How cost-effective is buying an electric car?

Motoring 2020-7-23
Is Buying An Electric Car Cost Effective

The sale of electric cars in the UK has steadily increased over recent years, but for many of us, the question remains - "Is it cost-effective?"

With more drivers in the UK choosing to drive an electric car, recent statistics from Next Green Car show that at the end of May 2020; there were over 128,500 electric cars on our roads and over 315,000 plug-in models including hybrids.

The reasons for drivers making the switch varies - for some, it's all about the carbon footprint, whereas others feel electric vehicles better suit their lifestyle and budget. So before you can make a final decision on switching to electric, it's best to know the ins and outs of owning one.

How much does it cost to run an electric car?

Running costs for an electric car is typically much lower when compared to a conventionally fuelled vehicle, making a strong case for switching.

With the average cost of petrol currently at 110p* per litre, every 10,000 miles you drive will cost you just over £1,185. Compare that with just 4p per mile on a pure electric car meaning your bill could be reduced to only £400 - that's a massive 70% saving!

All vehicles need servicing and even the occasional repair; however, as electric cars have fewer moving parts, there is less to go wrong. The only thing you'll have to think about is replacing the battery but this is unlikely to be an issue for most drivers.

How much does it cost to insure an electric car?

Premiums are still slightly higher at the moment compared to petrol or diesel cars, but it's clear that this trend is changing. As electric vehicles are more commonplace and insurers now have more data for the cost of repairs, combined with the number of garages which can carry out EV repairs, premiums are slowly on the decline.

It also helps that electric cars are less likely to be stolen as they have a smaller range, take a long time to charge and require the correct charging cables amongst other things.

Put simply, although electric car owners can still expect to pay slightly more for their cover at the moment, increased competition from insurers will start to bring down the cost.

What about Clean Air Zones?

Those of you who have to travel through Clean Air Zones (CAZ) or Ultra-Low Emission Zones (ULEZ) will know that this can significantly increase the cost of regular journeys (especially combined with congestion charges).

Transport for London (TfL) currently charges cars that don't meet emission standards £12.50 per day when entering ULEZs in addition to the £15.00 daily congestion charge. From October 2021, other major cities will follow suit, emission-related charging is becoming more frequent and more punitive every year.

If you want to see if you'll need to pay a charge for driving in a Clean Air Zone, you can check via the government website here.

Can you still get a government grant?

From 12th March this year (2020), drivers making the switch to electric cars are eligible for a grant of up to £3,000 on vehicles costing up to £50,000 to help offset the initial expense. 

Grants are usually applied as a discount by the manufacturer. However, the Government has tightened their rules and cars must now have an electric-only range of at least 70 miles to qualify.

For home charging, the Electric Vehicle Homecharge Scheme (EVHS) provides a grant of up to £350 towards the cost of buying and installing a charging point at your home. 

It pays to do your homework and ensure that you are getting the best deal, so shop around and see what each retailer is offering.

Do I have to pay road tax on an electric car?

The good news is pure-electric vehicles are currently exempt from Road Tax and the £320 Premium Supplement for vehicles worth £40,000 or more. Even if you own a plug-in Hybrid, you can still benefit from a discount in the first year, which is usually between £0 and £100 (depending on their emissions) rising to £140 in the second year.

Will I be taxed on an electric company car?

The Government has linked this with the Benefit in Kind (BIK) tax based on emissions meaning drivers have the incentive to make greener choices. The greener the decision, the lower the charge and pure electric vehicles are receiving the most significant incentives.

In April this year (2020), the Government introduced new rules around the electric-only miles a car can do. As a result, vehicles with a minimum range of 130 miles are now classified as pure-electric and will incur no BIK tax in 2020/21 compared with plug-in hybrids that are only capable of doing up to 30 miles or less -which face a rate of 14%.

Until recently, cars which emit just 75g/km, would have been considered a very green choice, will be subject to a 20% BIK charge by 2022/23 or, if registered after 5th April 2020, this could rise to 24% if they fail to comply the new RDE2 testing regime.

A recent report by Deloitte showed that a combination of company car tax and the net cost of fuel over 4 years for a higher rate taxpayer with a £30K company car could save over £4,000 per year by switching to a pure-electric vehicle. It seems that the overall message from the Government is clear - low emissions are not enough. We need zero-emission driving to be the order of the day!

In summary

Electric car ownership can seem more expensive; however, with 1 million electric vehicles forecast to hit UK roads by 2025, increased competition will continue to reduce headline prices for customers.

It's essential to look beyond seemingly high vehicle cost or tax implications and focus on the total cost of motoring - this includes fuel, servicing, the cost of entering emission-controlled areas and any available grants. In the long term, an electric car could save you money while protecting the environment.

Car Loans & Financing

If you want to get your hands on your very own electric car, we have low-cost car loans starting from just 3.9% APR Representative between £5,000 and £25,000. Click here to find out more.

*All statistics are correct as of 29/07/2020

Hitachi Hints and Tips is intended to be informative and interesting. It does not constitute financial advice, and you should always do further research when making any financial decisions. All information was correct at date of publication.

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