For a start, there still isn’t sufficient supply of EVs getting into Canada to meet consumer demand. According to a report prepared for Transport Canada by Montreal-based Dunsky Energy Consulting, just one in three Canadian car dealers had an electric vehicle in stock in the first half of February 2020 (before the pandemic prompted showrooms to close for two months). That figure fell to less than 20% outside of Quebec, B.C. and Ontario, with an average of two- to three-month wait times. “That means many Canadians struggle to find an EV to test drive, let alone buy,” Clean Energy Canada said in a statement.

For those who manage to find the EV of their choice, here’s the kicker: even with the rock-bottom borrowing rates being offered on conventional internal combustion engine (ICE) vehicles during the pandemic, the costs of both financing and leasing remain higher for EVs than for similar ICE vehicles, in some cases by as much as 3.5%. As a result, monthly payments and total cost of borrowing are disproportionately high. For consumers who are already cost-conscious in the current economic climate and find higher EV sticker prices a stretch, their higher leasing and financing rates are likely to be a deterrent.

Why are EVs being left out in the cold?

Since the era of Model Ts, banks have been offering loans for car purchases on the assumption that if the borrower couldn’t repay a loan, the bank could seize the car and sell it for a residual value.

The hitch for EVs is that there’s not a lot of historical data available to establish reliable residual values. That leaves banks working with worst-case scenarios for depreciation. While that means higher financing rates, EV leasing rates are most significantly impacted because of the need to estimate buyout rates.

Corporate Knights looked at the purchase price of the Nissan Leaf, Chevy Bolt and Hyundai Kona, factoring in each province’s available rebates and delivery charges, to examine the differences between leasing and financing rates offered for EVs and ICEs. The calculations are based on having no trade-in vehicle and making no down payment, which would be unusual, and some automakers would require the latter, but doing so equalizes the represented figures as much as possible. The rates shown are promotional and subject to a credit check, meaning they may not be available to every customer. Estimated lease buyouts are calculated based on a 24,000-kilometre annual allowance. These quotes were provided by real dealerships and don’t factor in any negotiating that customers might do.

Bolt best on financing

Through our research, we found that Nissan offered the most extreme example of financing disparity. With the Nissan Leaf Plus, financing rates across Canada were quoted at 3.9% as of late August for both 60- and 84-month terms. In Ontario, where the amount to be borrowed is highest, at $52,571, including taxes and the $5,000 federal iZEV rebate, this equates to a monthly cost of $716 over 84 months, with a total cost of borrowing of $7,587. Reduce that term to 60 months at the same rate and the cost to borrow naturally goes down to $5,377, with a higher monthly charge of $966.

By contrast, in late August it was possible to finance a Nissan Murano ICE SUV for a much more enticing 1.9% over 84 months and 0% over 60 months. Were those same rates available to a Leaf Plus buyer, the 84-month monthly payment would be nearly $50 less, at $669, and the cost of borrowing goes down by more than half, to $3,615. At the 60-month term, where 0% financing means there’s no cost to borrow at all, the monthly payment goes down by $90 to $876.

Hyundai wasn’t much better. While the automaker was offering 0% financing for up to 84 months on many ICE vehicles for much of the summer, the Kona EV rates were quoted at 2.79%. A customer financing a Kona EV in Ontario would borrow a total of $50,356.44 with sales taxes, resulting in a payment of $660.61 per month. This is $54 more than if that same customer opted for a Hyundai Santa Fe Luxury, a much larger gas-guzzling SUV that’s very close on price, at $50,949.44, but with cheaper monthly payments thanks to the 0% financing available over the same term.

If Hyundai’s EV and ICE rates were on par, the monthly payment for the EV would be reduced by $62 a month in Ontario and $52 a month in Quebec. In B.C., financing rates were slightly higher for the ICEs we looked at; at a rate of 1.49% over 84 months, the difference in the monthly payment is $27 per month, and the cost to borrow is reduced by nearly half.

In contrast, General Motors was running a promotional financing rate of 1.99% on 2020 Bolt EVs in August, which was more on par with the ICE.

For reference, Canada’s most popular EV, the Tesla Model 3, can be financed at around 2.15%, with a required down payment of $2,500 and a usual wait time of two to three months.

Leasing lead

For leasing, 48 months is a common term. Again, Nissan had significantly higher rates than GM for the EVs in our research, with the Leaf Plus at 4.9% (monthly cost of $716 and a total of $6,413 in interest paid). Contrast that with the 1.9% lease rate over the same term on a Nissan Murano; a Leaf Plus at that rate would cost $636 per month and only $2,461 in total interest.

At Hyundai, the gap in lease rates is in some cases greater than with the Nissan Leaf Plus, but the monthly rates remain lower because of the lower up-front cost of the vehicle. A customer leasing a Kona EV in Quebec would pay $560 a month over 48 months at 4.99% for a total interest payment of $5,036; if that same buyer opts for an ICE Santa Fe, the rate goes down to 1.49%. Had the Kona EV customer been given that rate, the monthly cost becomes $488 (a $72 savings), while the overall interest paid would be significantly lower, at $1,486.

As of August, Tesla is finally offering leasing options to Canadians, at least in Alberta, B.C., Ontario and Quebec. The Model 3 requires a $2,500 down payment and comes with a leasing rate of 3.85%, which is higher than similarly priced ICE competitors such as the Mercedes-Benz C-Class, offered at a lease rate of 2.99%.

Bridging the gap

Fitting monthly payments into customer budgets is key to closing deals. The current higher financing and leasing rates for EVs, the on-paper difference in monthly payments and overall cost of borrowing between EVs and ICEs is wide enough to turn away all but the most determined EV shopper.

How can we start to narrow that gap? A Corporate Knights Building Back Better report proposed a government-led system of guaranteeing EV auto loans over three years. Doing so could be just as critical as rebates to meeting Canada’s EV sales targets of 10% of light-duty vehicles per year by 2025, 30% by 2030, and 100% by 2040, by making it possible for Canadians to purchase or lease EVs with monthly payments that are on par with their ICE-driving counterparts.

Advocates say that if Canada also implements a zero-emission vehicle standard that requires a gradually rising percentage of vehicles sold to be zero-emission (as Quebec does), more Canadians could start driving away with EVs, all without being taken for a ride.

Stephanie Wallcraft is a multiple-award-winning automotive journalist based in Toronto and is the president of the Automobile Journalists Association of Canada (AJAC).

The post The electric car you can’t buy or lease appeared first on Corporate Knights.

The first concern is easing as batteries gain capacity and efficiency. For the latest generation, range exceeds 200 kilometres and some claim more than 400.

Determining range is tricky enough, since it’s heavily impacted by driving style, load, terrain and temperature.

Cost calculations are even more complex. Common wisdom is that electric vehicles (EVs) are more expensive to buy than alternatives powered by internal combustion engines (ICEs), but cheaper to fuel and maintain. As a result, EV advocates argue, it’s only fair to calculate total costs over a vehicle’s lifetime.

But, as we shall see, that’s easier said than done.

Our aim here is to compare the total cost of ownership, or TCO, of Canada’s top-selling ICE vehicles with battery-powered alternatives of similar size, features and quality.

The category leaders are the Honda Civic sedan, Toyota RAV4 compact SUV, and, this country’s sales champion, Ford’s F-150 pickup truck.

To challenge the Civic, we chose the revamped Nissan Leaf S. Hyundai’s new Kona Electric takes on the RAV4. And, up against the F-150 is … well, nothing. At least, not yet. A few manufacturers are developing battery-powered pickups, but none will go on sale before the end of 2020 and their performance specifications remain sketchy.
TCO comparisons assume EVs have higher purchase or lease costs, including price, taxes and interest. Their fuel should be cheaper, in part because battery power is more efficient than internal combustion. With fewer lubricants and moving parts, and less wear on brakes, they ought to cost less to maintain – although experts disagree on how much less.

“Maintenance costs are largely unknown,” says Steve McCauley, senior director, policy, at environmental research and advocacy group Pollution Probe. “We’re still dealing with the first generation of EVs on the road.”

“It’s difficult to assign maintenance values because every person’s maintenance cycle is different based on frequency of use, road conditions in their area, weather conditions in their area, and so on,” says Brian Miller, communications co-ordinator at Plug’n Drive, a Toronto-based non-profit committed to accelerating the adoption of EVs.

But the deeper we dig, the more complex comparisons become.

Purchase price seems simple, except that while comparisons are usually based on suggested retail price, most manufacturers offer a wide range of discounts, which can even be influenced by a buyer’s bargaining skills. Interest rates vary from bank to bank and dealer to dealer, and with a buyer’s credit rating. Financing costs depend on those rates, as well as on how much the buyer borrows rather than pays in cash.

The cost of batteries – the main reason for EVs’ higher price – keeps falling. When the first Leaf hit the streets, it was about $1,000 per kilowatt-hour of capacity. It’s now around $200, and further drops will change the cost equation.

Fuel costs are, literally, all over the map. Gasoline prices vary from province to province, and can rise and fall dramatically. Electricity rates tend to be more stable but differ widely from place to place. In addition, most jurisdictions offer time-of-use rates, which generally mean you pay less if you consume electricity during off-peak times. One result is that per kilometre driven, electricity is occasionally more expensive than gasoline.

With all this in mind, we’ll plug some numbers into a TCO analysis worksheet – the most useful we found – developed by Tom Lombardo, a retired professor of engineering technology and now president of Tohoca, a communications company in Rockford, Illinois.

Here are our assumptions:

• We use each vehicle’s suggested retail price, for models that are usually a step up from basic. HST or its equivalent is set at 12%. We did not include delivery charges or other dealer fees or, for EVs, the cost of a battery charger.
• Calculations are based on manufacturers’ claims for range and Natural Resources Canada’s Fuel Consumption Guide.
• Each vehicle is driven 20,000 kilometres per year, the “rule of thumb” cited by Statistics Canada.
• The gasoline price is $1.20 per litre, roughly the current average in Canada’s largest markets. The electricity cost is 8.7 cents per kWh, the off-peak price in Ontario, based on the assumption that EV owners recharge their vehicles at home overnight.
• Based on data from Pollution Probe and Edmunds.com, a leading industry analyst, the lifetime maintenance and repair cost for an EV is about 75% that of an internal-combustion vehicle. We used $100 per month as an average for the ICE, based on data from Canada Drives.
• Repair and insurance costs are about equal.
• The ICE buyer pays all cash. The EV buyer pays the same amount in cash and borrows the cost difference at 4.5% interest, with a 72-month term – the length most Canadian buyers now use, according to various sources.
• Each vehicle is kept for 10 years, so depreciation is 100%.
• We do not include EV subsidies, now available only in Quebec, up to $8,000, and British Columbia, up to $5,000.

Given our inputs, we found the $23,770 Civic LX with automatic transmission would cost $66,020 over 10 years. The Leaf S sticker price $36,798, would cost $63,816 over that same period.

The 10-year TCO for the $33,690 RAV4 XLE with front-wheel drive would be $78,373. The $45,599 Kona Electric “Preferred” would cost $73,388.

So, the EVs win in these categories. But TCO comparisons are meaningful only with specific local numbers.

For example, electricity costs nearly 17 cents per kWh in Halifax, where the Leaf’s ownership cost rises to $65,555 and the Kona’s price climbs to $75,004. Since Halifax’s gasoline price is close to our assumption, the Civic and RAV4 retain almost the same costs.

In New York City, where electricity runs 31 cents (Canadian) per kWh while gasoline is just 84 cents per litre, EVs lose in the comparison. But in Norway, where electricity rates are in the same ballpark as Canada’s but gasoline costs twice as much, EVs win hands down.

No battery-powered pickup trucks are ready for comparison, and it’s uncertain which will make it to market. The list includes the Havelaar Bison, planned for Ontario, and two U.S. models, the Bollinger B2 and Rivian R1T. Tesla promises one, but with no firm timetable.

All claim impressive range, payload and towing capacity, but none has performed in the real world nor revealed how large loads and rugged conditions would impact their range – a crucial consideration for working trucks.

The Rivian R1T, backed by a recent US$700 million investment by Amazon.com, seems furthest ahead. With the biggest battery available, Rivian says its range will top 600 kilometres. But the price in the U.S. will start at about C$94,000, and that’s for a base version with only 370 kilometres of range, making it more than double the price of a similar F-150.

Our conclusion: It’s clear that EVs are more expensive to buy or lease, and whether they overcome that handicap with lower operating costs depends heavily on fuel and power prices where you live.

As battery costs fall, the price gap will shrink, making it more likely that EVs will win any cost comparison, just as they already beat ICEs on environmental impacts.

Peter Gorrie is a Victoria-based freelance writer and editor who has covered environmental issues for more than 30 years.

The post Think you can’t afford that EV? In a faceoff against gas cars, the numbers say otherwise appeared first on Corporate Knights.