A week rarely goes by where you don’t hear someone saying that you can save money by buying a Tesla. I have listened to the same, and I know Elon Musk is world-famous for his exploits and entrepreneurship, but will his car save me money?
I’ve always wanted to know how much money I can save with a Tesla, but gasoline has usually been pretty inexpensive.
So, up until now, all of my cars and SUVs have always been traditional gasoline-powered vehicles. But recently, I started paying more money at the gasoline pump.
During the latest inflation crisis, I have seen signs of $5+ per gallon of gas.
Even though I never really wondered ‘how much money do you save with a Tesla,’ now I’m wondering how much money I can avoid spending at the gas pump.
Many people are looking for savings on their transportation, and the idea of being more friendly to the environment is also quite appealing.
So, I checked into the details and came up with an answer. The amount of money you save with a Tesla versus using a gas-powered car varies considerably. The amount of savings will depend on a few factors:
- Purchase price of the two vehicles
- Maintenance costs over time
- Electrical charging versus gasoline fill-ups
- Miscellaneous expenses and credits
Let’s see what we can find out about how much money you can save with a Tesla over a gas-powered car.
Table of Contents
- Is Using a Tesla Affordable?
- How Much is a Tesla: Initial Purchase Price
- How Much is the Maintenance Cost of a Tesla?
- Gasoline Costs vs. Electric Charging Costs
- Tesla Versus Gas Car Costs:
- Tesla Special Cost Considerations: Electrical Hookup
- How to Save Up for a Tesla
- How Much Money Do You Save With a Tesla
- Does a Tesla save you money over time?
- How much money do you save owning a Tesla?
- What is the downside of owning a Tesla?
- Are there any benefits to owning a Tesla?
Is Using a Tesla Affordable?
Now that we know what factors variables to compare, we can start adding things up. There are a lot of numbers in play, so you should be careful to make sure you understand everything before you jump to a conclusion.
How Much is a Tesla: Initial Purchase Price
Right now, on average, new and well-equipped electric vehicles tend to cost more than their internal combustion counterparts. That’s true for most Tesla models as well. But, the price of midsize passenger cars using standard gasoline engines continues to increase slowly every year, and the cost of gasoline increases as well.
On the other hand, the price of electric vehicles continues to decrease each year. That trend even seems to accelerate as there are more and more electric vehicles on the road.
But, the US isn’t energy independent like it was just a few years ago. The price of electricity and gasoline have both seen some dramatic spikes accordingly. So, let’s zoom in first on just the initial cost for purchasing a vehicle.
As of late-2021, an average compact car would cost about $25,000 new. An entry-level luxury car starts at around 50 grand. Tesla’s Model 3, with the ‘Long Range’ package and dual-motor all-wheel-drive, costs just over $45,000.
Using those numbers as a reference point clarifies that it’s possible to get a Tesla at a price that’s quite competitive with standard cars.
But, even removing the four-wheel-drive option from the Model 3 only drops the price to around $40,000. So, an entry-level Tesla Model 3 costs more than an entry-level small car with a gasoline engine.
Consider that a premium Model X from Tesla starts at nearly $100,000. Of course, they’re extremely luxurious and futuristic, and gasoline-powered vehicles at the premium end of the spectrum cost much more than $25,000.
So to be fair, let’s figure that the average Tesla costs around $10,000 more than a comparable and standard gasoline-burning car at the most. Let’s dig deeper and see if you can recover the balance in the higher initial cost over time.
See Related: Best Green Jobs to Start a Sustainable Career
How Much is the Maintenance Cost of a Tesla?
Teslas have a growing reputation for being very unreliable. They have fewer moving parts compared to a gas-powered vehicle, but customers complain of things like broken sensors, body panels that don’t align, failing heat pumps, air conditioning issues, and leaks in the trunk area because of missing rubber seals. Despite the needed repairs, Tesla owners, on average, are remarkably satisfied with their purchase.
Unlike with a Tesla, taking your gas-powered car to the shop is a routine occurrence, as a regular gas engine needs frequent oil and filter changes, fuel filter maintenance, and other service items to keep the combustion engine running its best.
That doesn’t mean that things never need servicing Tesla. And it certainly doesn’t mean that it never needs to go to the shop for routine items like tire and windshield wiper changes or air conditioner maintenance.
But your total maintenance costs when driving a Tesla might be less than $300 per year on average over five years. That’s due to Tesla’s strong warranty coverage that keeps costs down for owners experiencing issues with their car. Even the most reliable gas-powered vehicles tend to cost about a thousand bucks a year in maintenance.
That’s a savings of $700 per year in a Tesla. So, after five years of use, you’ll have saved almost $3500 on maintenance by buying a Tesla instead of a gas-powered car.
If we go back to our previous example, where a gas-powered car costs $10,000 less than a Tesla, your initial savings from investing in a cheaper gas-powered vehicle are almost wiped out after just five years. The margin is now only $5,000.
Gasoline Costs vs. Electric Charging Costs
Teslas charge via an electrical plug, there is no engine. Gasoline vehicles rely on a steady supply of fuel oil and refined gasoline. Therefore, the energy price is volatile, as international conflict and rising inflation caused by the US government drive costs upward. That volatility can dramatically affect the price of gasoline and electricity.
So, keep in mind that the math you do today may change significantly and unpredictably the next time you run a comparative analysis. With that brief disclaimer out of the way, we can start putting together some variables to compare the costs of owning a Tesla versus a gas-powered car.
For basic analysis, let’s assume that a typical car owner will drive 12,000 miles per year.
Gas-Powered Car Mileage Costs
In early 2022, before the outbreak of hostilities in Eastern Europe, the national average price of gasoline was just over $3.50 per gallon in the US. A standard gasoline car gets about forty miles to the gallon, per government figures. So for $3.50, you can travel up to forty miles. Or, with a little bit of algebra, we multiply both variables by ten and extrapolate that for $35 (ten gallons of gas), you can drive a gas car 400 miles.
If we divide the 12,000 miles typically driven per year by the 400 miles per $35 ten-gallon fill-up, it looks like this:
- 12000/400 = 30 tanks of gas
- 30 * $35 = $1,050 in gasoline
Therefore, an average car with a gasoline engine driven 12,000 miles will cost $1,050 per year. Now, let’s work backward and compare that figure to the electricity costs required to ‘fuel’ a comparable Tesla.
Tesla Electric Mileage Costs
As you know, Teslas use electricity for generating the power to drive. Though it might not seem the same as filling up with gasoline, there is still a mileage per charge. We can use the average cost of electricity to determine how much money it will take to drive a given distance. Let’s use the same 12,000 miles per year figure that we utilized in the gas-powered car math.
As of December 2021, before the Russian invasion of Ukraine, the average cost of electricity in the United States was 13.75 cents per kilowatt-hour. That cost may increase in the future, but the same is true of gasoline. So, let’s stick with it for our math comparing the cost of charging a Tesla to filling a car’s gas tank.
There are different Tesla models, each of which has various sized batteries and ranges. But, on average, a Tesla uses 34-kilowatt hours of energy per one hundred miles traveled. Now we have enough variables to calculate the cost of driving a Tesla 12,000 miles per year.
First, let’s divide the 12,000 miles per year by 100. The result is 120, and that is the number of times you will have to charge your Tesla to drive 12,000 miles. Now, let’s multiply the number of charges annually by the energy needed for each charge. Here’s what that all looks like mathematically.
- 12,000 miles / 100 = 120 charges to go 12,000 miles
- 34 kilowatt hours for each charge * 120 charges = 4,080 total kilowatt hours per year
- 4,080 kilowatt hours * 13.75 cents per kilowatt hours = $561
Therefore, an average Tesla driven 12,000 miles per year will cost their owner $561 in electricity costs.
See Related: Tesla Road Trip: 1,800 Miles in 3 Days (Case Study)
Tesla Versus Gas Car Costs:
Now we have enough money to compare the costs of powering a Tesla versus a traditional car. A gasoline-powered car will cost its owner $1,050 per year. In comparison, an average Tesla owner will have to pay $561 per year to travel the same distance. The difference of $481 is the savings represented by choosing a Tesla over a gas-powered car.
In our original example, we are still looking to recoup about $5,000 in upfront costs. If we divide the $5,000 we’re looking to make up by the $481 in annual costs to charge a Tesla, the result is just over ten.
- $5,000 / $481 annual charging costs = 10.4 years (rounded)
Compiling these numbers reveals that it would take about ten years for the Tesla owner to save enough money on gasoline purchases to make purchasing a Tesla less expensive than a gas car. However, there is still more analysis needed to get a true apples-to-apples comparison.
See Related: Is It Possible to Get Tesla Free Supercharging?
Tesla Special Cost Considerations: Electrical Hookup
To charge as fast and efficiently as possible, a car from Tesla requires special charging connections and professional installation from an electrician. The parts from Tesla only cost between $500 and $1000, and a quick electrical hookup might only cost another few hundred dollars.
But if you don’t have the correct electrical setup at home, it could cost as much as $5,000 for the entire setup. Let’s assume that, on average, there will be an initial investment of $2,000 to properly charge a Tesla at home.
Tesla Special Credit Considerations: Tax Credits
Tesla owners may receive a credit on their purchase in the form of a rebate or tax credit.
The tax credit you’ll receive varies tremendously based on several factors, including your income, your tax filing status, and where you live.
There are also a lot of plans in motion to increase the tax credit. For instance, the so-called ‘Build Back Better’ plan includes a change in the tax credit scheme.
But, since that increased federal tax credit is part of an enormous legislative package that hasn’t been passed into law yet, and may never be, it hasn’t come to fruition yet.
Plus, since Tesla does not operate a union-based factory, Tesla purchases may not be eligible for some or all of the credit.
Because the tax schedule and the credits on offer can change so dramatically, it’s hard to figure them into our math. Then, you also have to figure in your local and state discounts and tax reductions.
It’s pretty easy to check out the current incentives available for electric vehicles in each state.
In addition to real cash savings, rebates, and tax reductions, you may also find that there are additional perks to owning a Tesla, like access to the carpool lane when driving alone, waived fees for registering your car, and discounted access to municipal parking areas.
A quick look reveals that it’s common to receive a state tax reduction of $2000 or more. At the federal level, you may receive a similar tax credit for a total of $4,000 in savings.
All of a sudden, it becomes a no-brainer that a Tesla will save you money over a gas-powered car.
How to Save Up for a Tesla
- Limit meals out and keep a meal plan to limit grocery expenses
- Look for ways to trim your media expenses and streaming services
- Make your coffee at home
- Work more, spend less
- Avoid impulse purchases
- Wait to click ‘buy’ for a few days while you consider if you really need your purchase
- Map out your expenses and your savings plan
- Be a good steward of your savings by not competing with the lifestyles you see on TV
How Much Money Do You Save With a Tesla
It’s hard to know exactly how much you will save on a Tesla without nailing down the specific model you will purchase. Then, you also need to compare it to an exact competing car so you can compare the costs in a detailed manner.
You’ll also have to navigate the tax code at the local, state, and federal levels.
Even with all these variables, Tesla estimates that you’ll save almost $5,000 on a Model 3 with rear-wheel drive. Even though there are a lot of variables to consider, you can save big bucks buying a Tesla.
And when you combine the purchase of a Tesla car with their solar roof, you can cut down on your energy costs even more!
Does a Tesla save you money over time?
A Tesla electric car is known for its high upfront cost, but it can save you money over time. This is because electric cars are cheaper to maintain and operate than gas-powered cars. Additionally, Tesla’s electric cars have a longer lifespan than traditional cars, which means you may save money on repairs and replacements in the long run.
How much money do you save owning a Tesla?
Owning a Tesla can save you money in the long run due to its energy efficiency and low maintenance costs. According to a study by Consumer Reports, Tesla Model 3 owners can save up to $15,000 over five years compared to owning a similar gas-powered car. Additionally, Tesla offers free charging at their Supercharger stations for some models, further reducing the cost of ownership.
What is the downside of owning a Tesla?
The downside of owning a Tesla is that they are generally more expensive than traditional gas-powered vehicles. Additionally, depending on where you live, it may be difficult to find charging stations, which could limit your driving range. However, it is important to note that these downsides may be offset by the long-term savings on fuel and maintenance costs, as well as the positive environmental impact of driving an electric vehicle.
Are there any benefits to owning a Tesla?
Owning a Tesla is beneficial for several reasons. Firstly, Tesla cars are environmentally friendly as they run on electricity, which reduces carbon emissions and helps contribute to a greener planet. Secondly, Tesla cars are equipped with advanced technology that provides a superior driving experience, including features such as autopilot, over-the-air software updates, and a large touchscreen display.
Finally, owning a Tesla can save money on fuel costs since electricity is generally cheaper than gasoline or diesel fuel.
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Kyle Kroeger, esteemed Purdue University alum and accomplished finance professional, brings a decade of invaluable experience from diverse finance roles in both small and large firms. An astute investor himself, Kyle adeptly navigates the spheres of corporate and client-side finance, always guiding with a principal investor’s sharp acumen.
Hailing from a lineage of industrious Midwestern entrepreneurs and creatives, his business instincts are deeply ingrained. This background fuels his entrepreneurial spirit and underpins his commitment to responsible investment. As the Founder and Owner of The Impact Investor, Kyle fervently advocates for increased awareness of ethically invested funds, empowering individuals to make judicious investment decisions.
Striving to marry financial prudence with positive societal impact, Kyle imparts practical strategies for saving and investing, underlined by a robust ethos of conscientious capitalism. His ambition transcends personal gain, aiming instead to spark transformative global change through the power of responsible investment.
When not immersed in the world of finance, he’s continually captivated by the cultural richness of new cities, relishing the opportunity to learn from diverse societies. This passion for travel is eloquently documented on his site, ViaTravelers.com, where you can delve into his unique experiences via his author profile.