If you are new to the world of electric cars and are considering getting one for yourself, then one of the first questions you’ll be asking is: how much does it cost to run one?
Quite likely, your questions are:
- Is it cheaper than a combustion car?
- Is the maintenance cost higher than a combustion car?
- Which is more cost-effective: leasing, Personal Contract Purchase (PCP) or Personal Contract Hire (PCH)?
In this article, we will break down all the various costs that are included in running an electric car, as well as the different ways to help decrease those costs. Specifically, we’ll cover:
- Summary of electric car costs.
- Comparing an electric car vs combustion car.
- A cheaper way to drive an electric car: electric vehicle salary sacrifice scheme.
Note: are you an employee and want access to an electric car? With loveelectric, you can save up to 60% by setting up an electric car scheme and the loveelectric salary sacrifice scheme. Learn more here!
What are the various costs in an electric car?
Let’s break down the various costs you need to take into account when using an electric car.
Car itself (prices vary)
There is no denying that the most expensive part of owning a car is the cost of acquiring it.
With electric cars, the full purchase cost is higher than combustion cars for a few reasons:
- There are very few second hand electric cars.
- The materials are more expensive due to newer technology.
- Demand is outstripping supply.
Since there aren’t many second hand cars, your options if you want to outright own an electric car are:
- Buy a car with cash.
- Buy a car via Personal Contract Purchase (PCP) or Hire Purchase (HP).
- Buy a car via car financing or with a bank loan.
- Lease a car (with the option to: buy it at the end of the term with a final payment).
The average price of an electric car in the UK is £43,896, with the cheapest cars at around £20,000.
However, buying a car outright might not always be the most logical option when it comes to electric cars for the simple reason that the technology is improving rapidly on a year to year basis.
An electric car from five years ago would not be able to compete with today’s electric cars – which means that if you buy an electric car, the technology will get outdated quite quickly. We’ll discuss the nuances of this in more detail below.
If you’re deciding between leasing and buying, we recommend reading our article on the topic: Lease or Buy Electric Car; Which One Is Right for You?
Charging point & ongoing charging costs (£800 - £1,500, and between £3 and £30 per night)
There are a few places you’ll charge your car:
- Your home
- At work
- On the road
You’ll need a charger at home so you can charge your car overnight. An at-home charger can cost between £800 and £1,500 to install.
Charging at home will cost around £31.2 for a full charge of a 60kWh electric car, which will give you 200 miles of range.
To charge your car at work can vary depending on your employer. But most workplaces offer electric car charging for free.
On the road, you’ll find public charge points where it’s free to charge your electric car as well. Then, you’ll find rapid chargers, which will cost between £6 and £11 for 30 minutes of charging.
Maintenance (varies, but £100 a year is an average)
The first thing to note about electric cars is that the cost of maintenance overall is a lot lower, since the cars are brand new.
Not only that, but electric motors have far fewer moving parts than a combustion engine, which means that service costs are a lot lower than with regular cars.
There are some maintenance that will still take place though, including:
- Tyres and brakes
- Battery repair and replacement
- Windscreens and wiper blades
Unlike diesel or petrol cars, you won’t have to worry about:
- Oil changes
- Water replacements
- Spark plugs
It’s quite rare for your electric car battery to require repair or replacement. Whenever you have a service, the mechanic will check the health of your battery. Most batteries are covered by a warranty of seven years or more.
If your battery needs replacing after seven years, the cost could be between £6k - £10k depending on the whole capacity.
Brakes and maintenance
Depending on your driving, you might have to replace brake pads, discs and fluids, which can cost around £250.
The coolant usually costs £40 to replace.
The MOT will set you back around £30 to £50 per year.
Insurance (average of £470.57 per year)
Electric cars used to be more expensive to insure than combustion cars, but over time that gap has shrunk. GoCompare reported that the average cost of an electric car’s insurance policy is on average £470.57 per year, which is just a bit more than the overall average of £458.
There are some cases where the insurance is cheaper. For example, Insurer LV says that a Renault ZOE is 8% cheaper to insure on average than a Renault Clio (£287 and £311)
Taxes (close to £0)
The good news is that the UK government is incentivising the use of electric cars, which means there are a lot of savings to be made in taxes and grants.
Road tax (£0)
Road tax for combustion cars isn’t cheap, ranging from £10 to over £2,000 per year, depending on the amount of CO2 emitted per year.
Pure electric cars don’t pay any road tax.
Benefit in Kind tax (2% of value of the car)
If you get your vehicle as a benefit via your employer, you’ll have to pay Benefit in Kind tax. With combustion cars, BiK tax can go up to 40%. This doesn’t apply to company cars.
With electric cars, BiK is capped at 2% till 2025.
Congestion charges (£0)
Congestion charges are on the rise every year in certain parts of the UK, specifically in London. In London, charges go up to £15 per day if you drive within the congestion charge zone.
With electric cars, drivers pay no congestion fees at all.
If you meet certain eligibility requirements, you might be eligible for a grant, which would further decrease the price of using an electric car.
Plug in Car Grant
The Plug-In car grant was issued by the Office of Zero Emission Vehicles (OZEV) and you can use it against a portion of the cost of buying a brand new electric car.
If the vehicle is approved by the government, you could get up to £1,500 off the purchase of the vehicle.
To be eligible, the retail price of the car has to be below £32,000. You can check on the HMRC website to see a list of eligible cars. To get this grant, you don’t have to apply for it – the manufacturer will include it in the price they provide.
Electric vehicle homecharge scheme
With this grant you get a 75% discount on the installation of a home charging point, with the maximum contribution of £350 per installation. As of March 2022, this grant is only available for flats and rental accomodations. There are a few additional requirements:
- You must have off street parking.
- Your EV has to be eligible.
- You must either own or lease your EV.
- The charger and installer must be EHVS approved.
Energy Saving Trust grant
If you don’t qualify for the grant above but you live in Scotland, there are still options: you can get up to £300 off the installation of your home charging point.
Workplace charging scheme
If you’re an employer interested in adding charging points to your workplace, you can apply for the Workplace Charging Scheme (WCS) that can cover up to 75% of the cost of the installation. You could get up to a discount of £350 per socket up to 40 sockets. You can check if you meet the criteria for both the applicant and site eligibility on the HMRC website.
Some other requirements are:
- You must use an authorised installer
- You must either own the premises or have permission from your landlord
- You must have a Companies House Reference Number
Read more about electric vehicle grants here: Government Grants for Electric Cars
Example: electric car vs combustion car
Let’s take two examples of different people who want to drive an electric and a combustion car to compare monthly payments.
Andy buys an electric car via PCP, and Hannah gets a regular combustion car also via PCP. Andy wants a Vauxhall Corsa E and Hannah wants a Vauxhall Corsa.
The running costs are quite similar between both cars, but in this case the electric car actually comes out a little more expensive than the combustion car. Keep in mind that these are approximations, and you should always check with your provider and do your own research before making a decision.
A cheaper way to drive electric cars: electric vehicle salary sacrifice with loveelectric
There is an even more cost-effective way to access the best electric cars that is getting more popular: via an employer’s salary sacrifice scheme.
As we mentioned above, the technology in electric cars is evolving so rapidly that it often makes more sense to switch cars regularly so you always have the cars with long range.
This is why leasing a car might make more sense when it comes to electric cars: you use the leased car for 2 - 4 years, and then exchange your car for a better one once the lease is up.
With a personal car lease, you “rent” the car for a specific period of time, usually 2, 3 or 4 years and then return it for a new one once the term is over. Within the monthly cost, maintenance and servicing are often already included – although not insurance. Personal leases are a great way to access the cheapest electric cars.
But there is an even more cost-effective method: salary sacrifice schemes.
A salary sacrifice scheme is a scheme that is set up by your employer where you choose to sacrifice a part of your gross salary, in exchange for a benefit – in this case, an electric car lease.
It means a few things:
- If you are in a higher tax bracket, this scheme will get you into a lower one.
- You’ll pay less in income taxes and national insurance.
- A business lease via salary sacrifice won’t require a deposit upfront, and will include insurance.
At loveelectric, we help employers implement a salary sacrifice scheme so employees have access to electric vehicles via a business car lease, and employers can offer a benefit that helps employees’ salary go further. We’re licensed by the Financial Conduct Authority (FCA) and we specialise in the electric vehicle salary sacrifice scheme.
Here are some of the benefits of implementing the salary sacrifice scheme:
Cheaper than buying an electric car and a personal lease
Since you’re paying for the electric car lease out of your gross salary, you could save between 30% to 60% compared to a personal car lease.
You’ll get savings in three ways:
Almost all consumer goods get charged VAT at 20% – when purchasing or leasing a vehicle outright, you’d need to pay that VAT. When using an electric car scheme, the employer is responsible for the lease so they’ll be liable for the VAT. However, they won’t lose out either, since they’ll be able to reclaim 10% of that from the government.
Since you’re paying for the lease before you get taxed (gross salary), your net income will decrease, which means you’ll be paying less income tax.
Similar to income tax, the more you earn, the more national insurance you have to pay. By sacrificing some of your salary to pay for a lease, your salary will decrease and therefore so will your national insurance contributions.
There are a few other aspects that make this scheme cheaper:
- You won’t have to pay a deposit, making it cheaper than a personal car lease deal.
- Benefit in Kind tax is capped at 2% until 2025.
Finally, at loveelectric, we’re a broker rather than a leasing company. That means we have access to over 300+ dealerships and can access the best cars at the cheapest rates.
Let’s take another example and compare Andy with three other people who have electric cars. All three decide to get an electric car via the salary sacrifice scheme:
*Prices accurate at the time of writing, found on https://www.loveelectric.cars/electric-cars for a 5000 36month contract for a higher earner.
As you can see, accessing a car via the salary sacrifice scheme is a lot more cost effective than via PCP. In some cases, it can be even cheaper than a combustion car via PCP.
Take into account that the cost will vary depending on your salary range, your postcode, annual mileage and the length of your contract. In general, access an electric car via salary sacrifice is cheaper than leasing or buying and electric car:
Everything is included
With personal car leases, you’ll often have maintenance and servicing included. But you’ll still have to pay for insurance and a deposit.
With car leases via the salary sacrifice scheme, you’ll have even more included, such as:
- Early termination protection (in case the employee resigns or the employer makes them redundant).
At loveelectric, we help companies set up and manage the entire experience of an electric car salary sacrifice scheme. We’ll help educate and inform employees, set up payroll and manage the ordering and delivery of the car.
Learn more about how it works here: How loveelectric works.
For employers, it’s a great employee benefit
For employers, the salary sacrifice scheme is a great benefit to offer employees as it helps make their salary go further.
The scheme is free to implement for employers, which means it’s often a no-brainer. As an employee benefit, offering affordable electric cars helps boost morale and helps employees feel appreciated.
More environmentally friendly
As cars that run solely on electricity, electric cars are a lot more environmentally friendly than their combusion counterparts. EVs emit less pollution throughout their entire lifespan, especially if the electricity comes from renewable energy sources.
If your company is hoping to reach ESG targets, implementing the salary sacrifice car scheme is a quick and simple way to help reach those targets. If your company is hoping to build towards a greener future, electric cars are a great way to show your commitment.
The electric vehicle salary sacrifice scheme is one of the most cost effective ways to access a electric vehicle. At loveelectric, we’re hoping to help democratise access to electric vehicles with the salary sacrifice scheme.
You can learn more about our story here: Electric Cars are Expensive. Here’s How We’re Democratising Electric Vehicle Access At Loveelectric
We hope this article helps you understand better how much it costs to run an electric car and how it compares to combustion cars. As we mentioned above, there are multiple ways to access an electric car, and leasing often makes more sense as the technology keeps improving. You’re welcome to view our selection of electric cars and see if any would interest you.
If you’re interested in learning more, send us an enquiry to see how we can help you out!
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