Better idea to finance an electric car?$300

[scott1988]

ORIGINAL POST
Ok so I may be coming in here completely oblivious, please feel free to absolutely abolish me (kidding).

I've recently had a thought that I'm sure has crossed many minds before. As a bit of prior info, I'm an under-18 driver who is currently learning on my parent's car.

They're pretty open about finances and everything as I'm obsessed with this whole space, relentlessly invested in my own entrepreneurial ventures.

My question is as such: Given that it costs about $8000-$8500 a year to maintain the trusty 2006 lexus rx350 I'm driving, which does pretty well fuel-wise, why wouldn't you choose to instead go with an EV?

If you could save the ~$100/week fuel cost a.k.a $5200 ish a year by driving electric, even if I cant purchase a new/used EV outright, wouldn't financing it still be a better option as you'd pay less in interest than fuel, hence less of an expense as more of your money is going into equity in your car?

Just chucking numbers into a car loan repayment calculator with CBA, a variable loan for $30,000 (choosing to pay the extra $10000 with savings) to grab a $40,000 EV (very doable, especially considering id be looking to buy in several years time when the market will likely be more saturated and hence lower prices), payed off over 5 years with a 14% interest rate would leave you at $699 a month, roughly the same cost of running the current car I'm learning in.

Obviously I'm not factoring in insurance and registration etc with the EV, but as petrol is the main cost + you'd be unlikely to spend as much on services etc on a newer EV vs a car nearly 20 years old, I cant see why it isn't a better idea just to finance the EV as a) your monthly payments arent 100% expenses over the life of the loan, as you're gaining equity b) you'd save significantly on petrol in the long term and c) you'll also have a ~$30000 asset at the end of it all.

ANYWAYS sorry for the rant, please forgive And advice/comments much appreciated.

Edit: After lots of great advice I wanted to clarify two things:

1. Yes. There is an opportunity cost to investing my own money into a car that’s really a liability (don’t mind my ignorance there, when I said it was an asset I more-so meant that it’s worth something when I want to sell it vs the Lexus being worth very little)
2. The way I’m justifying this is a situation when the numbers work out to where:

Savings from no petrol > Insurance expenses
Maintenance costs are = or less on EV

 

[jonahvime]

@scott1988

you'll also have a ~$30000 asset at the end of it all.

Ah the innocence of youth

 

[hopehad]

@scott1988 Some of these responses are stating the conclusion sarcastically without spelling out some key details for a genuine question.

Cars lose value very quickly, especially new cars. Cars have lost less value the last few years with inflation and supply crunches but I would not bank on that continuing on a 3-5 year timeframe. Eventually better newer cars are going to be being built faster than we can buy them. On a luxury non-basic car, I would expect to lose roughly half the value within 3-4 years and 75-85% within 8-10. Older cars have increasing maintenance costs. Your car is a liability, not an asset. It is a near constant pit of expenses. Your car can be damaged beyond reasonable cost to repair for reasons that insurance may not cover and you may need to buy a new one.

The conventional finance advice is to buy a basic used car if you need to borrow, or pay cash if you are ready for an established adult's car. You lose money to extortionate personal loan interest and you lose money to massive depreciation. Taking out a bigger loan than neccessary for a depreciating asset is the easiest way to lose a stupid amount of money.

Buy used or a small reliable car and take as few loans as possible until you can buy a 'dream' car in cash. Don't take out a 30k+ loan for a car that will be outdated in two years.

Take it easy and good luck.

 

[rabbie77]

@hopehad Or buy a used EV? There will be likely be plenty around in 3-5 years time

 

[dpardue]

@hopehad

Some of these responses are stating the conclusion sarcastically

and it's a lot of fun to read.

 

[staystrongmama]

@scott1988

grab a $40,000 EV

Here's your problem - there's only two EVs on the market (or will be later in the year) for just under this price point - the BYD Dolphin ($38,890) and the MG4 ($38,990). That's somewhat of a downgrade from the RX350 - even an older model one, given you're literally buying the cheapest, cut-price cars in that market sector.

 

[amarie07]

@staystrongmama Op is young just buy a seven year old Camry.

Dude doesnt need to have a nice ride

 

[simplewoodencross]

@staystrongmama I believe a third model will join the under $40,000 space. So you can add the GWM Ora to the list. Doubt any of these evs will match your old Lexus.
If you live in Victoria you will pay a road user charge about 2.7 cents per litre.
Comprehensive insurance would be a killer and you would need the insurance if you finance a new car. Allow over $2000 a year for finance. I have not checked on the cost of servicing for these 3 vehicles.
I think you should get around 300km range from these vehicles but it will drop if you want to drive it at freeway speeds.
The really big problem- finding a bank or financier that will lend you $40,000 to buy a new ev.
Maybe start with a Nissan Leaf for around $10,000

 

[guidedbythelight]

@scott1988 Cars aren't assets friend.

Factor in depreciation, electricity costs and the opportunity cost of the $10,000 deposit and see if you are still ahead.

 

[stayler]

@scott1988 $8.5k maintenance a year for 15 year old car, Christ! Hope your getting a Christmas card from the dealer each year.

Good luck getting affordable comprehensive insurance and finance under your name for anything beyond a shitbox at 18.

Unless your doing high numbers of km a year fuel isn’t that big a component. As someone who had a Tesla 3 as a company car for 6 months they are overrated.

 

[civil82]

@stayler

$8.5k maintenance a year for 15 year old car, Christ

I think he's factoring in $5200 fuel.

But even $3300 in other running costs sounds unrealistically high.

 

[hillaryaya]

@civil82 If you factor in Rego, insurance, roadside assist and maintenance checks?

 

[civil82]

@hillaryaya No, how much do you think those things cost?

It's maybe a thousand for rego (Including compulsory third party insurance), and a few hundred for roadside and maintenance.

Insurance is highly variable, on a 2006 Lexus I'd just get third party property, which could be a few hundred $.

 

[staystrongmama]

@civil82 Third Party Property is only good if you want to limit your own personal liability but don't care about your car at all.

People often forget that comprehensive insurance also helps you if you're involved in a not at fault accident, as your insurer will still act on your behalf and organise repairs, loan vehicles etc. If you have third party property, you're on your own.

 

[civil82]

@staystrongmama Comprehensive insurance is frequently not economically viable on older vehicles.

OPs 2006 Lexus rx350 is maybe worth $8-10k.

I just went to NRMA, and was quoted $1200 per annum to comprehensively insure a 2006 rx350, with a $1000 excess (based on 35m with clean driving history).

So you need to incur catastrophic car damage in like 6 years or less to come out ahead.

That's a terrible bet.

People waste way too much money on unnecessary insurance, because they're bad at math like this.

 

[staystrongmama]

@civil82 You're thinking about it purely in terms of replacement cost.

What value do you put on having your insurance company deal with chasing someone up for repairs, including organising loan vehicles to minimise disruption to your life when you're involved in a minor accident that isn't your fault?

Obviously everyone is different and has different circumstances, but the knowledge that I don't have to personally deal with that side of things is worth the difference between full comprehensive and third party property for me.

 

[civil82]

@staystrongmama

What value do you put on having your insurance company deal with chasing someone up for repairs

Given the savings from not paying for insurance, after a few years you could entirely replace the car with your own money and come out ahead. So you could just not pursue the claim if you wish.

You're really struggling with this basic math.

but the knowledge that I don't have to personally deal with that side of things

I also don't have to personally deal with seeking minor property damages, because I'm not poor from wasting all my money on insurance.

 

[staystrongmama]

@civil82 So you're flexing on how independently wealthy you are because you saved maybe $500 per year on insurance?

By the way, third party property sure as hell isn't free, and you're not saving $1,200 per year when your entire comprehensive premium is that amount. Unless you're actually an idiot and driving effectively uninsured purely with a green slip/CTP.

Either way, my maths is fine.

 

[civil82]

@staystrongmama I pay $200 for third party property with NRMA. So I'm saving $1000 per annum.

I haven't been in a collision in 20 years, and my vehicles are mostly

 

[emaelppa]

@stayler I own a 1996 and a 2000 model vehicle, I'd struggle to spend $5k a year on each of them.

Ones a tuned Nissan Wagon and the other is a Land Rover.......