Gas or Electric? Helping My Best Friend Buy a Car

Nissan Leaf Mismo
Credit: Nissan

If you haven’t been paying attention while driving, electric cars seem to be taking over the roads.  Every day I drive to and from work, I see at least a couple of Tesla Model 3’s each way.  Not only that, but our parking lot at work just got our third Model 3.  It’s not just Model 3’s, but you are seeing a proliferation of Chevy Bolts and Volts (yes I know Volts are plug in hybrids) as well as Nissan Leafs.

As battery technology has advanced, this has led to greater ranges on these.  This is helping alleviate what has been called range anxiety (fear of running out of electricity while driving).  It also helps that over the years, the car design has significantly improved from just being blobs of metal (think BWM i3).  I mean have you not seen the 2018 Nissan Leaf?!  Overall more and more people are seeing the cost savings proposition that these cars present and trading in their gas guzzlers for more environmentally friendlier options.

To that end, we turn to my best friend Kurt’s current situation.  Kurt is currently driving a 2001 CL Type S with ~247,000 miles on it.  So his car has definitely been around the block.  We know Acura’s and other Japanese cars in general are built like tanks.  Even that being the case, the high mileage has my best friend worried that the cost of maintenance will eclipse the cost of buying a new car.  In addition, the car has a V-6 engine and for his type of city driving, it just drinks gas like water (he currently gets 24 MPG).

So with all of that, Kurt is thinking about buying a new car and wants to take a look into the feasibility and economics of buying a used Nissan Leaf.

To help him out, I’m going to help run an analysis for him to see what the cost of ownership would be for him should he continue to own the Acura versus buying a used Nissan Leaf.

Acura CL Type S

Kurt's 2001 Acura CL Type S

The Case for Keeping the Acura?

Starting out, we need to take a look at Kurt’s car and look at all the numbers related to that.   Kurt’s car overall is in pretty good working condition even at 247K miles.  Everything still works, the engine still turns over when started, and not to mention he just got new breaks and a battery less than a year ago.

To help in our analysis, let us apply the First Principle’s approach to thinking.  Remember, First Principle’s thinking is where we break things down into their fundamental parts to help solve the problems.  In doing so, we will first look at the biggest driver of cost in owning a car.  This is of course the cost of gas.

Before we can start there though, we need to take into account how much life is probably left in Kurt’s car.  Given the reputation of Japanese cars, I would estimate that Kurt would hopefully be able to drive the car until he reaches 300,000 miles.

This is of course before he should “REALLY” be worried about the car being able to function.  With the average annual miles per driver being about 15,000 miles [1], Kurt has about 3 ½ years before hitting the 300K milestone (300,000 miles – 247,000 miles = 53,000 miles; 53,000 miles / 15,000 miles per year ≈ 3.5 years).

We know that Kurt’s car has a fuel tank capacity of 17 gallons and given his driving habits, he is able to get an average 24 miles per gallon on a good week.  Therefore we know that he can drive 408 miles (17 * 24) before having to refuel.  With gas currently $3.57 per gallon (the car drives on premium unleaded) where Kurt lives, his bill to fill up is about $60.69.

Should Kurt drive the average annual miles per driver of 15,000 miles, he would have to fill up a total of 37 times (15,000 miles/ 408 miles per tank).  Armed with all that information, his total spending on gas per year is about $2,245 (37 times to fill up * $60.69 per tank).  The total cost for gas over that 3.5 year period is $7857.50.

The second biggest driver of cost we are going to look at is regular maintenance.  Regular maintenance here will cover the cost of oil filter and oil changes as well as tire rotations.  At my local Honda dealership (Honda and Acura are owned by the same company FYI), the cost of an oil change and free tire rotation is $70. Typically one would need to do this type of maintenance about seven to eight thousand miles or twice a year.  Total regular maintenance cost $490 ($70 per service * 2 times per year * 3.5 years of ownership).

With all of that calculated, our grand total is now: $8,347.50.  This works out to be about $200 a month over the three and a half years we expect the car to last.

  • Note: We won’t look at will be the extra unforeseen maintenance costs that could come up should Kurt’s car break down. This is because these types of costs are unpredictable.  Using our above analysis should be enough as it will be conservative in all of its assumptions.
Nissan Leaf
Credit: Nissan

The Nissan Leaf:

Now that we have looked at the cost of keeping the Acura, we will need to perform the same type of analysis for the Nissan Leaf.  Here we will focus on the main drivers of cost in owning a Nissan Leaf.  These costs include the following: cost of the car, cost of charging the car, and maintenance of the car.

The biggest driver of cost with the Nissan Leaf is of course purchasing the car!  In looking at a car for Kurt we will look at two different model years for the Leaf (2013 and 2015).  The reason I am looking at these two specific years is because for cars before 2013, it was reported that some cars were prone to battery degradation in hot climates [2].   This led to a reduction in range of 85 miles to 65 miles after two years.

Seeing as Kurt lives in the concrete jungle of Los Angeles and summers can be hot, I don’t want to risk this problem for him.  I am also considering the 2015 Leaf for him because they are said to have a new “lizard” battery that is pretty reliable.  With also being a newer car there should be less battery degradation.  Overall this will allow Kurt to have options when he ultimately decides if he needs a new car.

The last must have feature for Kurt is to have a DC fast charge port.  This is because it will allow him to charge his car at work for free or around the city when he needs to.   This will also allow him the ability to have extended trips as this will be his only mode of transportation.

Looking around, it looks like one can purchase a 2013 Nissan Leaf for about $8,500 less taxes and fees.  The 2015 Model goes for about $10,000.  One of the cool things I have noticed is that because of the range limitations (75 miles for the 2013 model, and 85 miles for the 2015 model), mileage on mostly all of these cars is extremely low.  You can typically find a 2013 Nissan Leaf with 20k-30k miles on it.

The next thing we need to look at is Kurt’s financial situation.  Currently he has $2,000 saved up for the car.  Doing a quick Craig’s List search, I believe he should be able to sell his car for anywhere between $1,000 to $2,000.  To be conservative we will assume he sold the car for $1,000.  That brings up his war chest to $3,000.

This leaves a funding gap of anywhere between $5,500 (2013 Model) and $7,000 (2015).   Kurt will most likely have to take out a car loan to fill this gap.  Here we will assume a 4% interest rate over 3.5 years.  Plugging all of these numbers into a loan calculator we get the following: 42 monthly payments of $141 for a total payment of $5,903 to finance a 2013 Nissan; 42 monthly payments of $179 for total payment of $7,513 to finance the 2015 Leaf.

The next and last thing we will need to look at is the cost to charge the car.  This is because with electric cars, they are so much simpler than gas combustion engine cars.  They are simpler because they have fewer parts.  Fewer parts means less maintenance.  Less maintenance means less cost!  With electric cars you don’t have to worry about an oil change, or engine filter, spark plugs, emissions check, and etc. and etc.  Isn’t that cool!

  • Note: We will not include scheduled maintenance (maintenance every 30k miles) cost for the analysis between both cars. This is because the cost for the service is about the same ($249.85 for the Nissan Leaf and $270 for the Acura; I got these prices by calling the local dealerships near Kurt or looking at their websites).  This is somewhat crazy considering the Nissan Leaf doesn’t have a gas engine.  Also I am not including other universal costs as well such as the cost of replacing the windshield wipers, brake fluid, and etc.  Another cool thing about an electric car is that they are equipped with regenerative breaking.  This means that instead of breaking as you would in a normal car, you can take your foot of the gas and the car will slow itself down and charge itself in the process.  This in turn saves you from using the actual breaks and ultimately saves more money on maintenance!

Again we will assume here that Kurt drives the average 15,000 miles per year.  If our range of our car is 75 miles (2013 model) and 85 miles (2015 model), he will need to charge 200 or 177 times per year respectively.  This leads to him having to charge 700 (2013) or 620 (2015) times over the course of three and a half years.

Should Kurt decide to charge at public charge stations, the going rate for one minute of charging is $0.20 [3].  Using an EVgo DC Fast Charging station it should take him only 30 minutes for a 2013 Leaf or 34 minutes for 2015 model.  From the chart below you can extrapolate that it takes 2.5 miles per minute of charge.  Therefore total cost for a single full charge comes out to be $6 (2013) or $6.80 (2015).

Credit: EVgo

 So again looking over a three and half year time span, the total cost for charging comes out to be $4,200 (2013) or $4,218 (2015).  Remember these numbers seem a bit high because this is assuming Kurt doesn’t charge at home or at work. 

Should Kurt be able charge at home, the going rate for electricity is $0.10 per kWh.  The battery capacity of the 2013 and 2015 Leafs are 24kWh.  That means for a full charge it will cost $2.40.  That means charging at home only will cost him a total of $1,680 (2013) or $1,488 (2015).

So what should he get?

Now throwing all these numbers into a table, let’s look at the grand total and see if it is worth it for Kurt to buy a new car!

 

Leaf Cost Benefit Analysis
Source: Indpendence Engineered
Leaf Cost Benefit Analysis
Source: Independence Engineered

As you can see tables above, should Kurt choose to buy a Nissan Leaf from 2013, he can actually save money or break even depending on how he chooses to charge.  He could of course even save more money by charging at work for free!  That said, buying a Leaf and only using a public charging station is probably not worth it in any situation.  Again this isn’t realistic and obviously a conservative take on the analysis.  Of course should something terrible go wrong with Kurt’s car within the three and a half year time frame, maintenance costs for the Acura could easily make up the ~$650 difference it would take him to buy a 2015 Nissan Leaf (assuming he charges at home).

Conclusion:

After running the numbers, I would probably recommend Kurt buying a used Nissan Leaf.  In some cases, Kurt breaks even or comes out ahead in doing so.  In other scenarios, he is just one bad maintenance situation from costing him a small fortune.  Buying a Leaf car would allow him to drive around with the peace of mind of not having to worry about such things.  It would also allow him to save money and reduce his carbon footprint.

 Should you guys want to look at the feasibility of buying an electric car, here is essentially what I did:

  • Calculated fuel cost
  • Calculate maintenance cost
  • Calculated any non-overlapping miscellaneous costs.
  • Researched cost of electric car you are looking at.
  • Calculate cost of charging your car.
  • Put all these numbers together and there you go!

 I know this article was filled with a ton of numbers and calculations, but I really hope that you found this analysis helpful.  Hopefully it helps those of you out there who are considering buying an electric car.

 Let me know your thoughts!  Are you considering an electric car?  Do you have an electric vehicle?  If so what do you think about it! 

Sources:

[1] https://www.fhwa.dot.gov/ohim/onh00/bar8.htm

[2] https://insideevs.com/used-nissan-leaf-buying-guide/

[3] https://www.evgo.com/charging-plans/

2 thoughts on “Gas or Electric? Helping My Best Friend Buy a Car

  • I enjoyed your analysis about deciding which option is best for your friend. I found the walk-through useful and intuitive. Some other items you may wish to figure into your calculations or note in your post:

    (1) The change in insurance expense by switching from an older (fully-depreciated) car to a newer car. It is more likely than not that he will pay a slightly higher amount to insure his 2013 Nissan Leaf compared to his 2001 Acura. However, if replacement parts are sparse and harder to come by for the Acura, the insurance company may welcome the upgrade and not have a material change in policy premium. The math is likely negligible but is something which should be factored into the decision.

    (2) The cost of depreciation should also be figured into your calculations. While the 2013 Nissan Leaf will be significantly depreciated by that point, it is still an expense your friend will incur. Once again, it likely won’t affect your calculations too much.

    (3) It is true that EVs do have lower on-going maintenance costs compared to gasoline-powered cars. However, the major expense for them is more binary, meaning when their batteries need to be replaced, that isn’t a trivial expense. These are costs a gasoline-powered car wouldn’t have to incur. Luckily, battery expenses continue to fall precipitously and by the time your friend would need to replace his batteries, they should be increasingly affordable. Should he choose to sell his EV when the batteries finally quick holding a substantial charge, he will have a liability on his hands more likely than not.

    (4) Your friend is fortunate to live in a part of the country that is supportive of the transition to electric vehicles. The three publicly-traded investor-owned utilities in California have all requested approval to invest in publicly-available charging infrastructure. They have been granted approval from the California Public Utility Commission to proceed and make charging infrastructure more accessible to their customers. The Los Angeles municipal utility has a program of their own to increase charging access. These programs are allaying many well-justified fears of the range anxiety concept you note above. Without these programs, the calculus around whether considering an EV to be an option skews wildly more in favor a gasoline-powered vehicle.

    Once again, I thought your post was informative and thoroughly walked-through the pros and cons of each scenario. I definitely appreciated your methodical approach and look forward to what else you have to say in the future.

    Best,
    Riley

    • Riley! Geesh, I need to get better at replying to comments even with this small blog of mine!

      Thank you for stopping by and I appreciate your insight and input. Overall the analysis is what I call a First Principles analysis and we need to look at the bigger picture to see if a big decision like buying a used Leaf is worth it. Details like you noted are important to account for (I also didn’t think about insurance and depreciation), but as you noted, the considerations are minimal and therefore shouldn’t really be a big driver if cost. As for the battery, even if we were to replace the battery some time down the line. I anticipate the cost of maintenance of a regular car to exceed the current cost of new battery.

      Again thanks for stopping by! I appreciate your insight and helping add some extra considerations that I didn’t even think about.

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