This is how the cost of ownership is distributed – we compare electricity with fossil fuels

Perhaps it has never been more difficult to choose a car than it is today? In addition to an ever-growing range of car models, a new factor has been added: the choice between a fossil engine and an electric drivetrain. Since the car is the second largest expense for most people after their home, finances play a crucial role in the decision-making process. Then it is important to do the math, because which drivetrain is most economically advantageous is very individual based on who you are, how you drive and where you live.

The total cost of ownership (often abbreviated TCO) for a car usually includes fuel, insurance, vehicle tax, service, depreciation and maintenance, which includes washing, replacing wearing parts such as windshield wipers and tire wear. Depending on the drivetrain, there is a big difference in how large a proportion these cost items make up of the total cost of ownership.

So we have made the comparison

To illustrate this, we compare three common used cars, one petrol-powered, one plug-in hybrid and one electric. The example cars are each a 2021 model and have 6,000 km on the odometer. The calculation has been made for three years of ownership and 1,500 km per year.

Volkswagen Golf, petrol engine

The Volkswagen Golf is one of the world's best-selling cars, with over 35 million units produced since the model was introduced in 1974. 215,000 units are registered in Sweden, and the Golf is the car model that is most often sold on the used market. Here we study the Golf 1.5 eTSI Sportscombi, a 130 horsepower petrol model.

The price today is around SEK 250,000 and the expected trade-in price in three years is SEK 157,000. This means an annual loss in value of SEK 31,000 and of the total annual cost of ownership of SEK 63,500, the loss in value constitutes 48 percent. The second largest contribution to the cost of ownership is fuel. Thanks to mild hybrid technology, declared consumption is a nice 0.56 liters per mile, but despite that and calculated at SEK 18/l, fuel constitutes 24 percent of the cost of ownership. Vehicle tax accounts for SEK 5,800, 9 percent of the total cost of ownership, followed by service which contributes another 7 percent and insurance of 6 percent.

KIA Niro, plug-in hybrid (PHEV)

The KIA Niro has many good features: adequate power, comfortable entry, decent space and a generous new car warranty. The Niro went on sale in 2016 and is available as a hybrid, plug-in hybrid and electric car. Here we study the plug-in hybrid version, which has 141 horsepower and can travel approximately 50 kilometers on electricity. Although not as common as the Golf, there are still close to 50,000 Niros on Swedish roads, of which just over 16,000 are plug-in hybrids.

The price tag for our three-year-old example is SEK 240,000, and the used car statistics indicate that the value in three years and 4,500 km will be SEK 160,000. The depreciation of SEK 26,700 per year will therefore constitute 53 percent of the total annual cost of ownership of SEK 50,400. Consumption is 0.5 l/km when the battery is empty, but we expect that 60 percent of the driving will be done on electricity. This means that the fuels, petrol and electricity, will cost SEK 9,200 per year calculated at SEK 3.5/kWh. This will be 18 percent of the annual cost of car ownership. The insurance premium and service cost are of the same order of magnitude as for the Golf, but due to the lower total cost of ownership, they constitute 13 and 8 percent of the total, respectively. The vehicle tax, however, is only SEK 360.

Peugeot e-2008, electric car (EV)

The Peugeot 2008 is a compact SUV that went on sale in Sweden in 2013. We take a closer look at the electric e-2008 , which has sold 2,500 units. The model has 136 horsepower and combines good space with a high level of equipment even in the basic version. The price today is 210,000 SEK and in three years we expect the trade-in price to be 128,000 SEK. The annual loss in value will therefore be 27,300 SEK, which constitutes 56 percent of the total cost of ownership of 48,700 SEK. Fuel in the form of electricity is expected to cost 9,100 SEK, 19 percent of the annual cost, followed by insurance of 5,000 SEK or 11 percent. The service cost for an electric car is normally low as it mainly involves checks. Service for the e-2008 costs 2,300 SEK per year, 5 percent of the annual cost. The vehicle tax for electric cars is, as always, only SEK 360 per year.

Let's summarize!

For the three test cars, the total cost of ownership is lowest for the electric car. However, this does not have to be the case: electric cars are still largely a premium product and the average price of used electric cars is significantly higher than for other powertrains. The more expensive the car, the higher the financial cost, regardless of whether it is interest on a loan or a loss of return. The cost per mile also differs significantly depending on whether you have the opportunity to charge at home or not.

The conclusion? That the percentage depreciation makes up a larger part of the total cost of ownership for electric cars compared to other powertrains. But this is not because they have lower resale value, quite the opposite. The explanation is instead that the cost per mile is low, service is cheap and vehicle tax only costs a few hundred kroner per year.

*The example cars are each a 2021 model and have 6,000 km on the odometer. The calculation has been made for three years of ownership and 1,500 km per year.