Is it cheaper per mile, or just per gallon?
According to E85Prices.com, E85 is 15% cheaper than unleaded on average. The cheapest E85 is 28% cheaper than gasoline. According to EPA figures, E85 gives ~ 70% of the mileage of gasoline in American flex fuel vehicles. Do out the math and on average, E85 is 18% more expensive per mile. Even at the greatest differential, E85 is barely break even right now.
Really, the only reason flex fuel vehicles exist is that ethanol in E85 consumption doesn't count against CAFE mileage figures. Only the gasoline content in E85 is counted. The EPA also assumes the car will be driving on E85 50% of the time and calculates fuel economy accordingly. So even though E85 gets only 70% of the mileage, on paper, only 15% of the fuel used is counted... There are set limits to how much of a CAFE contribution E85 can make, but hey, an E85 Tahoe has a CAFE rating of 33 mpg, compared to a CAFE rating in the teens for the regular gasoline only version. Plenty of incentive there for car makers that need a bit of help.