Electric vehicles are undeniably the future of the automobile industry.
Tesla (TSLA), Ford (F) and General Motors (GM) are looking to lead the charge to produce millions of EVs over the next few years with several other EV makers ramping up operations as well. Among the other auto makers making their way into the market are Mercedes-Benz (DDAIF) , Volkswagen (VWAGY), Stellantis (STLA), Rivian (RIVN) and Lucid (LCID), just to name a few.
Tesla produced about 936,000 EVs in 2021, while Ford rolled out about 27,000 and GM less than 25,000. But both Ford and GM are looking to produce 2 million EVs each by 2026.
The growth of the electric vehicle market is expanding significantly as the EV share of the global automobile market jumped from 4.11% in 2020 to 8.57% in 2021, according to the International Energy Agency in an Electrek report.
As the market grows and sales become more common and competitive, prices for EVs will undoubtedly be more affordable for consumers down the road. But in the near future, the average person in the market for a new EV may find it a challenge to afford to buy one.
How Much Income is Needed to Buy an EV?
Based on the median salary of $51,480 before taxes for 2021 from the U.S. Bureau of Labor Statistics, not many people earning median pay could afford any EV. Net Pay for that salary in New York is about $40,625, or $3,385 per month.
Using the Nerd Wallet standard of paying 10% of monthly take-home income for a car payment, a person making a median salary could only afford a $338 monthly payment. That wouldn't be enough for any new EV currently for sale.
A review of EV new car prices and incomes by TheStreet shows that it will take a much higher income than $51,480 to afford a monthly payment on a new EV. All of the following loan scenarios used a 72-month loan period, since 70% of new car loans in the first quarter of 2020 were for more than 60 months, according to Edmunds. All the prices of the vehicles excluded taxes and registration fees that would vary from state to state.
Ford
How High Are Monthly Payments for an EV?
A consumer seeking one of the lowest prices for an EV -- $32,495 for a 2022 Chevy Bolt -- would need to earn a $72,000 salary, or about $4,505 take-home after taxes and other deductions in New York, according to iCalculator, to afford the $452 monthly payment for 72 months. The loan, according to GM Financial, would require a $2,500 down payment and would finance $29,995 at 2.74% interest.
Someone with sportier tastes seeking to buy a 2022 Ford Mustang Mach E for $44,995 would need to earn $101,000, or about $6,046 per month take-home in New York, to be able to afford the $606 monthly payment, according to Ford's payment calculator. The 72-month loan would require a $4,500 down payment and offers a 2.49% interest rate through April 4.
And how much does one need to earn annually to afford a Tesla? A buyer seeking to purchase a Tesla Model 3 for $47,690 would need to earn about $111,000 annually, or $6,562 take-home to cover the $652 monthly payment. The loan calls for a 72-month term, $4,500 down payment, and a 2.74% interest rate, according to the Tesla Financing and Leasing Calculator.
Automakers will continue to roll out new electric vehicle models, but if they plan have the masses buy in and get behind the wheel of an EV, they'll need to find ways to cut prices to make these pricey cars affordable.
