Finance for Electric Vehicles


 

Wondering How To Finance An Electric Car Or Van?



Whether you're a personal buyer or a multi-vehicle fleet operator, getting the right finance for a vehicle is a key factor in operating it efficiently.

So how do you go about making sure you've taken the right approach to financing an electric car or van?

Our guide will help you work out which approach to funding your next electric vehicle will be most effective for you or your business, both in terms of cost and protecting your money.

And why not check out our guides to how EVs work and charging your EV too!



    Where To Start   


Where Do You Start With EV Finance?


If you've previously bought a new car or van you'll be familiar with the array of options open to you for funding, but electric cars and vans introduce a new parameter that weighs heavily on your vehicle finance decision - Risk.


Electric vehicles are relatively new to the car and van markets and, as such, their price performance in the used car and van markets is yet to stabilise.


Current second-hand values for electric cars and vans are reasonably strong compared to ICE powered vehicles, but this may not last as manufacturers overcome a combination of shortages of battery supplies and high demand for the product.


In addition, improvements in battery technology (longer range/faster recharge times) and other factors such as autonomous driving capabilities may make early electric vehicles less desirable than newer models in years to come.


Against this background, how do you minimise your financial risk from getting an EV, or at least contain the risk to a level you find acceptable?


The answer lies in understanding how each of the different finance options for EVs works and how you can use it to your advantage.


So, to get you up to speed on what's available to fund an electric car or van we've put together a summary of how the main finance options work.



BUYING


Advantages

Buying outright is the simplest way to fund a new electric car or van.

Keep the vehicle as long as you want and run it up to any mileage.

Technically you can 'profit' from looking after the vehicle well and achieving a better resale price than the normal market value.

Vehicles can be sold at any time without a specific financial penalty (leasing companies usually charge a penalty for ending a lease contract early).

Businesses can get 100% tax relief on an EV in the tax year of purchase.

Disadvantages

You are exposed to changes in market values and maintenance costs, in particular if used vehicle prices drop.

Money tied up in the car or van can't be accessed without either selling it or pledging it as security for a loan.

Businesses lose the use of money that could be invested elsewhere in the business to generate profits e.g. new manufacturing machinery.

The vehicle will appear as a depreciating asset on the balance sheet of a business purchaser.

Read more about buying outright in our finance library.


CONTRACT PURCHASE


Advantages

You only repay interest charges and depreciation costs during the term of the finance agreement.

The vehicle's expected future value at the end of the agreement is fixed so you know the minimum you will get for it when you finish the repayments.

If the car or van is worth more at the end of the agreement than the forecast value you can keep the difference or use it as a deposit towards a new vehicle.

You are protected from unexpected drops in second hand values.

Businesses can get a tax deduction on the interest charges on the finance, plus depreciation.

Disadvantages

You can't sell the car before the end of the contract without incurring a financial penalty.

If you exceed the agreed contract mileage or hand back the vehicle with excessive wear and tear you will incur financial penalties.

You repay less of the purchase price so interest charges are higher than bank loans or hire purchase.

The vehicle will appear as a depreciating asset on the balance sheet of a business purchaser.

Read more about business and personal contract purchase in our finance library.


LEASING


Advantages

The leasing company recovers VAT on the price of the vehicle so the lease rentals for cars are lower than comparable business or personal contract purchase.

You avoid some of the normal responsibilities of ownership, such as sourcing the best deal and haggling for the best resale (or 'residual') value.

You can swap to a new car every 2-4 years to keep pace with developments in battery and other in-car technology.

As long as the leasing company looks after the residual value smaller businesses don't currently need to declare the lease as a liability on the balance sheet.

Disadvantages

Deposits can be as high as 9 x the monthly lease rentals.

If you terminate the lease early you will have to pay a penalty (usually a number of months rentals).

If the vehicle is returned with more than the agreed mileage or with excessive wear and tear then 'end of contract' charges may be made by the leasing company.

The leasing company gets any surplus residual value on the vehicle at the end of the lease (there are some exceptions called 'finance leases').

Read more about business and personal leasing in our finance library.


SUBSCRIPTION


Advantages

You pay a monthly rental to cover all your costs of using a car or van.

You can cancel the subscription and just hand back the vehicle.

Monthly subscription covers depreciation, servicing and repairs, tyres, insurance and breakdown recovery and, typically, recharging costs.

You can swap to a new car whenever you want to keep pace with developments in battery and other in-car technology.

You get a fixed monthly 'allowance' of inclusive mileage and can top-up or 'roll-over' mileage if necessary.

Disadvantages

Monthly payments are a lot more expensive than traditional car or van finance or leasing.

If the vehicle is damaged outside the insurance terms you are liable for the repair costs.

Recharging points may be limited to those operated by the subscription company or its affiliates.

Usage restrictions may apply to limit how you drive the vehicle and 'black-box' telematics may report on your driving behaviour.

Read more about finance options for electric cars and vans in our finance library.




    How To Choose?   



How To Choose Your Electric Vehicle Finance?



Taking account of our summaries above, think about:

  1. Can you predict your annual mileage relatively accurately?
  2. Are you content to take your electric vehicle for a fixed period of time?
  3. Are you prepared to negotiate a purchase price and sale price for the vehicle?
  4. Do you want one fixed cost for everything or are you comfortable with costs varying over the life of the vehicle?
  5. Are you more concerned about getting the lowest monthly payment or getting the lowest total cost of finance?

Based on how your responses to these questions might come together, we've put a summary below of what might be your best options for electric car or van finance.






Here's How You Might Choose Your EV Finance


LEASE/CONTRACT HIRE

You answered;

  • 'Yes' to questions 1 and 2
  • 'No' to question 3
  • don't have the funds to buy the vehicle
  • you want the lowest monthly payment
Personal or business lease contracts might suit to you, especially if you are a VAT registered business.


CONTRACT PURCHASE

You answered;

  • 'Yes' to questions 1, 2 and 3
  • don't have the funds to buy the vehicle
  • comfortable with costs varying over the vehicle life
  • you want a lower monthly finance cost
Business or personal contract purchase might be suited to you.


BUY OUTRIGHT

You answered;

  • 'No' to questions 1 and 2
  • 'Yes' to question 3
  • comfortable with negotiating purchase and sale prices
Buying outright might be suited to you, but if you don't have the funds to buy consider a bank loan or hire purchase.


SUBSCRIPTION

You answered;

  • 'No' to questions 1, 2 and 3
  • 'Yes' to question 4
  • want an 'all-inclusive' monthly payment
  • need flexibility to start/stop a contract when it suits you
A subscription plan might be suited to you but is likely to be the most expensive option.




Remember though that the final choice is yours. Although it may seem a lot of work, get alternative quotes for each type of funding and compare them in terms of monthy payment and total cost. Consider consulting your professional advisers, especially if you will be tying up a large amount of your savings or capital in an EV purchase.

And if you hate the idea of doing all the maths involved then use our 'Lease or Buy' calculator to work out the best way of funding your new EV.



Contact Us




Whether you're a personal buyer, fleet operator or company car driver we have the most advanced tools you could ever need to help you choose your next new car.

From vehicle technical data to advice on buying or leasing, it's all here waiting for you.

So dive right in, or why not get in touch?

You never know what else we might know ....



   0333 444 0400

(+44 1792 224319 from outside the UK)

   info@drivesmart.co.uk




Contact

0330 444 0400
(+44 1792 224319 outside UK)

info@drivesmart.co.uk