Decisions on purchasing an EV
Dear
Money Lady,
I need to purchase a new car this year and I am not sure if I should invest in an EV, Hybrid, or regular vehicle. What do you think? Thanks, Gord.
Hi Gord, this is a great question and one I think a lot of Canadians are wondering since the Canadian government mandated that all light-duty vehicle sales be 100% electric by 2035. The problem for me is the current costs of EV’s. Now that vehicle pricing is truly the second highest investment purchase a Canadian will make next to buying a home, is it worth it to invest in electric vehicles now? Maybe not.
Most vehicles have a life span of 10+ years and to get the most value out of your purchase, you should plan to keep it this long. The problem is, we are just a little too far off the 2035 electric switch over date and the current vehicle manufacturers really aren’t offering a great selection of electric vehicles at competitive pricing yet. Yes, we are provided with rebate offers from every province to encourage us to “buy-in,” but we still have the issues with the scarcity of EV charging stations, especially in rural areas. The bestselling car today is actually not a car at all, rather it remains a light truck. The Ford F-150, Chevrolet 1500 and Dodge Ram 1500 series of light trucks (or pickup’s) are still our North American bestsellers. Today, electric vehicles sales only make up approximately 10% annually and most automakers rely heavily on the generous profits realized from their light-truck sales to fund their EV development efforts. Toyota, the world’s largest automaker, has announced that for every EV produced, they can make 10 or more hybrids with much less impact to the earth than the energy required to mine and extract precious rare earth minerals from the ground which is what constitutes the average EV battery.
The Canadian government now offers up to $5,000 in rebates towards the purchase of a fully electric or plug-in hybrid electric vehicle. It’s a good idea to check the Government of Canada website under “Incentives for Zero-Emission Vehicles” since not all vehicles qualify for this full rebate and there will be variations to the amount if you plan to lease your new purchase. To be honest, in my opinion, you can still get a better deal on a regular gas vehicle today, but if your budget allows, it would be a good idea to consider a hybrid option. Plan to keep this vehicle for at least 10 years to get your money’s worth out of it. Remember that most new car sale markups start at 7%-8% and dealerships are more willing to haggle on their pricing at the end of the month. Aim for a 3%-4% reduction in the list price of the vehicle and be prepared to walk if the sales manager won’t bend. Guaranteed, if they know you are a serious buyer, they will give in to this reduction in pricing, (a hint from one of my friends who is been in the new car sales business for over 20 years).
If you are leasing your vehicle and writing off the costs as a business expense, then definitely consider an EV or hybrid. This will give you the opportunity to “try it out” since you will most likely be trading in your vehicle after 3-5 years anyway. One thing you need to watch out for – if this is your 2nd or 3rd lease, make sure the car dealer discharges the old lease and sets up a new one. I have seen many times in the past, when we have pulled credit bureaus for clients wanting loans at the bank, that they have had multiple leases registered to their name. This is a banking “no-no” and can definitely hinder your prospects of acquiring future credit. Each lease must be clearly discharged, not transferred. By transferring a lease to a new vehicle, it creates two lease payments on a client’s credit report, one for the old vehicle
(not discharged but still registered with the VIN number) and one for the new vehicle. Be careful.
Christine Ibbotson is an author, finance writer and a national radio and television host. Send your questions through her website at askthemoneylady.ca