Tesla Model 3 vs Toyota Prius: Lowest Cost of Ownership in 5 Years?
The true cost of owning a vehicle goes way beyond just the initial purchase price. You have to consider a number of other costs to get the real picture. For example, the Model 3 purchase price is quite a bit higher than the Prius, but with all things considered and the costs savings associated with driving an electric vehicle, the Model 3 true cost of ownership may actually surprise you. But, are these cost savings enough to make up the initial price difference? Which vehicle is actually cheaper when it comes to the true cost of ownership over 5 years?
All New 2023 Toyota Prius
Image Courtesy of Toyota
Toyota redesigned the Prius for the 2023 model year and it's a huge improvement over the previous stodgy design. In fact, with the new design, it's actually quite an attractive vehicle now, but unfortunately it still has an internal combustion engine. The Model 3, on the other hand, is completely electric and has superior technology, but it has a higher initial purchase cost.
True cost calculations
Let's start with the purchase cost of the Model 3 versus a comparable Toyota Prius, and then we'll dive into some of the other factors that make up the true cost.Tesla recently dropped the prices of their vehicles, for instance, the Model three rear wheel drive model, which is the cheapest model three variant available that will be comparing today, went from a MSRP just under $47,000 to a new MSRP, just under $43,000. When you add in order and delivery fees, the actual purchase price of a white Model 3 RWD without any other added features is $44,630.
When it comes to a comparable 2023 Prius model, we need to at least compare the XLE trim level to be fair when it comes to available features, so this is the trim that we'll use for our comparison. The starting MSRP of the 2023 Prius XLE is $30,895. However, when you add in a basic package and the delivery, processing and handling fee, the actual purchase cost goes up to around $33,725.
Model 3 cost over $11k more than the Prius
When you compare these two prices side by side, the Tesla Model 3 is around $11,000 more initially than the Prius XLE two wheel drive model. However, unlike the regular Prius hybrid, the Tesla Model 3 is currently on the IRS list of vehicles that qualify for the $7,500 federal U.S. tax credit. However, do note that in March, the IRS is planning to bring out further guidance on the batteries sourcing the battery materials sourcing guidelines, which may actually make the rear wheel drive model three not qualify for this credit due to using lithium ion phosphate batteries that are sourced from CATL in China.
Nonetheless, until March, we know for sure that the Model 3 RWD currently qualifies for that credit, so this is a good time to purchase that vehicle if you're interested.
Note that there are several stipulations for this tax credit which can be found here. For instance, you have to have at least $7,500 of tax liability, and there are also some income limits for you to apply for this credit. But nonetheless, many people will be able to take advantage of this tax credit, and it will be interesting to see what the IRS comes up with in March. Maybe the Model 3 RWD will still qualify for something.
Prius Prime and the Tax Credit
Now, do note that the Prius prime, which is a plug in version of the Prius hybrid, has the possibility of qualifying for some of these credits because it will have an 8.8 kilowatt hour battery, which does meet the battery size requirements, however, it will also be subject to the battery sourcing guidelines as well, which are still a bit in flux. Additionally, Toyota has not yet released the pricing or availability yet for the 2023 Prius Prime, so for now, we're just going to stick with what we know and we're going to stick with the regular Prius hybrid non plug in version.
So if you take that Model 3 RWD purchase price, $44,630, and you subtract that $7,500 tax credit, that gives you a purchase price of $37,130, meaning that the net purchase price difference for those who qualify for that tax credit drops down to just $3,405.
However, do note that since these credits are likely changing for the rear wheel drive model three in March, I'm going to go ahead and include these calculations with the tax credit and without, so you can make your determination based on your particular situation and if these credits change.
Other factors to consider
One of the first factors that we need to consider which will influence our five year cost comes down to the miles driven per year. For this, I'm going to go with 15,000 miles driven per year. So, in a five year period, that would equate to 75,000 miles. Next, we need to know what the current prices are when it comes to electricity and fuel. According to saveonenergy.com, the average residential electric rate in the United States is around 16.09¢ per kWh. And according to AAA’s website, the average national U.S. gas price is around $3.50.
Next, we need to determine the efficiency of these vehicles so we can determine how much these vehicles cost to drive per mile. When it comes to energy costs according to fueleconomy.gov, the Tesla Model 3 RWD is able to go 100 miles with 25 kWh of battery capacity. On the flip side, the Prius hybrid is able to go 52 miles on a gallon of gas.
Insurance Costs
The next factor that we need to consider is insurance cost. In order to get a really accurate quote, I actually called my insurance agent and asked them to quote me out for a Model 3 RWD, and a Prius XLE two wheel drive model. As you can see below, the Model 3 is surprisingly only slightly more expensive to insure over the Prius hybrid.
Another important factor to consider are the finance costs. So, I went over to bankrate.com and they have a great loan calculator, and I put in the various loan amounts for these two vehicles and got the amount of interest that would be paid for a five year loan at a 6% interest rate.
We also need to consider maintenance and repair cost. While those numbers can vary quite a bit from owner to owner, I went to edmunds.com to find out what they estimated for these two vehicles and for the Prius. They estimate that maintenance should cost around $3,411 over five years and repairs should be around $601. For the Model 3, they estimate that the 5 year maintenance costs will be around $2,133 and that the repair costs will be around $1,980.
Depreciation Comparison
Lastly, before we add all these numbers up and come up with a true cost and a cost per mile, we need to see how much these vehicles depreciate over five years, because for this calculation, we're basically going to assume that you buy this vehicle driver for five years and sell it.
So I went over to kbb.com, and I looked up the value for a 2018 Toyota Prius with 75,000 miles. And based on an original purchase price of around $30,615 over five years and 75,000 miles, that vehicle has depreciated around 29%.
On the flip side, if you look at a 2018 Model 3 Long Range, which had an initial purchase price of a bit over $50,000, according to Kelley Blue Book, that vehicle has lost around 35% of its value over that five years and 75,000 miles.
5 Year Cost of Ownership: Model 3
So, with all those numbers in mind, let's not add all this up and get a true cost of ownership over 5 years and 75,000 miles and the cost per mile during this period of time. So, first of all, starting with a RWD Model 3, when you add up these various costs, sales tax, energy, insurance, financing, maintenance, repairs and the value of depreciation over this period of time, you come up with a true five year, 75,000 mile cost of just under $40,000 or $0.53 per mile.
However, this RWD Model 3, at least until March, currently qualifies for the $7,500 federal U.S. tax credit. So, for those who qualify, with the tax credit subtracted, the actual five year cost goes down to $31,925 or $0.43 per mile.
5 Year Cost of Ownership: Prius
Now, moving over to the XLE front wheel drive Toyota Prius, over 5 years and 75,000 miles, if you add up these various costs and the value of depreciation, the vehicle has lost over this five years, that five year true cost of ownership is $32,886 or $0.44 per mile.
So, in a side by side comparison, for those who qualify for the $7,500 U.S. federal tax credit, you can see that the actual ownership cost of the Model 3 RWD is almost actually slightly lower than the Prius XLE front wheel drive model. In March, if that tax credit completely goes away, that could change if the tax credit goas away, thus making the Model 3 cost around $0.10 more per mile over the Toyota Prius.
Check Local Incentives
However, make sure that you check for other local or state incentives that you may qualify for based on where you live. You may just be able to save thousands more on top of these numbers that we've already mentioned. Potential local incentive may make up for some of the cost difference if this $7,500 credit goes away for the RWD Model 3 in March. Do note that if you're trying to take delivery of a RWD Model 3 before March 1st, Tesla has recently had a number of these models in inventory throughout the USA for fast delivery.
Return of the Long Range AWD Model 3
There's also the strong possibility that after March, if the RWD version no longer qualifies for that credit, Tesla will once again add back the Long Range AWD Model three to the design studio, which should cost around $49,990 before the delivery and order fees or upgrades. Since that vehicle, currently uses batteries manufactured by Panasonic at their Gigafactory in Nevada, it should qualify for the credit even after March.
The Model 3 Wins
So, at the end of the day, if you qualify for that full tax credit, the Model 3 RWD is less expensive per mile with all things considered. That makes the Model 3 the clear winner, and it makes so much sense to drive the Model 3 over the Prius, because it's a pure electric vehicle, which is better for the environment. The Tesla Model 3 also has better software and superior technology, and if you have solar panels on your home, this cost could actually go lower.
If you're in the market right now for a new vehicle and you're considering either a Prius hybrid or the Model 3, do the math for yourself and it just might surprise you how affordable an all-electric Model 3 may be.
