Electric Car Finance: Everything You Need to Know

Electric Car Finance: A Complete UK Guide

Electric vehicles are rapidly becoming mainstream in the UK. With the government’s ban on the sale of new petrol and diesel cars coming in 2035, rising fuel costs, and significant improvements in range and charging infrastructure, more people than ever are considering making the switch to electric. But how do you finance an electric car, and what should you know before you commit?

Can You Finance an Electric Car?

Yes. Electric cars can be financed in exactly the same way as petrol or diesel vehicles. PCP, HP, personal loans, and leasing are all available for electric vehicles, both new and used. The application process is identical, and the same factors that determine approval and interest rates apply.

In fact, electric cars can be particularly well-suited to PCP finance because they tend to hold their value well, which means the Guaranteed Minimum Future Value is often relatively high, resulting in lower monthly payments.

The Cost of Electric Cars

One of the biggest barriers to electric car ownership has traditionally been the higher purchase price. While this gap is narrowing, electric vehicles still tend to cost more upfront than their petrol or diesel equivalents.

However, the total cost of ownership tells a very different story. When you factor in lower running costs, the financial case for electric cars becomes compelling:

• Electricity is cheaper than petrol or diesel. Charging at home on a standard tariff costs a fraction of what you would spend on fuel. If you have a home charger and an off-peak electricity tariff, the savings are even greater.
• Lower road tax. Electric vehicles currently attract zero road tax (Vehicle Excise Duty), though this is changing for new EVs registered from April 2025.
• Congestion Charge exemption. Electric vehicles are currently exempt from the London Congestion Charge, saving drivers up to fifteen pounds per day.
• Lower maintenance costs. Electric motors have fewer moving parts than combustion engines, which means less can go wrong. There are no oil changes, no timing belts, and brake pads last longer due to regenerative braking.
• Company car tax benefits. Electric vehicles attract very low Benefit in Kind (BIK) rates, making them an extremely tax-efficient choice for company car drivers.

Government Incentives and Grants

The UK government has offered various incentives to encourage electric vehicle adoption:

• Plug-in Car Grant: While this has ended for cars, grants may still be available for vans, taxis, and other vehicle types. Check the latest government guidance.
• Electric Vehicle Homecharge Scheme (EVHS): A grant towards the cost of installing a home charging point, available to qualifying homeowners and tenants.
• Workplace Charging Scheme: A grant for businesses to install charging points at their premises.
• Salary Sacrifice Schemes: Many employers now offer salary sacrifice schemes for electric vehicles, which can provide significant tax savings.

Choosing the Right Electric Car

The electric car market has expanded enormously. There are now options to suit most budgets and needs:

• Small city cars: Ideal for urban commuters with shorter journeys.
• Family SUVs: Spacious electric SUVs with ranges exceeding 300 miles.
• Performance vehicles: High-performance electric cars that rival their petrol counterparts.
• Used electric cars: A growing market of pre-owned EVs offers excellent value for money.

When choosing an electric car, pay close attention to the official range, charging speed, and the availability of charging infrastructure near your home and workplace. Real-world range can be lower than the official figure, especially in cold weather or at motorway speeds.

Charging Your Electric Car

Charging infrastructure is a key consideration:

Home charging is the most convenient and cost-effective option. A dedicated home charger (typically a 7kW wallbox) can fully charge most electric cars overnight.

Public charging is available at thousands of locations across the UK, including supermarkets, car parks, service stations, and dedicated charging hubs. Rapid chargers (50kW and above) can add significant range in 30 to 60 minutes.

Workplace charging is increasingly common, with many employers installing chargers for their staff.

Financing a Used Electric Car

The used electric car market is growing rapidly, and there are some excellent deals to be found. Early electric vehicles with shorter ranges can now be purchased for very affordable prices, making them ideal as second cars or urban runabouts.

When financing a used electric car, check the battery health and warranty status. Many manufacturers offer battery warranties of eight years or more, which can provide peace of mind.

Is Electric Right for You?

An electric car makes the most sense if you:

• Have access to home or workplace charging
• Do the majority of your driving within the car’s range
• Want to save on running costs over time
• Are environmentally conscious
• Can take advantage of company car tax benefits

If you regularly drive very long distances without access to charging, or if you do not have off-street parking for a home charger, a hybrid or plug-in hybrid might be a better stepping stone.

Get a Quote for Electric Car Finance

At Happy Motor Finance, we can help you find competitive finance for electric vehicles from our panel of lenders. Whether you are buying new or used, we will find the best deal for your circumstances. Get a free, no-obligation quote today.