Charging up your knowledge on EV financing

Hear that? It's the gentle hum of electric vehicles (EVs) gliding through UK streets. As more and more people are drawn to the eco-friendly allure of EVs, the twisting road of financing options can get a tad bewildering. But, don’t stress! We’re shining a light on the path to make your journey to EV ownership a breeze.

The complex world of EV financing

Considering making the switch to an electric vehicle? It's a fantastic choice, both for the environment and your driving experience. But when it comes to financing that future ride, the terrain can get a bit uneven. The automotive industry is ever-evolving, presenting an array of financing avenues, each with its own set of benefits.

Perhaps you're contemplating the streamlined process of traditional leasing or weighing up the versatility of PCP (Personal Contract Purchase). Then there's the straightforward proposition of Hire Purchase and the tax efficiencies of Salary Sacrifice. With such a diverse set of options, it's understandable if the path to financing your EV feels a touch complicated.

Popular financing models

Emerging from the diverse landscape of EV financing, we encounter several signposts that guide potential EV owners to their destination. Here's a straightforward look at these financing options:

Traditional Leasing

TL;DR: You pay a set monthly fee and enjoy the ride, but the car remains the leasing company’s property.

Leasing a car is akin to a prolonged rental arrangement. Unlike purchasing, you never own the vehicle, and once your contract concludes, buying the car isn't on the table. When it comes to terms like Personal Contract Hire (PCH), it works like an extended vehicle rental. You commit to a fixed monthly fee for the lease duration, and once it's up, the car goes back to the finance provider without an option to buy.

PCP (Personal Contract Purchase)

TL;DR: This involves an initial deposit, regular monthly payments, and, if you choose, a final balloon payment to secure ownership at the end.

In a Personal Contract Purchase (PCP), you start by paying a deposit, followed by monthly instalments over a typical period of 2-4 years. At the end of this term, you have three options: trade the car in for a new one, purchase it outright with a balloon payment (at which point you become the owner), or keep driving it. If you decide not to buy the car, you might face mileage restrictions, similar to many leasing deals. Going over these limits incurs fees, a crucial consideration if you plan on returning the car. However, if you're buying it post-contract, the overage won't affect the balloon payment.

Hire Purchase

TL;DR: It's simple. Pay in instalments and, once the final payment clears, the car is all yours.

With a Hire Purchase Contract (HP), much like the PCP, you kick off with an initial deposit followed by monthly payments, typically spanning 3-4 years. The essence of HP is in its name – you're essentially 'hiring' the car with an intent to purchase it. Hence, mileage restrictions aren't a concern, as you're working towards ownership from the get-go. However, it's crucial to note that maintenance isn't typically included. This means that upkeep, along with any damage repair costs, will fall on your shoulders. It offers a straightforward path to full ownership without the end-of-term decisions that come with other financing methods.

Salary Sacrifice

TL;DR: An innovative approach where your car payment is conveniently deducted from your pre-tax salary, leading to considerable savings.

Read on to learn more about EV salary sacrifice:

EV salary sacrifice with loveelectric

Navigating the world of EV financing can be complex, but there's a solution that most find the most financially sensible to get behind the wheel: EV salary sacrifice. In the UK, salary sacrifice offers exceptionally favourable monthly payments. With an ultra-low Benefit-in-Kind (BiK) rate of just 2% (as of 2023/24) for electric cars, the savings available are substantial. When you combine this with reductions in income tax and national insurance contributions, electric car drivers with a salary sacrifice deal can get savings of up to 60% on a new car.

At loveelectric, we work directly with companies across the UK to bring EV salary sacrifice to employees. We're on a mission to make electric cars accessible and affordable to all, guiding you through this electrifying landscape and ensuring you reap the financial benefits while driving greener.