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Green Vehicles and Car Insurance: Everything You Need to Know

Feeling the pinch of high gas prices lately? Whether you’re driving a truck or car, those trips to the gas station aren’t exactly easy on the wallet. With the carbon tax climbing and gas prices following suit, it’s natural to wonder about your options. Should you keep shelling out for pricey fill-ups, or is it time to explore alternatives like electric or hybrid vehicles? If you’re grappling with this dilemma, you’re not alone. Today, we’re delving into how these eco-friendly cars can ease the strain on your wallet, both at the pump and in terms of insurance costs. Keep reading to learn more about cutting your expenses.

What is the Carbon Tax? 

Canada’s carbon tax has been around for some time now. In 2018, Parliament passed the Greenhouse Gas Pollution Pricing Act, which outlined how the federal government would require provinces and territories to implement a levy on greenhouse gas emissions or follow the federal system. This law came into effect on April 1st, 2019. The policy consists of two main parts: the “fuel charge” and the “output-based pricing system”. The “fuel charge” applies to the purchase of 21 different fuels that are used for heating or generating electricity. Typically, the distributor of the fuel pays the tax, and then the cost is passed down to you, the consumer, when you fuel up your vehicles, pay your home gas bills or fill your propane tanks. The “output-based pricing system” targets larger businesses with significant carbon footprints, such as industrial companies, oil producers, chemical manufacturers, automakers and power plants. Instead of paying a fuel tax, these businesses pay based on a portion of the emissions they produce. This portion is determined individually by each industry. Companies emitting over 50,000 tonnes of carbon dioxide or an equivalent measure of other greenhouse gases like methane and nitrous oxide are automatically included in the system, while those emitting between 10,000 and 50,000 tonnes can choose to participate.

How Does the Carbon Tax Work?

The purpose of the carbon tax is to raise the cost of burning fossil fuels, which release greenhouse gases and contribute to global warming. Initially set at $20 per tonne when it began in 2019, the carbon tax has been gradually increasing. On April 1st, it rose from $65 to $80 per tonne. In hopes that homeowners and businesses will eventually shift to cleaner energy sources, it’s scheduled to rise by $15 each year until 2030, when it will reach $170 per tonne. Although the April increase only added about three cents per litre of gasoline, by 2030, it could add almost 40 cents per litre. This steep increase could prompt homeowners to switch from gas-powered trucks and SUVs to electric or hybrid ones to save money at the pump.

The Impact of Higher Carbon Taxes on Gas Prices

With over 25.4 million automobile registrations, many people are feeling the impact of higher carbon taxes. To understand how these increases will affect Canadians, the Canadian Energy Centre examined the impact of the carbon tax on fuel costs for the top five vehicles sold in Canada in 2019: Ford F-150, Dodge Ram 1500, Toyota RAV4, Honda Civic Hatchback and Honda CR-V. Here are the key findings:

  • Ford F-150: In 2021 annual costs were estimated at $3,931, with the federal carbon tax accounting for $257. By 2030, annual costs are projected to be $4,832, with the federal carbon tax making up $1,158, an increase of $901, or 350 percent from 2021.
  • Dodge Ram 1500: In 2021, estimated annual fuel costs were $3,931, with the federal carbon tax comprising $257. In 2030, estimated annual fuel costs would be $4,832, an increase of $901, or 350 percent from 2021.
  • Toyota RAV4: In 2021, estimated annual fuel costs were $2,654, with the carbon tax accounting for $174. By 2030, estimated annual fuel costs would be $3,263, with the federal carbon tax comprising $782, an increase of $608, or 350 percent from 2021.
  • Honda Civic Hatchback: In 2021, estimated annual fuel costs were $2,453, with the federal carbon tax comprising $161. By 2030, estimated annual fuel costs would be $3,015, with the federal carbon tax making up $723, an increase of $562 or 350 percent.
  • Honda CR-V: In 2021, estimated annual fuel costs were $2,587, with the carbon tax accounting for $169. By 2030, estimated annual fuel costs would be $3,180, with the federal carbon tax comprising $762, an increase of $593 or 350 percent.

Understanding Green Vehicles 

Gasoline-powered vehicles used to dominate the roads, but times are changing. Zero-emission vehicles (ZEVs) have become increasingly popular. Statistics Canada reports that over 65, 253 hybrid electric cars were registered in just the first nine months of 2021. A survey by KPMG shows that this trend is likely to continue, with seven in 10 Canadians planning to buy a vehicle in the next five years considering electric or hybrid options.

Electric Cars vs Hybrid Vehicles

Despite only gaining acceptance recently, electric and hybrid vehicles have been around for some time, evolving since their inception in 1996 and 1997, respectively. Electric cars run entirely on an electric propulsion system, aiming for better fuel economy than standard cars. Hybrid vehicles, on the other hand, combine gas-powered engines with electric propulsion systems, using the electric motor until the battery runs out and then switching to the internal combustion engine. When it comes to green vehicles, many drivers prefer hybrids because they don’t need charging infrastructure; they charge through regenerative braking, which stores electricity as you brake or coast. 

The Benefits and Drawbacks of Hybrid Vehicles 

Benefits 

Environmentally Friendly Vehicle 

Hybrid vehicles offer an environmentally friendly alternative to traditional gas-powered cars. They are a great option for anyone looking to reduce their carbon footprint but not yet ready to switch to a fully electric car. Although hybrid vehicles still use gas, they consume far less than the average gas-powered car, making them a greener choice for eco-conscious drivers.

Less Expensive than Electric Cars 

Hybrid vehicles are more cost-effective than electric cars. They are generally cheaper to buy and maintain, and you still use much less gas than with a traditional gas-powered car. This makes hybrids a great choice for those looking to save money while also reducing their fuel consumption. 

Drawbacks 

Higher Upfront Costs 

Although more cost-effective than electric cars, hybrid vehicles still present a large upfront cost. When compared to the average gas-powered vehicle, they are often found to be more expensive due to their advanced technology and limited supply. This higher initial cost could be a barrier for some buyers.

Higher Maintenance Costs 

Another drawback of hybrid vehicles is their higher maintenance costs. They can be more expensive to maintain than a typical gas-powered car, like a Hyundai Elantra. This is because hybrid parts often cost more, and servicing them may require specialized expertise, leading to higher rates.

Still Runs on Gas 

Although hybrid vehicles use less gas than traditional cars, they still rely on gasoline, which contributes to emissions. While hybrids are better for the environment than their gas-powered counterparts, they don’t eliminate greenhouse gas emissions. For those looking to make a significant impact on reducing emissions, switching to an all-electric vehicle is clearly the best option. 

Advantages and Disadvantages of Electric Vehicles 

Advantages

Zero Emissions 

The most evident benefit of choosing an electric vehicle is its zero emissions. Since no gasoline is required, there are no greenhouse gas emissions, making this green vehicle both environmentally friendly and cost-effective. 

Better Government Incentives 

While green vehicles in general regularly receive government rebates, electric vehicles often receive more substantial incentives from both provincial and federal governments compared to hybrid vehicles. These incentives may have a more significant impact on your decision-making process when considering purchasing an electric vehicle. 

Good Riddance to Gas 

By ditching gas, you’re saving big. Canadians driving about 15,000 km a year fork over roughly $2000 annually for gas (ignoring recent price hikes). But with an electric car, gas is a thing of the past. All you need is electricity, which costs just a few hundred dollars a year. Say goodbye to frequent trips to the pump!

Disadvantages 

Shorter Range

Electric cars aren’t without their downsides. They do demonstrate limited range, which means they can only go so far before needing a recharge. While some models have decent ranges of 200 to 300 miles, luxury EVs can reach up to 500 miles. However, if you have long commutes or take frequent road trips, this may not be the vehicle for you.

Heavy Price Tag 

Electric cars come with a hefty price tag, surpassing both hybrids and gas-powered vehicles in cost. They’re currently the priciest type of vehicle on the market. While maintenance is less frequent, when it is needed, it tends to be costly. For instance, replacing a battery can be triple the cost of a standard car battery.

Lengthy Charging Time 

Charging an electric vehicle isn’t as quick as a gas fill-up. It can take anywhere from eight to twelve hours to go from empty to full, depending on the charger. However, public charging stations with higher voltages are available. These powerful chargers can juice up your electric cars in as little as 15 or 30 minutes.

How Does Owning a Green Vehicle Affect Your Insurance? 

Car insurance for an emission-free vehicle is similar to insurance for any other car. Your premium is determined by factors such as your driving risk and the value of the vehicle, not its fuel source. However, if a vehicle is more expensive to replace, insurance costs tend to rise. As discussed above, electric vehicles often have costly battery replacements and specialized repair needs, which can increase premiums. But it’s important to remember that this upsurge isn’t due to the vehicle’s fuel source but rather the expensive parts involved. Opting for a non-luxury EV brand can result in a lower premium compared to high-end models.

3 Ways to Save with Electric Cars 

  1. Look for Rebates 

There are many incentives available that can make it easier to afford an electric vehicle. For instance, the Government of Canada’s Zero Emission Vehicle Program provides point-of-sale incentives ranging from $2,500 to $5,000 for those who buy or lease a Zero Emission Vehicle. Additionally, there are rebates available for home chargers. You can find more information on the Government of Canada’s website. 

  1. Shop Around For Electric Car Insurance 

Certain insurance companies provide incentives and discounts for owners of electric or hybrid vehicles. It’s worth asking about these discounts when shopping for electric car insurance. Usually, no additional paperwork is needed to qualify, and you could save up to 10 percent on your premiums. As always, it’s important to compare car insurance options to find the best rate.

  1. Prioritize Electric Vehicle Battery Care

Electric car batteries typically come with an 8-year or 160,000 km warranty. However, with proper care, they can last up to 20 years. During hot summer days, it’s essential to park your electric car out of direct sunlight and use a sunshade to keep the battery cool. In winter, when temperatures drop below freezing, ensure your battery is adequately charged before driving and plug in when the temperature falls below -15C. Cold weather can cause EV batteries to drain faster due to the lack of heat production from the motor. Finally, to prolong your electric car battery’s lifespan, avoid fast charging above 80 percent unless necessary to reach the next charger or your destination. 

Contact Acumen Insurance for Hybrid and Electric Car Insurance 

Keep the conversation going! If you’re eager to delve deeper into protecting your green vehicle, whether it’s a hybrid or electric car, reach out to Acumen Insurance today. Our team can assist you in securing the right car insurance for your eco-friendly ride. Your best interests are always our priority. Connect with Acumen Insurance today to secure an electric car insurance quote.