VSConsumers are increasingly keen to go electric. The number of electric vehicles (EVs) on UK roads is set to soon overtake France after a huge surge in sales. But if an increasing number of motorists want to change their vehicle, many are also wondering if they can afford it.
Although cheaper to operate, electric vehicles are more expensive to purchase than other vehicles, suggesting that they are out of their price range. And while the number of electric vehicles sold in the UK has now passed half a million, research from the Green Finance Institute indicates that most purchases are made by corporate fleet companies, not individuals.
A report from the think tank states: “Consumer adoption of electric vehicles is still in its infancy and a number of barriers are deterring more people from switching in the short term.
“The higher initial cost of vehicles, the rate of improvement in battery range, concerns about access to reliable charging infrastructure and the perceived complexity of the transition mean that many are reluctant to make a VE their next car”,
Last year, the average pre-tax retail price of a mid-size electric vehicle was €33,300 (£28,914) compared to €18,600 for a petrol car, according to BloombergNEF.
Added to this, the cost of living crisis is putting more pressure on households. According to banking group Close Brothers, research suggests that many people are changing their minds about buying because of the current need to tighten their belts.
But there are ways to hit the road without shelling out huge amounts.
The personal rental contract (PCH), better known as leasing, is indeed a very long-term rental. You don’t keep the car at the end of the term, but you make monthly payments to keep it for a set period. It’s usually the cheapest way to hit the road, but there’s usually a limit to the number of miles you can drive in a year, according to Dan Powell of automotive site AutoVillage.
The advantages are clear: a new car every few years, and the depreciation of the vehicle is not the problem of the driver, but of the leasing company.
Lease terms are typically between two and four years, but drivers are usually responsible for repair costs that are their fault, says Zoom EV’s Jeff Fairbotham.
The price of a rental depends on the price of the vehicle, the length of the contract, the mileage, its value at the end of the term and whether certain options, such as maintenance, are included.
There may be additional charges if the lease is terminated early or if you exceed mileage limits. “You never own the car, and you could be stung for extra cash if you go over your annual mileage allowance, or if the car has more than just dents and scratches from wear and tear,” says Gill Nowell of the insurer LV=.
Comparison site Auto Lease Compare gives the best price for a Nissan Leaf at £261 per month on a four-year contract at 5,000 miles per year.
Hire-purchase and PCP
Similar in some ways, hire purchase and personal contract purchase (PCP) can both end up with the driver owning the car.
Lease-purchase contracts are split between the installment and the installments over the term of the contract. After the final payment is made, the car is yours, usually for up to five years. Again, the price of a transaction is modified by the term and the amount of the initial deposit.
PCP is the most popular type of car finance in the UK, and differs in that the driver can keep the car, trade it in or return the keys at the end of the term. If they want to keep the car, they pay a final “balloon” payment.
“Instead of reimbursing the full value of the car over the term of the contract, you only reimburse the depreciation. As a result, the deposit and monthly payments tend to be lower than in a traditional hire-purchase agreement,” says Powell.
Drivers will have to respect the mileage limits with the PCP contract and will have to pay if they return the car with damage.
Which car? lists a £239-a-month Skoda Scala on a PCP contract at 5.9% APR, with 15% down payment, over four years as its best available deal at the moment.
For people who work for a company with an electric vehicle wage sacrifice program, significant tax savings can be realized in a manner similar to pension or cycle-to-work plans.
After signing an agreement and selecting a car, a fixed amount is deducted from the pre-tax salary. The employee then pays the tax on benefits in kind, which is 2% for electric vehicles this tax year.
Wage sacrifice packages can offer everything a driver needs to hit the road – car, insurance, maintenance offers, breakdown assistance – in one payment.
Simon Down, tax director at Deloitte accountants, explains that people sign up for a fixed period and agree on an annual mileage. “Underneath it is basically a car rental agreement. A company…gets a rental provider to provide cost and maintenance, and all the other kinds of parts you need to keep you on the road.
A £31,000 EV taken out for three years under a wage sacrifice scheme will end up costing the employee £420 a month after tax savings are included and benefits tax paid in kind, as calculated by Deloitte. A lease on the same car, with maintenance and insurance to be paid for, would cost £619. There are usually penalties if you quit your job and end the program early.
“The government has been using company car taxation for several years to influence certain behaviors. I think they want it to be clear that we have to get to zero emissions. Right now there is a strong incentive to switch to electric cars,” says Down.
Take it month by month
Drivers who don’t want to commit to long leases have the option of taking them on a month-to-month basis with a Netflix-style subscription.
A new breed of business has emerged that has insurance, taxes, maintenance, and other essentials included in the single price. Contracts usually renew monthly, so as long as you keep paying, the car stays with you.
Elmo offers a Fiat 500e for £449 a month or a Renault Zoe for £469. Both have a limit of 800 miles and come with a one-time administration fee of £95.
Onto, which includes public charging in its prices, offers a Renault Zoe for £489 a month with a 750-mile limit, or a Vauxhall Corsa-e for £549.
Onto founder Rob Jolly claims he has 6,000 cars with subscribers. Base prices start at £379 per month, with mainstream cars around £500 per month.
Why everything changed for the Spotify generation…
Owning your own vehicle is quickly becoming an unnecessary demand for consumers.
The development in recent years of different types of subscription models shows that ownership is not as important for a new generation of drivers.
AutoTrader’s Erin Baker says young motorists see cars differently than their parents. “The younger generations coming and going in the market – probably 18 to 35 year olds – are increasingly happy to look at subscription models where there is no more than a monthly cost.
“They’re used to sharing their lifestyle, they share their music choices on Spotify, they share their streaming choices, they share their lives on social media, so they’re less embarrassed to have a private car around them. belongs.
“And that fits nicely with not seeing cars as the same status symbol as older generations.”
Cars aren’t viewed with the same level of “badge snobbery”, according to Baker, with brands such as Kia, Tesla and Hyundai replacing BMWs and Jaguars on people’s wish lists.