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Lease or an Buy Electric Car; Which One Is Right for You?

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Whether you’re a car enthusiast or you’re just looking to get a new car, you’ll know that there’s not only a multitude of options of brands and models but there are also lots of different deals, payment plans or ways to purchase. It can be overwhelming with so many options, so here is a basic guide of some of the most popular methods of getting an electric car to hopefully help you decide which way to go (or help you at least narrow down your options!).

Is it better to lease or buy an electric car?

There are three different ways in which you can get an electric car; buying, leasing and leasing with salary sacrifice. So, what are the main differences between them all, and which one should you pick? Here’s a brief overview of the key differences so you can compare all the different ways to help you select the option that suits you best. 

Buying an Electric Car

Purchasing a car is typically one of the most common ways in which people acquire a car and there are a couple of different ways in which you can do so. The most common ways are through a Personal Contract Purchase (PCP), Hire Purchase (HP) or by using a bank loan. With all of these, you’ll have a higher monthly cost compared to leasing but at the end of the term, you may have an option to own the vehicle. There’s also the option to buy the vehicle outright, however, this is less common.

Electric Car PCP

With a Personal Contract Purchase (PCP) you’ll pay in monthly instalments after paying a deposit upfront. A PCP will usually last from 2-4 years time and once your contract is over, you’ll have three different options, you could trade it in towards your next car, buy it (using what’s often called a balloon payment) and after that, you could either just keep it or sell it on. You won’t technically own the vehicle until you’ve paid that final balloon payment. With a PCP, you’ll also have restricted mileage (similar to most leasing options) and if you exceed the agreed mileage you will have to pay a fee. This will be something to consider if you intend to return the vehicle at the end of the contract, however if you’re planning to purchase it afterwards it won’t increase the cost.

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Electric Car Hire Purchase 

A Hire Purchase Contract (HP) is just like a PCP in the sense that you’ll pay monthly instalments following an upfront payment. They typically last 3-4 years and a good way to think of HP is that you’re hiring before purchasing, so you won’t have to worry about exceeding the expected mileage as you intend to purchase the car. You usually won’t have maintenance coverage either to any costs associated with that or potential damage costs will be your responsibility. 

Pros & cons of purchasing an electric car

There are a couple of reasons why buying a car might be the best choice for you, including that you won’t be limited by the mileage and you can modify the car as you own it outright. If you choose to go with a PCP, HP or bank loan, check with your finance provider if you are permitted to modify your vehicle before doing so. 

In order to encourage more people to make the switch to go electric, there are currently government grants available of up to £1,500 which can be used on electric vehicles that are priced below £32,000. (gov.uk) Depending on what kind of finance plan you have chosen, the costs can be less predictable and may take a while to fully pay off, so it is less flexible than a lease and you’ll most likely not be able to get a new car as quickly as with leasing.

Cons of purchasing an electric car

When you purchase a car, you will have to pay for maintenance fees, breakdown costs etc, so if you’d prefer to know you’d be covered in the case of that potential eventuality, purchasing a car may not be the best option for you. 

Also,  keep in mind that while buying a car will mean you can sell later on, over time vehicles will depreciate in value, so selling when you’re ready for a change may cost you more than the money spent during the contract of a lease.

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Electric car lease

There was a boom in demand for the option of leasing electric vehicles, in fact, according to Next Green Car, enquiries regarding leasing electric cars increased by over 101% between 2020 and 2021. So, what’s all the fuss about?

In essence, when you lease a car, you’re renting it for a longer time than you’d typically rent a car for. When you lease a car, just like if you rent one, you don’t own the car at any point and when your contract is over, there isn’t an option to purchase the car. You may have seen different terms related to leasing such as Personal Contract Hire (PCH) or Business Contract Hire (BCH), here’s a quick overview of the different ways you could lease a car.

Electric car personal lease (PCH)

A PCH works like a long term rental agreement of a vehicle, you’ll pay a fixed monthly cost during your contract period and after that, the vehicle will be returned to the finance provider and you won’t have the option to purchase it. 

Electric car business lease (BCH)

A BCH works similarly to a PCH, the key difference is that instead of it being an individual person leasing, it goes through your business and just like a PCH there won’t be an option to purchase it after your contract ends. 

Pros of leasing an electric car

There are a couple of reasons why people choose to lease, with the primary reason being that it can be much more affordable when all costs are taken into account; the monthly fixed cost can be quite low or lower than something like a monthly PCP payment and maintenance costs are covered. 

Leasing also allows for more flexibility, as the contracts can be short, plus there is often an array of mileage options so you can pick what would suit your preferences best. Additionally, if you like getting a brand new car every couple of years, leasing is a great option as you won’t be tied down in a long contract and when you’re ready to move on to a new vehicle you don’t have to factor in the cost of your previous vehicles’ depreciation. 

Cons of leasing an electric car

Leasing with a PCH or BCH isn’t your best bet if you would like to purchase the car following the end of your contract as this isn’t typically a possibility with most leasing contracts. This also means you most likely will not be able to make any modifications to the car as you will need to return it following the end of your contract and you will be charged if there is any damage to the vehicle beyond the BVRLA Fair Wear & Tear guidelines.

While leasing is usually more affordable than purchasing a vehicle, keep in mind that depending on what kind of lease you go for, there may be a down payment or deposits required. In the case of leasing through salary sacrifice, it isn’t required but with some PCH or BCH you may have to put down a deposit of 3-6 times the monthly rental.

Although not having the option to own or modify the car may limit you somewhat, the good news is if you choose to lease, you won’t be affected by the depreciation of the vehicle like you would if you purchase it instead. 

Another thing to keep in mind is that with a lease you’ll have a restricted mileage, i.e. when you sign up you’ll have to estimate how many miles you anticipate you’ll put on the car. If you go above the estimated mileage, you will have to pay a fee, although this can be adjusted during the contract if you anticipate you will increase beyond the original estimated mileage. 

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Salary sacrifice electric car

Yet another option of leasing is through salary sacrifice. A salary sacrifice is an agreement that an employee will forgo a portion of their gross salary and in return, they will receive a benefit. You may previously have heard about salary sacrifice in the context of paying a pension or childcare but in this case, the benefit is an electric car. A salary sacrifice scheme works similarly to standard leasing, with a couple of exceptions. Just like the other forms of leasing described above, it’s like renting a car for a couple of years and in the case loveelectric, your lease term can last from 2-4 years (with another option of 1 year coming soon!). 

The loveelectric salary sacrifice scheme is similar to a BCH, but we operate in the salary sacrifice market, meaning that if your employer is signed up to the loveelectric salary sacrifice scheme, you could lease a brand-new electric car for nearly half of the average monthly leasing price, no deposit necessary! If you’re unsure of what salary sacrifice is or want to learn more about how it works, check out this guide to salary sacrifices here  as well as this  HMRC resource to get a more in-depth explanation of how this scheme works. 

Pros of leasing an electric car with salary sacrifice

No Deposit

With a loveelectric salary sacrifice lease, there are no upfront costs or deposits required, you won’t need to pay a delivery fee, plus maintenance and breakdown fees are included. All that's required is that a monthly payment is taken directly from your salary. Again, this might seem unconventional but it most often works out a lot cheaper every month, click here to see a breakdown of how leasing using salary sacrifice is cheaper than standard PCH or BCH leasing.

Flexibility

Just like a PCH and BCH lease, a lease using salary sacrifice also allows for much more flexibility in the sense you won’t be tied down in a long PCP or HP contract where you can’t upgrade to a new car every couple of years, or be stuck paying back a bank loan. Leasing lets you get brand new premium cars at a more affordable price, what’s not to love?

Attract Talent

There are not just benefits for employees either! Just like a BCH lease, employers can use a salary sacrifice lease to increase the attractiveness of their company in the recruitment process and also increase employee retention, ensuring you retain your highly qualified staff. 

The employer saves too

Furthermore, employers will also save money on employees who wish to take part in a salary sacrifice scheme, completely HMRC approved! This is due to that employers in the UK will typically pay around 13.8% in National Insurance Contributions (NIC) on employees wages but as a portion of their salary being used for their salary sacrifice benefit (in this car the employees new electric car) technically decreases their employees wages, so the amount of NIC will decrease. If you’d like to learn more about the other benefits associated with salary sacrifice schemes for employers, click here to read our article about how it could improve your company culture. 

No negative equity in the future

Another advantage of leasing an electric car is that the price of electric cars may look very different in 3 or 4 years time, with technology advancing so quickly in this market many of today’s models could be underpowered compared to the cars available in 2026. This could mean that electric car owners are “under water” (or have negative equity) on their asset. With leasing, you don’t have to worry about that as you don’t own the asset, you simply return the car at the end of the lease without the hassle of selling it (and potentially absorbing a loss).

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Cons of leasing an electric car with salary sacrifice

One disadvantage of leasing with a salary sacrifice (just like with a PCH or BCH lease) is that there is no possibility of owning the car after the contract ends, so if you know you like to have full ownership of the vehicle to keep or sell on, leasing may not be the best choice for you. It’s good to keep in mind that while you may not be able to own the car afterwards, this may actually be a benefit to some people as this means you are not affected by the depreciation in value of the car, it all depends on what your preferences and goals are.

Just like with other forms of leasing, if you choose to lease through salary sacrifice, be aware that you’ll have restricted mileage. Of course, you will have the option to increase your mileage and pay a little bit more every month or pay a fee if you exceed but this may be something to keep in mind. 

Additionally, leasing using a salary sacrifice scheme is only available if your employer is signed up to the scheme, so depending on the circumstances at your place of employment this may not be an option for you. It also means the contract will be tied to the business and while there are solutions to if you chose to work at another company, it will most likely be a factor to consider. 

FAQs

Are electric cars cheap to lease?

Buying an electric car can be very expensive, but with leasing, it doesn’t have to be! Leasing a car with salary sacrifice can nearly halve the monthly payments when compared to the monthly cost of being tied down to a PCP or HP contract.

With a lease from loveelectric, you won’t need to pay any deposits or any other kind of upfront costs, plus servicing and maintenance are included too, all you need to pay is your monthly payment.  In order to get the most accurate idea of how little you would need to pay per month for your dream car, sign up here and you’ll have access to our online portal where you can search for a personalised quote. 

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Is leasing an electric car a good idea? 

The primary reason why leasing through salary sacrifice is such a great option is that it tends to be far cheaper, as the monthly cost of leasing can be up to half the average cost of the payments in a PCP deal. Along with this, when you lease through loveelectric there aren’t any deposits or final payments, plus you won’t have to pay for any delivery charges.

If you like being flexible, leasing is definitely the way forward! With a lease from loveelectric, you have access to the newest cars on the market without being tied down to a long contract, so if after a few years you’d like to upgrade to something new, you’ll have access to the latest car models on the market. The shortest contract currently available is 24 months, although there will be a 12-month contract option coming soon. 

With a loveelectric lease, you’ll have all breakdown, servicing and maintenance costs covered, so you can just enjoy driving your new car without needing to worry. Also, as the vehicles available to lease are new, you’ll most likely be covered by the manufacturer's warranty!

However, do keep in mind that if you want to own the car outright leasing won’t be the right choice for you, as there is currently no option to purchase a car after you’ve leased it. Also be aware of the fact that as you won’t own the car, you won’t be able to modify it either, so if you like to customise your vehicles, leasing wouldn’t be a good option.  

Another thing to keep in mind is that you will also be liable to any damage that may occur, as this won’t be covered in the contract. The same applies if you go over the agreed mileage that you set out with, you’ll be charged for the excess.

Photo by Bram Van Oost on Unsplash

Can I lease a Tesla?

Yes! With loveelectric you can lease different models and nearly halve the average monthly cost. Check out our range of vehicles we have available on our website or click here to send an enquiry, to be able to create a personalised quote.

Can I purchase the car after my lease ends?

Currently, loveelectric don’t offer the option to purchase a vehicle after your lease ends. If you’d like to purchase a vehicle after your contract ends, a PCP or HP contract may be better suited to you.

Electric car lease deals

 If you’ve considered getting an electric car, why not lease one through loveelectric? With a loveelectric lease you will have access to premium cars at a much more affordable price point, so why not check out some of our range on our website or sign up here to view all the latest cars added to our line-up on our app.

 

 

 


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