Electric vehicles have a lot of advantages. They result in no gas stops, they have incredible torque making for a fun driving experience, and they are better for the environment. These factors may make buying an electric vehicle worth it, regardless of whether the financial equation pencils or not. Of course, as a CPA, the numbers matter to me and I’ve always been curious on whether there is actually an investment decision which makes sense based on the additional cost of electric vehicles against the savings from not buying gas over the car’s life. This article will dive into the math and find out.

The assumptions made here are going to be based on Vancouver BC inputs. We have notoriously expensive gas – perhaps a reason I see EV’s everywhere here!

Choosing an apples to apples comparison of say, a Tesla Model 3, to a gas powered car is virtually impossible, because there is such incredible utility to Tesla’s beyond their powertrain. The technology, interior package and constant software updates make the cars stand on their own. So instead of trying to compare two specific cars together holistically, I will compare purely the cost of fuel consumption of a similar gas powered performance car absent all other variables. I will use the BMW 3 series as the closest comparison I can think of.

**2021 BMW 3 Series** **330i XDrive**

The car has a 2.0 litre inline 4 cylinder engine, producing 255 horsepower. It has an 8 speed automatic transmission. The vehicle has a combined fuel efficiency of 8.3L / 100 kms. The cost of a litre of fuel right now in Vancouver is about $1.65. Therefore, the cost of fuel to drive 100 kilometers is about $13.70.

**2021 Tesla Model 3**

The car has a 283 horsepower electric engine. Based on the BCHydro website, which is the electricity utility in Vancouver, the cost to charge a Tesla Model 3 performance sedan at home is about $2 per each 100 kms of driving.

**Lifetime savings**

Let’s assume as an owner you could invest money at an 8% return. This is the rate we will use as the discount rate to calculate the present value of gas savings from buying an electric vehicle.

On an average of 15,000 kilometers per year, the Tesla costs $300 per year to charge at home. The same number of kilometers per year on the BMW costs $2,055 per year. The net savings is $1,755 per year.

Let’s assume both cars last 10 years before they are effectively worthless and ready for the scrap heap.

The net present value of $1,755 per year over 10 years at an 8% discount rate is $11,776.

Based on this math, and ignoring all other merits of the vehicles other than fuel consumption, you shouldn’t be willing to pay any more than $11,776 more for the Tesla than for the BMW. This is the amount which represents an equal return on your gas savings to investing it at your 8% rate of return in the market.

**So what are the prices?**

The BMW has an MSRP of $49,350 CAD. The Tesla has an MSRP of $54,610. The Tesla also has government incentives available for clean energy vehicles, bringing the price down.

Therefore, it’s quite clear that between these two vehicles, the Tesla is the better financial choice, assuming you value all other features of the cars equally.

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