EVs come with the promise of zero emissions, but many buyers are attracted by the additional prospect of sigificantly lower running costs.
An increasing number of people are considering an electric vehicle (EV) for their next car. The looming ban on the sale of new petrol and diesel cars is one thing, but advances in battery technology and an improved charging infrastructure mean that EV ownership is within reach of more drivers.
EVs come with the promise of zero emissions, but many buyers are attracted by the prospect of lower running costs. It’s important to do your sums before taking the plunge, because while some aspects of EV ownership cost less, others could be pricier.
All EVs priced at less than £35,000 are eligible for the government grant, which is taken off the manufacturer’s list price. The other thing to consider is that mainstream EVs are available on affordable finance, so a new Renault Zoe could cost less than £200 a month. That’s not much more than a Renault Clio.
Such is the rate at which battery technology is progressing, a short personal contract purchase (PCP) or personal lease (PCH) deal might be most sensible when buying an EV. A budget of £200 a month might be enough for a range of 200 miles today, but it could be closer to 300 miles in a few years.
Assuming you don’t splash out on one of the most expensive models, an EV should be cheaper to run than an equivalent petrol or diesel car. Here are some of the costs associated with running a car, with a brief overview of whether an EV is likely to be cheaper or more expensive.
The monthly repayments for a new EV are likely to be more than the cost of an equivalent petrol or diesel car. That’s simply because the purchase prices are higher. As the costs come down, the reductions will be passed on to consumers in the form of cheaper finance. This is especially true of PCP deals, as the monthly payments are based on the car’s residual value.
If you’re buying a car built from the ground up to be an EV, you can expect to pay a minimum of £200-£250 a month. Alternatively, you could buy a Dacia Sandero, Britain’s cheapest new car, for around £100 a month. It will be a while before EVs reach this level of affordability.
EVs of the past suffered from catastrophic depreciation. The combination of a small charging network, limited range, high purchase prices and buyer apathy meant that EVs shed their value faster than most petrol and diesel cars.
Things are improving. As the charging network improves, range estimates go up and appetite for EVs increases, residual values should firm up. On average, cars retain around 40 percent of their value after three years and 36,000 miles.
Some EVs retain their value better than others. Desirable cars like the Porsche Taycan, Tesla Model S and Polestar 2 will depreciate slower than more mainstream models.
You won’t have any problems securing insurance for your EV but the annual premium will almost certainly be more expensive. There are a number of reasons for this, most notably the cost of replacing the batteries, electric motors and electronics in the event of an accident. There’s also the purchase price to consider – an insurance company won’t want to be out of pocket in the event of a claim for fire or theft.
Take the Seat Mii Electric, which is one of the UK’s cheapest EVs. Some versions of the city car slot into the lowest insurance group (1), whereas the Mii Electric gets a group 12 rating. This means it’ll be more expensive to insure, ruling out young and inexperienced drivers.
An EV should be cheaper to maintain than a petrol or diesel car. Indeed, Go Ultra Low claims that maintenance costs could be as much as 70 percent lower over a car’s lifetime. This is partly because an EV has fewer moving parts, which means there’s less to go wrong.
Take the Kia e-Niro as an example. On a nearly-new car travelling up to 11,000 miles a year, the cost of a three-year servicing plan is £479. On a Niro plug-in hybrid, the cost is £489.
The difference is even greater if you don’t sign up for a service plan. Based on a nearly-new Hyundai Ioniq and driving up to 10,000 miles a year, a first-year service costs £55 on the electric model or £141 if you’re buying the plug-in hybrid or hybrid variants.
Regenerative braking should mean that the brakes last longer than in conventional cars. That said, EVs remain exposed to the ravages of the British road network, so damage caused by potholes can be a problem.
One thing to watch is the cost of tyres. The rate of wear is higher on EVs, so you might burn through your rubber faster than you would in a conventional car. It’s also worth noting that some used Renault Zoes might be advertised without batteries. Although the cost is included in all new Zoe models, earlier versions required owners to lease the batteries from Renault, so this will need to be factored into the running costs.
The rate of Vehicle Excise Duty (VED, or road tax) is based on a vehicle’s CO2 emissions the first time it’s registered. Since April 2020, all EVs have been exempt from VED, regardless of list price.
The situation is different for EVs registered between 1 April 2017 and 5 April 2020. Although EVs with a list price of less than £40,000 remain tax exempt, more expensive cars are subject to a premium rate surcharge. This is payable from the second year for five years.
The difference could increase if the government decides to increase the rate of VED for conventional cars.
Company car tax is based on the list price of the car, its CO2 emissions, and the employee’s tax band. Employees pay up to 35 percent BIK (Benefit in Kind) tax, on a sliding scale, depending on the car’s emissions.
For the 2021/22 tax year, employees who drive an EV will pay just one percent BIK. In 2022/23, it rises to two percent, a rate that will be held for two years. This means EV company car drivers will pay no more than two percent BIK until April 2025. The cost savings are incredible, as our full guide explains.
Because an EV relies on battery power, you need never visit a petrol station again, but that doesn’t mean you can forget about the cost of ‘fuel’. Whether you’re charging at home or via one of the UK’s 40,000 public connectors, the electricity will cost you money.
There are a number of online tools that allow you to calculate the cost of running an EV. For example, with a 7kW home wallbox and an energy tariff of 8p, it would cost £4.16 to charge a Renault Zoe Q90. That works out at 1.8p per mile. Compare that with the £65 cost to fill a 50-litre tank of fuel…
Other, more expensive EVs will cost more per mile, but anything up to 5p is realistic. That works out at just £5 per 100 miles.
There are other benefits associated with running an EV. Zero-emission capable vehicles are eligible for a 100 percent discount on the £15 London Congestion Charge, while some London boroughs even offer free or reduced-charge parking for EVs.
EVs are also exempt from the London Ultra Low Emission Zone (ULEZ), saving drivers £12.50 a day. In time, EVs could be the only vehicles free to enter nationwide Clean Air Zones. As the cost of EVs comes down, the savings are likely to increase, although the current tax benefits and incentives are unlikely to remain in place forever.