked my head back into the headrest. It was. I had not experienced that in a car before. It's. They are shockingly fun cars to drive. I think that's another thing that should be thrown out there for people who think, oh, EVs, they're this, they're this Sierra Club green choice and people like them and they don't have any pepper power or anything like that. The opposite is true. They are so much fun to drive and they they will beat a lot of cars off the line that have to, you know, first have those controlled explosions within an engine and then transfer the power to the tires. Whereas with an ev, it's just literally instantaneous.
- [22:22]
A
All right, because so you said before that now is the right time to buy an EV. And I'm curious, what's special about now, 2025 or even 2024, what's going on now that makes this the right time?
- [22:34]
B
Sure, the market has changed. That's the simple answer. Two key things have made it much more affordable to buy EVs now. The first being the Inflation Reduction act, which was passed by Congress in the still current administration for a little bit longer. That provides a significant discount on vehicles that qualify. So if you're buying a new car, you can get up to $7,500, which is now taken directly off the price of the car. You don't have to file paperwork for it. The dealership does it for you. Or $4,000 for a qualifying used car. At this point, there are enough EVs being sold that there is a large and robust used car market. And this, I think, is where the FI listener should be perking their ears up at this point. Because EVs and all cars at this point are still very, very expensive cars to buy. The average cost of any vehicle to own is now close to $40,000. Wow. But oddly enough, electric vehicles have depreciated faster than ICE vehicles. And because of that, they are very affordable now. And if you can get one that's under $25,000, which makes it qualify for the $4,000 rebate. If you check a few other boxes, you can now get into an EV for 15, 18, 20, $22,000. That makes it much more appealing to somebody looking to replace a car.
- [24:09]
A
Thanks for listening to Choose a Phi and for all your support of our mission here. The absolute best way to support Choose a Buy is when you sign up for your next rewards credit card to use our cards page at choose a buy.com cards. I keep this page constantly updated, so it should always be the top resource for you. Thanks for being part of our community and for your support.
- [24:30]
B
So I mentioned used cars are much more affordable now. The reason why used cars are much more affordable now in one respect is there's just a lot more of them out there. A lot of EVs were leased. And when those cars come off of lease, guess what happens? They go to the used market. And if there are too many of them at one time, prices end up deflating almost 7% of all American cars on the road now are EVs. And this is according to Edmunds.com that means that 1 in 14 cars on the road are an EV. And that's just. We've reached that point where it's hit critical mass, where an EV is no longer an oddity that you see now and then you're seeing them all over the place and there, I think the marketplace is just coming into play now. I would say that's the big reason why cars are becoming a lot more affordable now.
- [25:22]
A
That makes sense. And also, like you said, companies like Hertz who really over invested in, I guess their estimation now overinvested in EVs, they've had a absolute glut of these on the market. I know. I actually, at your insistence, I went down to the Hertz in Richmond here and visited because I actually ultimately wound up purchasing a 2020 Hyundai Elantra, so a regular internal combustion engine car and got a great price on it, frankly. But I saw a couple dozen Teslas there and I remember speaking with the agent who said if I never see another Tesla, it'll be too soon. And it wasn't that she hated Teslas, it was just they had so many of them because, I mean, they spent at least my understanding, hundreds of millions of dollars, if not more, on Teslas. And like you said earlier, really people who are. It was a bad bet, frankly, because it just was misunderstanding the rental market. People who are flying into a new city and maybe have never used an electric vehicle, and maybe we could talk about this either now or later in the episode, but don't want to have to learn how to drive an entirely new thing. They don't want to learn how to charge it or try to find a charging station. Like when somebody's renting, you want as little friction as humanly possible. Like it's even, frankly, sometimes too much friction to fill up your silly gas tank because it's like, oh no, I'm on, on the way back to the airport, where am I going to find a gas station? Like, that's the friction, not less. Oh man, I've got to charge this stupid thing and figure out how to do it. So that was just frankly a terrible bet by Hertz and obviously they lost hundreds of millions of dollars, if not more. But on the upside, it helped out people like you who were able to purchase one or more of these vehicles from Hertz, which is a pretty nice little side benefit for you.
- [27:08]
B
Yeah, I agree with your analysis 100% and the reason why I agree with it is because you could go to the Hertz website and see how many vehicles were available and the bolts flew off of their shelves. And the Teslas weren't far behind it. They simply had more Teslas to sell than bolts because they invested even heavier into that. And I agree with you, when you're renting a car, you don't want to learn how to drive it. I think you described that perfectly. And yes, that threw a ton of vehicles into the rental market as well. And honestly, the simple economics of owning a car are if you walk into a dealership and you buy or lease a vehicle, let's say you're going to buy an EV and you buy it for $50,000 when you walk off the lot, what is it worth? It's worth whatever you can sell it.
- [28:00]
A
For at that point, whatever the market will be.
- [28:04]
B
There's just a simple element to it. It doesn't matter that you paid 50,000 for it. I'm not going to pay 50,000 for it used. And when it's three years old, well, all right, I'm willing to give you 24,000 for it. So I think it's very similar to all car depreciation. They lose value and they lose value fast in the first three or four years. I will note that the depreciation really tails off after three or four years. Three or four years is the sweet spot because a six year old EV isn't going to be that much better than a 4 year old EV as far as price goes. A 4 year old EV that you might get for let's say $22,000, that 6 year old EV might be 18 or $19,000 and it's just not as appealing at that point.
- [28:49]
A
Gotcha. Are there. I know I'm jumping around, but there's so many interesting things. People who would be maybe wary of purchasing a UZV because they've made up something in their head about the battery life. Or maybe the person who owned it before me didn't charge a ride or something Like I'm thinking of every excuse in the book. Like are there legitimate reasons to not want to purchase a UZV as compared to a used internal combustion engine car. Or is it in your estimation, is it fairly similar?
- [29:18]
B
I think it's fairly similar. All the reasons why you would not want to purchase a used vehicle, electric versus ice, are exactly the same. It's hard to know if your car has been dogged by the person who owned it before you. When we bought our 2021 Tesla earlier this year. It had 51,000 miles on it. It had one owner, and we hope that owner treated it well. It certainly looks good. It's a beautiful car. We've had no problems with it after the first three months of ownership, and I have no reason to expect that we will. But, yeah, you're buying a car that somebody got rid of for a reason, and so that's always going to be in the back of your head. And I think I would answer your question with, if this is the sort of thing that is going to keep you from buying a used vehicle, maybe you're not the kind of person who's going to buy a used vehicle to begin with.
- [30:09]
A
Yeah, I mean, that's totally fair. And to be frank, I was cautious in terms of buying a car that used to be a rental car. Granted, I bought a, like I said, a Hyundai Elantra that's a standard internal combustion engine car. But this thing was a rental car with 60,000 miles on it. And it had a stain or two in it. It had a little maybe a smell that wasn't exactly perfect. So maybe somebody smoked in there at some point over 60,000 miles. And obviously I got a great price on it. But clearly it was in the back of my mind that I don't know what happened to this. When people get rental cars, it's not like they treat it lovingly and beautifully. So I think any type of used car purchase is a risk on some level, but it has to just be a calculated risk in terms of, hey, what's the cost of this thing versus the potential value? I know I got this thing for. I think it was only like $12,000, Chris, which was fantastic. I was thrilled with that. It's vastly better than any car I've had. But frankly, it was a gamble. There's no question about it. But what's the worst that happened? I figured, I mean, we're talking $12,000. It's not like the residual value would be zero even if it was a lemon. So anyway, that's just a little bit more about my buying experience, but I think it's illustrative of, of the mindset of, hey, this is not just an EV thing. Because I know a lot of people are cautious about buying used EVs, so that's why I wanted to paint the picture of this.
- [31:30]
B
Right. And, you know, I. I think we have to address the elephant in the room. And I mean that both literally and figuratively, EVs have been politicized for better or worse. And for anyone considering an ev, my sage advice is please, please, please check your politics at the door. When it comes to EVs, these cars should not have been politicized. And yet they have been. So I think that would be a good time to talk about some of the legitimate concerns that have been brought up about EVs and maybe mention one or two of the concerns that aren't nearly as legitimate. I'm going to address the things that as an EV owner are not great about owning a vehicle. The first thing I'm going to start with is if you own an ev, the tires are going to wear out a lot quicker if you're hard on the accelerator. So one thing that EV owners do complain about is, wow, I had to replace my tires at 15 or 20,000 miles and that was a fourteen hundred dollar investment that I had to put in the car. Don't drive with a lead foot. That's, that's to the FI audience. Don't drive with a lead foot. This problem is not going to be an issue for you. Or alternately, don't buy a Ford F150 Lightning that weighs, you know, thousands and thousands and thousands of pounds that are going to be very hard on tires to begin with and also are going to have very large tires. So I just don't see the scenario for a FI listener that a Lightning is ever going to make sense if you're building towards your FI goal. The other things that are real detriments for owning an EV is cold weather. EVs perform significantly worse in cold weather when it comes to fuel efficiency. And of course the fuel we're talking about here is the electricity in warm weather. In my Chevy bolt, I get approximately 4.5 miles per kilowatt hour. And we're going to spend a little bit of time teasing out what the actual costs are about EVs, but start from there. 4.5 miles per kilowatt hour. We've had a very cold January in Virginia, which I know is, you know, the top of the South. Virginia is not cold by New England or Midwest standards at all. And in recent days I am now getting 2.8 miles per kilowatt hour. So it's a huge hit. So when it comes to what your fuel efficiency looks like in an evidence, you really need to measure it over the course of a year. So people that are the evangelists that are making it seem better than it should be are saying, yeah, I'm getting 5 miles per kilowatt hour. Well, yes, I get that too. When the weather is perfect, and the weather is often perfect around here, and it's a lot cheaper to cool your car than to heat your car. Okay, but over the course of the year, that's all going to average out and we'll get into what those numbers look like. And it's still a lot cheaper than gasoline. Just a lot cheaper than gasoline. But the critics are correct. In the winter, it's not nearly as appealing. So if you live in Minnesota, you do need to factor that in. You may pay higher local property taxes on your EV as well. One of the costs that are baked into owning a gasoline powered vehicle is that road maintenance is often paid for via gasoline taxes. If you own an ev, guess what, you are not paying to maintain the roads via a gas tax. So the way that localities claw that back is they lift the local property taxes on your ev. It's a supplemental charge that can be a bit of a shock. It's like, wait a minute, why am I paying extra property tax for the privilege of owning an ev? Well, because you have to do your share to help maintain the roads as well. So that's a legitimate cost as well. And in a vacuum, all by itself looks like, oh, yeah, this is a terrible deal. It's still not a terrible deal. Road trips, road trips are definitely challenging in an ev if you don't think about it, how you're going to do it. If you own a Tesla, which is what the majority of EV owners do have, they dominated the marketplace for years and years. The Tesla supercharger network is amazing. And you can get your car back on the road in under a half an hour and go for another two or three hours and you will be just fine. If you have other vehicles like a Chevy bolt, you are going to be a little more challenged in that space. So you do have to think about that, and that's a big sticking point for people is, wait a minute, I can't drive my bolt down to Florida efficiently. That's 100% true. Okay. I would also add, how many times do I drive my bolt down to Florida? I have never driven to Florida, but my wife has driven a couple of times. And, you know, road trips are a consideration and you do need to factor that in. I would note that the vast majority of people are driving around town. And the last thing I want to talk about, which is not a minus, is the battery. We've already talked about this to a certain extent, but if you are of a certain political bent, you will emphasize that the battery is going to Wear out, and it's going to cost you thousands and thousands of dollars. And it's actually not economical at all to buy an ev. And as somebody who's driven by dollars and cents, that was something I needed to appreciate and research and see if there was much truth to it.
- [36:57]
A
Okay.
- [36:58]
B
And now that the EV industry is mature, there's just not much truth to it. It really isn't. That should not be a consideration when looking at a ev.
- [37:07]
A
So question about that, though. So battery technology is consistently getting better. And this is just off the top of my head, kind of off the wall thing, but let's say you have your Tesla 3, and because we talked about there's not a lot of moving parts in said vehicle, and let's say we're 10 years from now, right? It's 2035, and the battery technology is wonderful. Is it conceivable. You talked about replacing the battery. Right. So, hey, if something goes wrong, it's a few thousand dollars, whatever it may be. Is it conceivable that 10 years from now you could just take that same shell of a car and put the current battery technology into it, or is that just not even remotely conceivable?
- [37:48]
B
I think I would rephrase it to say that in 10 years from now, when my car will be 14 years old and should still be quite serviceable, if the battery needs to be replaced, which I doubt it will be, it will have degraded some, which simply means it doesn't have as much range as it did. If the battery needs to be replaced, you simply swap out the battery and it's going to be a whole lot cheaper. Because with all technologies, as we've seen over and over and over, they just get cheaper and better over time. This is where the political conversation really falls apart. If you're betting against technology, you're making a losing bet over and over and over again.
- [38:29]
A
That's certainly fair, and we've seen that over the last many decades at this point. So, yeah, the march of progress moves on. I think that's pretty clear.
- [38:37]
B
Yeah, solar and wind were never going to be affordable until they were.
- [38:41]
A
Yeah, no, that's fair.
- [38:42]
B
Okay. At this point now, I think I want to transfer over to the discussion that revolves around, is an EV right for you? Because I'm sure a lot of your listeners are thinking, okay, this is all great, but should I get an ev? All right, let's talk about why you would want to and why you would not want to, because there are good arguments on both sides. Here's the Reason why an EV is right for you. As we mentioned before, we have now reached the phase of the market where we have transitioned from early adopters to easy adopters. And because 7% of all cars now in America are EVs, there is a lot of cars out there. Prices are slowly but surely coming down. The IRA is currently in place right now, and hopefully within the next administration is not going to be going anywhere. It's going to be a heavy lift for the next administration to roll it back because it was a law that was passed. That means it's going to have to go through Congress or a lot of hoops are going to have to be jumped through. So those rebates should still be in place. And there are a lot of used EVs on the market that have depreciated a lot. The next reason why you would want to consider an EV is the total cost of ownership is going to be a lot less over time than an ICE car. You can go ahead and do your own research. As long as you go to reliable sources over and over and over. The verdict is in. It's just cheaper to own an EV over time than an ice. The biggest reason why it's cheaper to own an electric vehicle is because the fuel is so much cheaper. Here's the caveat. The fuel is so much cheaper when you charge from home. If you can't charge from home, everything goes out the window at that point. If you go to a public charger, you are going to pay anywhere from two times to four times or more the cost of electricity.
- [40:41]
A
Wow.
- [40:42]
B
To power your car up. And I'm going to give you a couple of relevant examples. In the state of Virginia, electricity is about 15 cents per kilowatt hour. If you go to a Tesla Supercharger station, you are going to pay 37 or 38 cents a kilowatt hour locally. And if you go to one of their competitors, one that opened up near me, they're charging 54 cents per kilowatt hour.
- [41:07]
A
Wow.
- [41:07]
B
15 cents per kilowatt hour. 54 cents per kilowatt hour. Critics of EVs say that if you're paying 45 cents per kilowatt hour to charge your car, you're not saving any money at all versus gas. And they're 100% right.
- [41:20]
A
So, right, you said 45 cents per kilowatt hour, but is there a break even? Because undoubtedly electricity costs different amounts. So you're saying roughly 15 cents is your home cost here in Virginia, but obviously electricity costs different amounts at home in different parts of the country. Is there some break even line that you've contemplated or is it just a back of the envelope thing?
- [41:42]
B
Well, I have looked at that. So yes, you're right. Electricity costs are different all over the country with a low of approximately 11 to 12 cents per kilowatt hour, with a high closer to 40 cents per kilowatt hour. Electricity is most expensive in the Northeast where it's about 25 cents per kilowatt hour, and in California where it's roughly 38 cents per kilowatt hour. So I was saying that if you go to a Tesla supercharger in the Richmond area, you're paying $0.38 per kilowatt hour. But in California electricity is $0.38 per Kilowatt hour. Here's the difference. Gasoline is much more expensive in California than it is in Virginia. Everything's more expensive in California.
- [42:22]
A
That's a great point. So. Right. It would be naive to just say, oh, the electricity costs more. So therefore that's the only, the only factor, the only variable. And that's obviously not the case. So you have to, you have to look at both sides of it.
- [42:34]
B
Yeah. But you do have to do your math. So are you ready for a little math?
- [42:37]
A
Let's do it.
- [42:38]
B
Okay. One of the things that has been pushed to people is the mile per gallon equivalent of electric vehicles. Unfortunately, it does doesn't work nearly that well because there are too many variables in both the gasoline side and the electric side to consider. So we'll start with the obvious one, gasoline. You pay X amount of money per gallon and you get roughly the same gas mileage in your car. A little bit less in the city and a little bit more in the highway. So let's say right now the national average is about $3 per gallon. And if you're getting 25 miles per gallon from your vehicle, then it is $3 to drive 25 miles. Or another way of putting it, it costs a dollar to drive just over eight miles. So your trip up to the store and back, let's say it's eight miles, you know, that's a dollar. Yep, that's pretty easy to get your arms around. With electric vehicles, there are these variables to consider. One, how much are you paying for electricity? And that's the big, like we said, the swing is huge. If you're charging at home, you should know how much you're paying per kilowatt hour. The easiest way to do that is to look at your electrical bill, see how many kilowatt hours you bought or consumed. Over the last month. Divide it by your monthly bill and there you go. Like I said, in Virginia, it's going to average about 15 cents per kilowatt hour. And it's going to be different in different areas. There you go. It's 15 cents per kilowatt hour in Virginia. Now, you need to know how efficiently you're driving your car. We talked about that earlier. In spring, I'm getting almost 5 miles per kilowatt hour, whereas in the winter I'm getting closer to 3. So we're going to split the difference because that's about what I've been getting. I have the odometers in these electric vehicles will tell you how well you've done over time. And I get 4.2 miles per kilowatt hour in my bolt as long as I've owned it. But I haven't gone through a full winner yet. So we're just going to call it 4.4miles per kilowatt hour. So that means for 15 cents I can go 4 miles and for 30 cents I can go 8 miles. Now, remember the gas equivalent where we said it cost a dollar to go eight miles?
- [45:01]
A
Yeah.
- [45:02]
B
Now I'm paying 30 cents to go eight miles. If you're charging at home, my costs are one third of what it costs to use a gasoline car. And I can tell you that Robin and I, we are both fully fi at this point. We don't have full time jobs, so we are not commuting back and forth to work. But I will tell you, we're super active people. And we were still managing to spend about $300 a month on gasoline because our house is central to the Richmond area, but close to absolutely nothing. We're in this diamond in the rough neighborhood that we absolutely love, but we have to drive everywhere to do anything we want to do. So we just put a lot of miles on our vehicles.
- [45:45]
A
Yeah. And Chris, just to slow down there for a second. So when you were doing the analysis, you were saying for guests, it's maybe roughly now $3 per gallon. We're figuring 25 miles per gallon. That came out to about 12 cents per mile. So I just did the quick math and said, okay, you're going to have this car for 100,000 miles, which I think frankly most people in the FI community are going to have for longer, but we'll take 100,000 miles times 12 cents. So that's about $12,000 in gas.
- [46:10]
B
Yeah.
- [46:10]
A
Right. Now you said yours is about one third of that. It might even be a little bit less. Frankly, but we'll say a third. So that means over a comparable 100,000 miles, you're saving $8,000.
- [46:23]
B
Yeah.
- [46:24]
A
In gas versus the electricity that you're selling. So when you talk about the overall cost of ownership, I think that's the picture that I hope people leave here with. And obviously we're nowhere near done, but it's. Well, now, especially with these used vehicles, the price of purchasing has come down. So it's no longer the 50,000. It's much more in range and maybe even cheaper, frankly, than buying certainly a new car, even a Honda Civic. I went in and it was like $26,000. I couldn't believe it. But like we talked about, there aren't that many parts that break. Maybe the tires are a little more expensive. But you're also then saving. If we're figuring back in the envelope, $8,000 in gas costs per 100,000 miles. So you're starting to understand, and let's be clear, I am not an evangelist at all. So I'm, I'm coming in with a very skeptical mind. But I'm also a math person, so I'm seeing the picture here. So it's making a whole lot of sense to me.
- [47:16]
B
Yeah. And I had to be converted to it. I mean, just, you know, to put that out there. I, you know, I drove gas cars for 40 years. You would not describe me as somebody who is. Loves EVs just because I love the technology. I'm really driven by dollars and cents, mostly. At the end of the day, it's just my Scottish roots. It's just part of who I am. So I cannot emphasize this too many times. This is if you are charging at home, that's where you're going to get that $8,000. If you are not charging at home, that number is going to be a lot less. It will still be better than filling up at the gas station. And frankly, right now, $3 per gallon for gasoline is low compared to recent years. One good thing about electricity is it's not volatile. Electricity costs are very, very stable, whereas gas can go all over the place. It's $3 today, but in three months it could be right back to $4. It would take very little in the world to get gas right back to $4 a gallon. Sure.
- [48:13]
A
No, that's totally fair and right. Again, just to fill in the math on this, we're saying In Virginia it's 38 cents per kilowatt hour at a Tesla supercharger. So we just figured the math is simply at $0.15 per kilowatt hour. It's about one third of the equivalent gas cost, but at 45 cents, so tripling that, it's comparable. So you're getting essentially no savings on the gas at 45 cents per. So even the Tesla supercharger would save you a little bit. You'd save a little less than 20%. But nevertheless, that's nowhere near the massive, massive 2/3 or even more 70% savings that you're talking about.
- [48:50]
B
Yeah, it's not a very compelling economic argument for an EV at that point. So if someone were to ask me, chris, should I buy an ev? My very first question is, can you charge at home? And if their answer is no, I'm going to be asking them to take a big step back and say, all right, well, why are you getting into an ev? Because now you're going to have to use public chargers and the savings, while still there aren't going to be nearly as high as they used to be.
- [49:15]
A
Right. Also the convenience. Right. Of having to go out and charge it elsewhere. So that's. That's not insignificant as well.
- [49:22]
B
Yeah, exactly. So now that we've talked about some of the negatives of getting into an ev, let's talk about some of those positives of owning an ev. Why you would want to at this point. I've already mentioned some things about the EV experience that just make it a technologically better, more fun, sounder option. The instant acceleration, the regenerative braking that puts energy back into your engine. They are super quiet. I haven't talked about just how quiet these things are. It's just nicer to drive. You don't go to gas stations if you're charging at home. That's one of the things you never have to deal with if you're charging at home. You park your car, you plug it in, which takes literally 10 seconds, and you always have a quote, unquote, full tank of gas to start the day. You should almost always be at maximum mileage or close to it if you're driving normally. Also, there are other things that are associated with owning an ice car that you don't have to deal with. You don't have to do oil changes. There's no exhaust system. There are almost no brake jobs. There is more routine maintenance that you are going to do through the dealership, through an independent repair place, through a Jiffy Lube that you just don't have to deal with with an ev. They're just simpler to own.
- [50:42]
A
And, Chris, like you mentioned, it is fun technology, too. Right. Like again, I'm not a, I'm not a massive Elon Musk fanboy, but you sit in a Tesla. And I know I've driven in in a couple recently when I was out in, in Phoenix. I know Pete, Mr. Money Mustache has one and drove us around. And it's just cool technology. I mean, seeing the big screen and just the self driving part of the self driving is interesting too. That might not be exactly ready for primetime, but. But it's pretty darn cool. And there's just a lot of neat things that make it a whole lot more fun than a traditional car. So that's a very amateur way of looking at it, but it does seem like a fun car.
- [51:21]
B
They are. They're just super fun cars. I'm not really a car guy. I mean, I've always had cars because I've needed to have cars. And like I said, we've had seven different Mazdas in our family. And usually when we got rid of the Mazda was because, well, it was 19 years old and it was at the end of life at that point. We drive them until we donate them to the local public radio station. Cars are utilitarian and practical for me, but I have had more fun in these EVs than I've had in any car since I started driving back in the mid-80s. So I did mention charging at home. And there are a lot of questions about charging from home and charging in general with EVs. And I want to take a minute to explain that because a lot of people don't understand. Okay, I know I have to charge the battery, but how do I actually do that? So there are three ways that someone typically charges their car. One we've already discussed is going to a supercharger and charging your battery relatively quickly for more money than you would might want to pay. If you're in the FI world. If you're charging at home, you're either going to use something that's called level one charging or level two charging. Level one charging is literally plugging a three prong outlet into a socket and then plugging your car in.
- [52:41]
A
Okay.
- [52:41]
B
And one of the things that detractors of EVs like to hit on is how incredibly slow that is to recharge your car. When you plug in using Level 1 charging, you're either going to recharge at 8amps or 12amps, and this is depending on whether you've plugged into a 15amp circuit or a 20amp circuit. So when we charge at home, we actually have two EVs now, and we use level one charging. And one car is plugged into a 15amp circuit and one is plugged into a 20amp circuit. So we are able to plug both of our cars simultaneously. I will point out they are on different circuits. You cannot put two Level one cars on the same circuit. You will absolutely blow the circuit. Okay, three and a half miles per hour is not a lot of miles. But I will point out that if your car is parked in the driveway from 8pm to 8am well, let's just do a little math, because that's what five people do. Eight times three and a half is 32 miles. And 32 miles is a lot of driving. For some people. 32 miles may be their daily commute. 32 miles may be less than what they typically use. How do you know if that's right for you? If you've been driving for a long time now, you probably have a good idea of how many miles you put on your vehicle per year. I typically put 12,000 to 15,000 miles on my car every year. So let's just do 12,000 because that's easy math. It's 1,000 miles per month. If I'm getting 32 miles at three and a half miles per hour, which is just overnight charging 30 days in a month times 32, guess what? I'm right at 1,000 miles.
- [54:25]
A
Okay.
- [54:26]
B
Robin and I are using level one chargers. And I have never used the bolt at a public charger as long as I've own it. And I've never had a problem with mileage. I've never come close to draining the battery. It's usually at least half full most days. It starts off at 100% full because, you know, I say parked 12 hours, if your car is in the driveway, it should be plugged in. One of the tenets of EV ownership is when you're charging at home, you follow the principle of abc. Always be charging.
- [54:58]
A
Okay. Now is that only if you have a Level one. We'll talk about level two in a second. But is this exclusively for people who have Level one, or is it Level two as well?
- [55:07]
B
It can be true for Level two as well, because once your car is charged, it doesn't keep on charging. It knows when to cut itself off.
- [55:13]
A
Okay, very cool. That's information I didn't have.
- [55:16]
B
Come back to how much you charge a battery, and we'll come back to that. A Level 2 charger is an additional cost that detractors of EVs like to point out. To install a Level 2 charger in your home is going to be approximately $500 to $2,000, depending on how much wiring you already have, what kind of charger you put in. But I say the fair estimate is about $1,500. I'm like, well, shoot, $1,500. You know, we talked about saving $8,000 over the cost of gas. Well, I just gave 1,500 of it back putting in this charger. Now I'm down to 6,500. It's not as attractive as it used to be. Again, this is the Scott and me coming out. You know, I'm now crunching the numbers hard. This is why we don't own a level two charger. We don't need a level two charger. But level two chargers are wonderful. With a level two charger, you will completely charge your car overnight. Instead of getting 30 miles back, you are going to get back a couple of hundred miles. And, you know, you're just in great shape. If you own a level 2 charger, you have the luxury of my quote, unquote, fuel tank is always full when I pull out of the driveway. So they're very, very nice to have. And most people that have EVs do install a Level 2 charger. And places that sell electric vehicles push Level 2 chargers, not because it's a profit center, but because they don't want pushback from customers that say, oh, charging this thing is so horrible. Just spend the $1500, put in your level 2 charger, here's the car to the person who does it. They'll come out, and it's an easy button, and they're 100% right. You will love having a level two charger. But if you are in the FI community and that $1500 matters to you and you don't need a level two charger, maybe you don't install a level two charger. And I would say that's the exception to the rule. But I would also say that FI listeners are the exception to the rule. We're all about the exception to the rule. Every rule deserves to be challenged.
- [57:14]
A
Yeah, indeed.
- [57:16]
B
So coming back to charging your car up, one thing that is not advertised and should be is how far your car can travel on a fully charged battery. The reason why I say that is because best practices across all car manufacturers are to not charge your battery to 100%. It's not like an iPhone or an iPad, where you always charge back up to 100%. That's actually not great for the longevity of the Battery, you can do it, but you're going to limit the life of the battery somewhat. It will degrade a little more quickly over time. You should be charging your battery to 80% overnight, so that needs to be factored in. So my Chevy bolt, in good weather can drive about 260 miles on a full quote unquote tank. But the reality is it has a capacity of about 210 miles in good weather based on the fact that you charge this up to 80%. So buyers should know that going in. When the electric vehicle manufacturers advertise their vehicles and they say, we have a range of 300 miles, you should be knocking 20% off of that because you're going to be charging to 80%. So if someone says 300 miles, it's really 240 miles.
- [58:35]
A
Got it.
- [58:35]
B
If someone says 200 miles, it's really 160 miles.
- [58:39]
A
That makes sense. Now, I know a lot of people have range anxiety when it comes to road trips. Is it okay to charge it and have the anticipation of that full range to 100% when you're thinking about a road trip?
- [58:52]
B
Oh, right. That's a fantastic question. You should have no problems occasionally charging your battery to 100%. So before you start on your road trip, and I do this all the time, if I know I'm going to be putting a ton of miles on the vehicle, I will charge it to 100%. So there are occasions when I will drive from Richmond to Baltimore, which is about 170 miles, and I'll take the bolt and I'll charge it to 100%, which gives me about, you know, 250, and I know I'm going to get to Baltimore with about 80 miles to spare. So, yes, you can do that. Here's one thing that people should also know about charging your batteries. When you're using a fast charger or even when you're charging at home, it is very quick to charge up to 80%, but it is not quick at all to charge from 80 to 100%. The time it takes to charge the battery drops precipitously. To get that last little bit of 20% takes an optimization from the car that simply takes more time to process. So if you're at a public charger, the recommendation is always recharge to 80% and then go down the road, because that will be your quickest charge. In a Tesla, you can typically take your car to 80% in about 20 minutes. And those superchargers, they are often at, at least in the Virginia area, at the most popular convenience stores, Wawa Sheets, Royal Farms, that sort of thing. Where. Well, I was hungry anyway. I needed to use the bathroom. Anyway. Taking a 20 minute break is no big deal.
- [60:25]
A
Yeah, I hear you. And I think anybody who's familiar with their cell phone battery, I know you mentioned before that you should always charge it to 100%. I suspect there's some people who are, who are questioning that, but I'm not sure the precise best practice. But I think the important part is anybody who's familiar with their cell phone battery knows it rapidly charges to 80% and then the amount from 80 to 100, it takes dramatically longer per percent. At least that's anecdotally. I've seen that across multiple, multiple phones. So I'm fairly confident that that's true. So it seems to be very similar in that regard, at least conceptually to understand.
- [60:59]
B
Right. And I didn't want to imply that charging your phone to 100% is what you should be doing. I just know that's what most people end up doing because it actually takes work to change it to something else.
- [61:10]
A
Agreed. Totally agree. All right, so keep going with best practices.
- [61:13]
B
Oh, one last thing. People don't hang onto their cell phones for 15 years.
- [61:17]
A
That is very true.
- [61:18]
B
So who cares if the battery degrades quicker in an iPhone? You're only going to have the thing four or five years anyway. Great point. So at this point we've talked about whether buying an EV makes sense or not. And I would wager that some people are thinking now, yeah, an EV probably does make sense for me. And I would also wager that most of the people listening to this podcast are going to be conscious of the money they are spending. If you are a wealthy person and can afford an F150 Lightning, by all means, knock yourself out. You didn't need me to tell you that's a good purchase for you. But for everybody else where dollars and cents makes a difference, my hearty recommendation is to get into a used vehicle because that depreciation hit is so steep over the first three or four years that if an EV gets under $25,000 and it qualifies for the used clean vehicle credit from the IRS, then you will get an additional $4,000 off the price of the car. And I think I mentioned that we own a Tesla and we bought a Tesla that was right under $25,000. The dealership who did that did that on purpose. We bought ours for 24,900, we got $4,000 off, and then with taxes and everything. We walked out the door with a 2021 Tesla for $22,000.
- [62:39]
A
Wow.
- [62:39]
B
$4,000 off is 16% off of the cost of the car if you're buying it at the very top end. If you're buying a car for $20,000, 4,000 off is 20% off the cost of the car. It's really just $4,000 at the end of the day. But it sounds better when you say 20% than 60%. But $4,000 is $4,000. Let's take a moment to dive into the fine print and I'm going to read from the IRS website about the used Clean vehicle credit. So these are their words exactly. Beginning January 1, 2023, if you buy a qualified used vehicle or fuel cell vehicle from a licensed dealer for $25,000 or less, you may be eligible for a used clean vehicle tax credit. The credit equals 30% of the sale price up to a maximum credit of $4,000. If you do not transfer the credit, it is non refundable when you file your taxes, so you can't get back more on the credit than you owe in taxes. You can't apply any excess credit to future tax years. At the time of sale, a seller must give you information about your vehicle's qualifications. Sellers must also register online and report the same information to the irs. If they don't, your vehicle won't be eligible for the credit. Purchases made before 2023 don't qualify. Who qualifies? This is the good part. You may qualify for a credit for buying a previously owned qualified plug in electric vehicle or fuel cell vehicle, including cars and light trucks, under Internal revenue code section 25E. To qualify, you must be an individual who bought the vehicle for use and not for resale, not be the original owner not be claimed as a dependent on another person's tax return not have claimed another used clean vehicle credit in the three years before the purchase date. In addition, your modified adjusted gross income may not exceed $150,000 for married filing jointly or a surviving spouse, $112,500 for heads of households, $75,000 for all other filers. You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. If your income is below the threshold for one of the two years you can claim the credit.
- [65:12]
A
That's really, really interesting. So it's modified adjusted gross income so that you can just get it as a line item off your 1040. And it's cool that you have Some certainty, because you can look at the prior year as well, because you don't know precisely what your modified adjusted gross income is going to be for the current year until you file the tax return, Most likely by April 15th of the following year. So that's a cool provision in that, that it gives you some certainty.
- [65:37]
B
Right. And there was a lot of words in there. And I think the key points are the car needs to be at least 2 years old. My Chevy Bolt, which was a 2023, didn't qualify because it wasn't old enough. But now that we're in 2025, a Chevy Bolt could qualify. You also need to go to the IRS website and see which vehicles do qualify. But here's the simpler way. If you're buying a car from a dealership, they are going to list whether the car qualifies for the credit or not. Whether you qualify for the credit, the dealership isn't going to have that information. They don't know what your adjusted gross income is, but they can tell you if the car qualifies for the credit. So when we bought our Tesla, we bought it from a dealership that only does electric vehicles. And right on the website was this car qualifies. The other interesting thing is if you're going to buy one of these vehicles used, you should buy it from a dealership that will do the paperwork for you. I did not have to go through any hoops other than sitting in the dealership for an extra 15 minutes giving them information to get that $4,000. It was taken off the price of the car. And that's an easy button built into the Inflation Reduction act that has made it super compelling to get an EV now. And if you remember, when I started reading off from the IRS website, it said beginning January 1, 2023. That's why buying an EV now is compelling, because that 16 or 20% off, that wasn't available in 2022. And used car prices were through the roof during the pandemic in 2021 and 2022, when you could get an enormous amount of money for a used car. But now used cars are a lot cheaper. The pandemic has passed and the law has gone into effect, but you do need to pay attention to AGI and do you qualify or not? Gotcha.
- [67:30]
A
Okay, that makes sense. And right. It's modified adjusted gross income.
- [67:34]
B
Yeah. Okay, so to wrap all of this up as a choose fi listener, is an EV right for you? I would argue that if you were already in the market for a car and you were considering an EV for any number of reasons. Getting into a used ev, especially if you qualify for the tax credit, really does bring the cost down to a point where it makes it a good option, especially because your total cost of ownership is going to be a lot lower over time. If you're not a road warrior, if you drive 15,000 miles or less per year, you can probably get away with level one charging at home with maybe the occasional quick charge, and maybe not at all. And my last thought regarding that is, buyer beware. If you buy an ev, you're never going to want to go back to a gas car. I can almost promise you that.
- [68:25]
A
It is a very compelling case, Chris. And, you know, I think, I think for me, I'm almost there. And I think that's actually, frankly, part of why I purchased such an inexpensive car for this kind of intermediate time where I feel like I could be convinced. And I suspect you're doing a pretty good job of convincing me that an electric vehicle is maybe my next car. But, yeah, I couldn't exactly get there in 2024 just based on some very particular things going on in my life. But nevertheless, it is really compelling. And I understand, and I think the people in the FI community are smart enough to understand the total cost of ownership. And I think that's really an interesting thing. Not to mention that, like, we're talking about, many of these used cars are just frankly cheaper, especially with this credit, than comparable internal combustion engine cars. So it's not even a question of, oh, will I make up the difference. It's, hey, there might not even be an upfront difference. And like we talked about, you could be spending 30% of the energy costs and dramatically less in terms of upkeep and maintenance. And oil change, all the foregone oil changes and, you know, all the, the fluids and this and, you know, like the timing belt. You think about, like, these things that you had to do on a car for five to $700, and you never know when the darn thing is going to break. There's none of that.
- [69:45]
B
Oh, yeah, there's no timing belt. We didn't mention that at all. But, you know, you really hit on a good point, Brad. It doesn't make sense for you right now. I have a buddy that would love, love, love to buy an EV right now, but he lives in a condo, and because he lives in a condo, he can't charge at home. And because he can't charge at home, my counsel to him is until they install an EV charging station, don't buy one. I mean I love the cars, but it needs to be a good fit and every listener should really be they should be doing the math on this. If it's fits well from the math side and it can fit well from a number of other sides as well. But if you're trying to get to fi and you're thinking does an EV work for me, take into consideration what the total cost of ownership is going to be starting with. Can you charge from home? If you can't charge from home, I'm going to have a tough time making that sell.
- [70:36]
A
Agreed. Chris, thank you so much for coming on. Thanks for all this analysis. I know you wrote a five page outline here which we pretty much touched on probably 95 to 100% of it and it's, it's really helpful. I suspect a lot of people are going to have questions. So obviously we have our main Facebook group, but really the best way for you to send in a question is just go to Choose a Com feedback and we have our new feedback page there. And Chris, almost undoubtedly we'll do a follow up to this with questions that people have because I'm sure they're going to come pouring in. So yeah, if you have a question, choose a vi.com feedback and we will definitely make a real strong effort to have a follow up episode because I think this is important. I think this is really top of mind for people. So again, thank you my friend. I appreciate it.
- [71:20]
B
Brad, thanks for having me on. It's always a pleasure.
- [71:23]
C
Thank you for listening to today's show and for being part of the choose the five Community. If you haven't already. The best ways to get involved are first subscribe to the podcast. So you're listening to this on a podcast player, just hit subscribe and then subscribe to my weekly newsletter. I actually sit down every Monday and write this by hand and I send it out Tuesday morning. So just head over to choose if I.com subscribe and it's really really easy to get on the the newsletter list right there and I would greatly appreciate it. It's the best way to get in touch with me. You can actually just hit reply to any of those emails and it comes directly to my inbox. So that's the way that I keep a pulse of the community and how we keep this the ultimate crowdsource personal finance show. And finally, if you're looking to join an in real life community we have choose a VI local groups in 300 plus cities all around the world. So head to choose a vi.com local and you'll find a list of all of Those cities in 20 plus countries all across the world. And if you're just getting started with FI, or you have a family member or friend who you think would be interested, two easy ways choose a VI episode 100 is kind of our welcome to the FI community. And even though it's a couple years old at this point, it still stands up. And it's a really great just starting point to get an understanding of what is financial independence. What are we doing here? Why are we looking to live a more intentional life where we save money and use it as a springboard to live a better life? And then choose a VI created a Financial Independence 101 course that's entirely free. Just head to choose a vi.com advanced fi101 and again, thanks for listening.