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Can you buy an electric car on finance?

Emma Lunn
Written By:
Emma Lunn

Soaring petrol and diesel prices could increase the appeal of electric cars – if you can afford to buy one.

Figures from online car buying and selling website Carwow show that more drivers are thinking of making the switch to electric, with rising petrol prices a key reason why.

And it’s also seeing a growing trend of ‘usership’ over ‘ownership’ with a 44% increase in leasing enquiries over the past year.

The figures suggest this shift is being accelerated by the increasing demand for electric vehicles (EVs). In the last 12 months, it has reported a 200% increase in electric vehicle lease enquiries, and EVs now make up 38% of all Carwow enquiries, up from just 11% in 2018.

In terms of the individual models most in demand, EVs featured highly, with the Tesla 3 topping the Carwow list in 2021, and the all-electric VW ID.3 in fourth place.

Hugo Griffiths, features editor at Carwow, says: “Petrol prices have been rising for some time now, but the last few weeks have seen some of the sharpest rises in years. Our data suggests this has had a direct impact on interest in electric vehicles, as motorists look to mitigate the impact rising petrol prices have on their household budgets. Two in three motorists tell us costs are a key consideration for them as they decide whether to go electric.”

Anyone buying a new car after 2030 will need to purchase an electric or hybrid vehicle as the government plans to ban the sale of new petrol and diesel vehicles by then.

According to the Society of Motor Manufacturers and Traders (SMMT), many drivers are already making the switch. Its March data shows that purchases of battery electric vehicles was up 102% year-on-year. Sales of plug-in hybrid electric vehicles were up 12%, and hybrid electric vehicles 52%.

All in all, electrified vehicles comprised more than a third (34.1%) of all new car registrations for March.

Are electric cars more expensive than petrol cars?

The upfront cost of an electric car is a lot more than a petrol or diesel car. According to Auto Trader, electric vehicles are typically 37% more expensive than petrol cars.

Erin Baker, editorial director of Auto Trader, says: “When you look at the demographic profile of people who are currently searching for electric cars on Auto Trader you see it’s predominantly older, richer people living in affluent parts of the country, a trend at odds with the ‘normal’ profile of early technology adopters who tend to be young and metropolitan.”

Auto Trader’s own Road to 2030 report shows the number of electric models priced under £20,000 dropped from 11 in 2020 to just three in 2021. It also shows limited choice within body types.

Baker adds: “Motorists are feeling the pinch from all directions at the moment, and despite positive environmental intentions – the number of people citing environmental reasons for owning an EV has grown from 48% in January 2020 to 56% in August 2021 – rocketing energy prices coupled with a large upfront ticket price of an EV doesn’t bode well for significant uptake of EVs.”

Are electric cars cheaper to run than petrol cars?

Those drivers that can afford to make the switch to an electric vehicle will find that their new wheels are cheaper to keep on the road. According to a study by Compare the Market, electric cars are 47% cheaper to run than petrol cars.

The price comparison site found that an electric car typically costs £1,091 a year to run while keeping a petrol car on the road costs £2,062, a difference of £971. The research analysed the cost of insurance, fuel, and vehicle emissions duty (VED).

The study took place last summer – petrol prices have risen a lot since then so there are probably even higher savings to be made once you own an electric car.

Do you pay VED on electric cars?

All electric cars are exempt from VED as they have zero CO2 emissions.

With petrol and diesel cars, the more harmful the vehicle the higher rate of tax applicable. But not all petrol cars are liable for VED. Some petrol cars built and registered before 1 April 2017 that produce 100g/km of CO2 or less are tax-exempt.

With an electric car, you also won’t have to pay to enter any low-emission zones such as the Ultra Low Emission Zone (ULEZ) in London, and you won’t have to pay the London Congestion Charge either.

Can I get a discount on an EV?

Yes, the plug-in car grant (PiCG), funded by the government, offers a discount on the cost of buying an electric car. The scheme means the government puts a sum of money towards the purchase of zero-emissions vehicles.

However, the government has been reducing the plug-in car grant discount amount. Previously buyers could get £3,000 off vehicles – this was reduced to £2,500 in March 2021 and then reduced again to £1,500 in December.

The maximum price of vehicles that could be bought using the grant was initially £50,000, but this reduced to £35,000 in March last year and then cut to £32,000 in December. The good news is, there is a decent choice of electric cars that cost less than £32,000.

Can I buy an EV on finance?

Electric car buyers have several options to finance their purchase, the same as they would if they bought a petrol car. Options include personal contract purchase (PCP), hire purchase (HP), car leasing, or taking out a car loan.

With a PCP plan, you pay a deposit, monthly payments for two to five years, then a ‘balloon payment’ at the end of the deal if you want to keep the car. If you don’t want to buy the car, you can hand it back and take out another PCP on another new car.

Smart Home Charge has compiled a list of the top 10 lowest priced electric cars with PCP finance. Its best deal was for a Renault Zoe Iconic R110 EV 50 which requires a £6,763 deposit, then 36 monthly payments of £199. If you want to keep the car at the end of the three-year term, the balloon payment will be £13,668.

Other electric cars with monthly payments under £300 on PCP include a Nissan Leaf (£6,427 deposit then £219 a month for 36 months), a Fiat 500 Electric (£4,495 deposit then £249 a month for 36 months), and a Hyundai Kona Electric SE Connect (£8,700 deposit then £254 a month for 36 months).

What is the cheapest EV?

According to car price guide Parkers, the cheapest electric cars on sale in 2022 include the Smart EQ Fortwo (£20,350 to £24,425), and the bigger Smart EQ Forfour (£20,785 to £25,565).

Other models on the list include the Fiat 500 Electric (£22,995 to £29,995), VW e-Up (£23,555), MG 5 EV (£27,495 to £29,995), and Mini Electric Hatch (£27,900 to £33,900).

If you buy a new petrol car it’s likely to be a lot cheaper than the cheapest electric cars. For example, Auto Express says a brand new Dacia Sander will cost from £10,145, a Kia Picanto from £11,450, and a Citroen C1 from £12,245.

How much does it cost to charge an EV?

Some drivers are put off switching to an electric car due to a lack of access to charging points. However, the government has now set a new target to increase the number of chargers tenfold to 300,000 by 2030.

The cost to charge an electric car in the UK varies between home and public charging. According to Pod-point.com, a typical electric car with a 60kWh battery and about a 200-mile range would cost about £15.10 for a full charge at home. Rapid charging at a motorway service station would cost about £6.50 for a 30-minute charge that would last about 90 miles.

Campaign group Which? has called for an overhaul of the electric car charging network. It says improving the access to the public charging network is vital to accommodate the predicted growth in electric car use. Those who are unable to charge from home face having to pay higher prices on the public network, and all electric car drivers face challenges including multiple payment systems and poor charge point reliability.