The most cost-effective ways to purchase an electric vehicle

cinch has shared a handy guide on how to embrace a new, eco-friendly electric vehicle without breaking the bank.

In September 2023, the number of new plug-in hybrid and fully electric cars sold in the UK reached almost 64,000, making up 23.2% of all car purchases.

Electric vehicles (EVs) continue to grow in popularity among drivers, with an increasing percentage of Brits investing in eco-conscious alternatives to petrol and diesel.

As things stand, EVs usually cost more to buy upfront than their traditional fuel-powered equivalents.

Although the price of electric cars is expected to reach parity with their petrol and diesel counterparts between 2025 and 2027, the current price differential may put some buyers off from making the switch to electric now.

So, what are some of the most cost-effective methods to jump behind the wheel of your first electric car? cinch has shared a handy guide on how to embrace a new, eco-friendly driving experience without breaking the bank.

Personal Contract Purchase (PCP)

From October 2021 to September 2022, more than two million cars were bought on finance in the UK – 700,000 new and 1.5 million used.

One of the most popular ways of spreading the costs of purchasing a car, whether it’s an electric, petrol or diesel model, is to opt for a Personal Contract Purchase (PCP) agreement.

Sam Sheehan, motoring editor at cinch, explained: “With a PCP agreement, rather than splashing out a significant amount of money upfront, you’ll be asked to put down a deposit. Then, you can spread out the remaining sum in monthly instalments to make the overall payment more manageable.

“Bear in mind that with PCP, you’re not covering the whole price tag of your car. Instead, you’re just paying the difference between the vehicle’s initial value and its predicted worth at the end of the contract.

“When that moment comes, if you’ve grown fond of your motor, you can choose to make a final ‘balloon payment’. This way, you’ll be able to keep the car and become its legal owner.

“Alternatively, if you fancy switching to a different EV, you can give your ‘old’ car back to the finance company and pick a new model. To do so, you will have to set up a new agreement and fill out some paperwork.”

Hire Purchase (HP)

Hire Purchase (HP) is another finance option that allows you to put down a deposit and pay back what you owe in monthly instalments.

The most substantial difference for drivers who pick HP finance is that, at the end of the contract, they will own their EV – with no balloon payment due.

The final instalment will automatically include an ‘option to purchase fee’ – once this is paid, your electric car is all yours.

One thing to consider is that HP monthly repayments are likely to be a bit pricier when compared to PCP as you’re covering the car’s full value (plus interest).

EV leasing

If you don’t have a budget to invest as a deposit and aren’t quite sure if a certain car will tick all the right boxes, leasing can be an option worth considering. In the UK, the total lease market stands at almost 1.4 million cars, so leasing is becoming increasingly popular among British motorists.

Also known as Personal Contract Hire (PCH), this type of car finance gives you the chance to rent your vehicle of choice for a selected number of months, paying regular and more manageable instalments. When the contract expires, you’ll have to give the keys back and jump behind the wheel of an alternative model.

With EV leasing, there are a few rules to abide by, all of which will be clearly stated in your contract. For example, you may have to stick to a certain mileage limit or pay out any damage charges for anything more than standard wear and tear.

If you like to change cars regularly, PCH is a budget-friendly option that can get you in the driving seat of plenty of appealing vehicles.

Personal car loan

Another finance option to help cover the costs of your new electric vehicle is to take out a personal loan. To do this, you’ll need to apply to your bank or a lender.

If your application is successful, you’ll receive the money you need to match the EV’s price tag, meaning you’ll own the car from the off and can modify or put it up for sale as you please.

Of course, you’ll have to gradually repay the debt through monthly repayments, which will depend on your bank or lender’s specific requirements.

If you live north of the border and are after a used EV, you can benefit from an interest-free electric vehicle loan funded by Transport Scotland. You can expect to receive up to £30,000 to cover the costs of a fully-electric car, with a repayment term of up to six years.

Incentives for electric vehicles

In recent years, the UK government has been trying to encourage the take-up of electric cars.

It has recently pulled the plug on a number of grants and subsidies, but there are still some handy incentives that make EVs a money-saving option. Some of these include:

• Road tax exemption – If you drive a zero-emission EV, you’re exempt from paying the so-called Vehicle Excise Duty (VED), also known as ‘road tax’. This will change from 1 April 2025, but until then, you won’t have to worry about this additional expense.
• Free driving in the city centres – With an increasing number of cities and towns around the UK introducing emission-free zones, the owners of fuel-powered cars might have to pay a fee each day to enter these restricted areas if they don’t meet the minimum emissions standards. Electric vehicles tend to be exempt from these charges, meaning EV drivers can cruise around town without having to spend extra fees.
• Charging point and infrastructure grants for landlords – These grants are aimed at giving financial support to landlords considering buying and installing EV chargers for their residential or commercial properties. For example, landlords can receive up to 75% (or £350 maximum) of the cost towards the purchase and installation of charging point sockets. They can also get funds to alleviate the expenses of wider building and installation work, such as wiring and posts, as well as installing multiple chargers. In terms of infrastructure grants, landlords can receive up to 75%, or a maximum of £30,000.