Want an electric car but fear the cost? Here’s how to flick the switch

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The Guardian

Consumers are more and more eager to go electric. The number of electric vehicles (EVs) on British roads is soon set to exceed France after a huge surge in sales. But while a growing number of motorists want to switch, many are also wondering if they can afford it.

Although they are cheaper to run, EVs are more expensive to buy than other vehicles, leading many to believe they are out of their price range. And while the number of EVs sold in the UK has now exceeded half a million, research from the Green Finance Institute says that most purchases are by corporate fleet companies, and not individuals.

A report from the thinktank says: “Consumer adoption of EVs is still in its infancy, and a number of barriers deter larger numbers from switching in the short term.

“Higher upfront cost of the vehicles, the pace of improvement in battery range, concerns about access to reliable charging infrastructure and perceived complexity of transitioning means many are hesitant about making an EV their next car,”

Last year the average pre-tax retail price of a medium-sized EV was €33,300 (£28,914) compared with €18,600 for a petrol car, according to BloombergNEF.

Added to that, the cost of living crisis is putting more pressure on households. Banking group Close Brothers says research suggests many people are changing their mind about buying due to the current need to tighten belts.

But there are ways to get on the road without shelling out huge amounts.


Personal contract hire (PCH), best known as leasing, is, in effect, a very long-term rental. You don’t get to keep the car at the end of the term – instead, you make monthly payments to keep it for a set period. This is usually the cheapest way to get on the road but, typically, it has limits on the number of miles that can be done in a year, according to Dan Powell of motoring site AutoVillage.

The pros are clear: a new car every few years, and the depreciation on the vehicle is not the problem of the driver, but the lease company.

Leasing terms are mostly between two and four years, but the drivers are typically liable for repair costs that are their fault, says Jeff Fairbotham of Zoom EV.

How much a lease costs depends on the price of the vehicle, the length of contract, mileage, the value of it at the end of the term and whether certain options, such as maintenance, are included.

There can be additional costs if the lease is ended early, or if you exceed mileage limits. “You never own the car, and you may be stung for additional money if you go over your annual mileage allowance, or if the car has more than fair wear bumps and scratches,” says Gill Nowell of insurer LV=.

Comparison site Auto Lease Compare gives the best price for a Nissan Leaf at £261 a month on a four-year contract at 5,000 miles a year.

Hire purchase and PCP

Similar in some ways, hire purchase and personal contract purchase (PCP) can both end up with the driver owning the car.

Hire purchase contracts are split between the deposit and instalments over the term of the agreement. Once the final instalment is paid, the car is yours, usually over a period of up to five years. Again, the price of a deal is altered by the term, and what the initial deposit is.

PCP is the most popular type of car financing in the UK, and differs in that the driver can keep the car, trade it in, or hand back the keys at the end of the term. If they want to keep the car, they pay a final “balloon” payment.

“Instead of paying off the entire value of the car over the term of the agreement, you only pay off the depreciation. As a result, the deposit and monthly payments tend to be lower than a traditional hire purchase agreement,” says Powell.

Drivers will have to stick to mileage limits with the PCP contract and will have to pay if they hand back the car with any damage.

What Car? lists a Skoda Scala at £239 a month on a PCP contract at 5.9% APR, with a 15% deposit, over four years as its best available deal at the moment.

Salary sacrifice

For people who work for a company with a salary sacrifice scheme for EVs, considerable tax savings can be made in a way similar to pensions or cycle-to-work schemes.

After an agreement is signed and a car is selected, a set amount is deducted from pre-tax pay. The employee then pays benefit-in-kind tax, which is 2% for EVs this tax year.

Salary sacrifice packages can offer all of the things a driver needs to get on the road – the car, insurance, maintenance deals, breakdown assistance – under one payment.

Simon Down, a tax director at accountants Deloitte, says people sign up for a set period and agree an annual mileage. “Underneath it’s essentially a car lease. A business … gets a lease provider to provide the cost and the maintenance, and all the other kinds of bits you need to keep on the road.”

A £31,000 EV taken out for three years in a salary sacrifice scheme will end up costing the employee £420 a month after the tax savings are included and the benefit-in-kind tax paid, according to Deloitte’s calculation. A lease agreement on the same car, with maintenance and insurance having to be paid, would cost £619. There are usually penalties if you leave the job and end the scheme early.

“The government has used the company car tax system for a number of years to influence certain behaviour. I think they want it clear that there is a need to get to zero emissions. At the moment there is quite a strong incentive to switch to electric cars,” says Down.

Taking it month by month

Drivers who don’t want to commit to long leases have the option of taking them by the month with a Netflix-style subscription.

A new generation of companies has emerged which has insurance, tax, maintenance and other essentials included under the one price. Contracts usually renew each month, so, as long as you keep on paying, the car stays with you.

Elmo offers a Fiat 500e for £449 a month, or a Renault Zoe for £469. Both have a limit of 800 miles, and come with a £95 one-off admin fee.

Onto, which includes public charging in its prices, offers a Renault Zoe for £489 a month with a limit of 750 miles, or a Vauxhall Corsa-e for £549.

Onto’s founder Rob Jolly says it has 6,000 cars with subscribers. Base prices start at £379 a month, with mass-market cars around £500 a month.

Why it’s all change for the Spotify generation …

Owning your own vehicle is quickly becoming an unnecessary demand for consumers.

The development in recent years of different types of subscription models shows that ownership is not as important to a new generation of drivers.

Erin Baker of AutoTrader says younger motorists see cars differently to their parents. “The younger generations coming up and entering the market – probably 18- to 35-year-olds – are increasingly happy to look at subscription models where there is no more than a monthly cost.

“They are used to sharing their lifestyle, they share their music choices on Spotify, they share streaming choices, they share their lives on social media, so they are less bothered about having a private car that is their own.

“And that coincides well with not seeing cars as the same status symbol as older generations did.”

Cars are not seen with the same level of “badge snobbery,” according to Baker, with brands such as Kia, Tesla and Hyundai replacing BMWs and Jaguars on people’s wish lists.

July 24, 2022 at 08:37PM Shane Hickey

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