Electric vs Petrol Cars: Which Is Cheaper in Australia?

Switching from a petrol (or diesel!) car to an electric car is an option that many Australians are considering. In this article, we compare electric and petrol cars in Australia, and break down the associated costs.

At IMB Bank, we understand the answer to the headline question goes beyond upfront costs. A good, long-term comparison looks at upfront costs, running expenses, long-term savings, and maintenance costs. Cost of living increases, including petrol and electricity prices should also be considered when buying a car.

As more electric vehicles enter the market, we want to help our customers make the right decision for their circumstances, so read on to discover more about which type of car may be the more cost-effective option in Australia.

What are the Upfront Costs: EV vs Petrol Cars?

The cost of an electric vehicle (EV) in Australia often starts higher than a fuel-based equivalent. According to the RACV, the cost of an EV can start from $25,000. For a medium-sized EV, you’d be looking at around $45,000 as an initial price point. The exact cost of an EV will depend on factors such as the make, model and age of the vehicle.

There is a reason for this higher upfront cost: the cost of the battery technology.

That being said, prices are steadily declining as more EVs enter the market and more manufacturers transition to electric-based vehicles. According to the International Energy Agency, falling costs are accelerating EV adoption. What used to be a rarity, with premium brands like Tesla dominating the market, is now a lot more commonplace and therefore increasingly affordable, with a growing range of brands like Toyota, Jeep and Hyundai (and many more) producing their own EVs.

Petrol and diesel cars still tend to be cheaper to purchase initially, which is an attractive option for many Australians. However, the sticker price only tells part of the story. Government incentives, rebates, and reduced running costs can help offset the higher EV purchase price over time. Let’s investigate this more.

How Do Running Costs Compare Between EVs and Petrol Cars?

A big difference in an EV vs petrol car cost comparison comes from day-to-day expenses.

EV drivers can significantly reduce ongoing costs compared to petrol or diesel vehicles. Savings can reach up to 70% on fuel and around 40% on servicing, largely due to the way electric vehicles are designed and powered.

Electric cars are more energy efficient, have far fewer mechanical components that require maintenance, and rely on electricity, which is typically cheaper per kilometre than petrol or diesel. These factors combine to lower day-to-day expenses and help balance out the higher upfront purchase price.

For a typical Australian driver covering around 13,700 kilometres per year, this can translate to roughly $1,000 in annual fuel savings, increasing to about $1,200 when charging during off-peak electricity periods.

What is the Australian Government Support for EVs?

Government incentives are helping to lower the cost of owning an electric car in Australia, including through tax incentives that reduce upfront and ongoing costs. This is partly because the Federal, State and Territory governments have agreed to achieve zero emissions by 2050. Ways in which they are helping include:

• The 2022 Electric Car Discount helps reduce the purchase cost of eligible EVs through a fringe benefits tax exemption. This is typically accessed via salary packaging, making electric vehicles more financially accessible for employees.
• The Clean Energy Finance Corporation is supporting the transition to EVs by helping lenders offer more competitive green car loans. This can lower borrowing costs and make financing an EV more affordable.
• From 1 January 2025, the Australian Government introduced the New Vehicle Efficiency Standard. This policy is designed to improve the efficiency of new vehicles entering the market and expand the availability of low and zero emissions options, including EVs and hybrids.
• Additional support may also be available depending on your circumstances. Eligible businesses may also benefit from the instant asset write-off when purchasing business assets, including electric vehicles, allowing them to claim a deduction on the cost (subject to eligibility criteria and thresholds).
• State support is also available, with each state offering its own incentives depending on where you live.

The 2026 Federal Budget announced proposed changes to the FBT exemption structure:

• Phase One (current rules continue): The existing full FBT exemption for eligible EVs continues until 31 March 2027.
• Phase Two (1 April 2027 to 1 April 2029): The full FBT exemption will apply only to eligible EVs with a value of $75,000 or less. EVs valued above $75,000 but below the fuel-efficient luxury car tax (LCT) threshold will receive a 25% discount on FBT otherwise payable.
• Phase Three (from 1 April 2029): All eligible EVs valued below the fuel-efficient LCT threshold will receive a 25% FBT discount. The full exemption will no longer be available.
• The Government has only confirmed that “existing leases” will not be impacted by the changes.

Which Is Better Financially?

For many Australians, an EV may be the cheaper option in the long term.

While the upfront cost of an EV is often higher than a petrol or diesel car, lower running and maintenance expenses may mean you’ll save more over time.

The Commonwealth Scientific and Industrial Research Organisation (CSIRO) predicts households that fully switch to EVs by 2030 will save up to $30,000 over 20 years when compared to a household that doesn’t make the switch. The exact savings depend on how often you drive, your access to home charging, and local electricity rates.

Petrol cars may still suit those prioritising a lower upfront cost or who drive less often. However, for many Australians, the balance is shifting toward EVs as the more cost-effective option over time.

Calculate Your Savings

Thinking about making the switch?

At IMB, we want to support our customers every step of the way, including if you make the switch to an EV vehicle. Our handy personal loan calculator can help you understand whether you can finance this decision. Alternatively, get in touch with one of our friendly team members, and we’ll be happy to help.