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Electric car finance

Buying an electric car on finance: A complete guide

Victoria Russell
Written by  Victoria Russell
5 min read
Updated: 16 Apr 2024

As the push to switch to electric vehicles continues, our guide can help you decide on the best finance option for your new or secondhand electric car.

The automotive landscape is undergoing a seismic shift towards sustainability, with electric vehicles (EVs) at the forefront of this revolution. The allure of EVs is undeniable; they promise a greener footprint with zero emissions, whisper-quiet operation, and the tantalizing prospect of bypassing the gas station, along with lower running costs. However, the higher upfront cost of EVs can be a roadblock for potential buyers. Thankfully, electric car finance emerges as a beacon of affordability, illuminating a path for consumers to join the electric wave without the financial sting.

Financing Your Electric Dream

Financing an EV mirrors the process of traditional car financing. Borrowers pay an initial deposit followed by monthly payments, spreading the cost over time. This approach allows the cost of the vehicle to be spread over a period, making it more manageable for the buyer's budget. The journey to EV ownership need not be a sprint; with the right finance plan, it can be a comfortable cruise.

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Choosing the Right Finance Path

The road to EV ownership is paved with a variety of financing options. Each route offers its own scenery and pit stops. Some paths lead to full ownership of your electric chariot, while others resemble a long-term rental with the option to switch lanes and return the vehicle at the end of the term. The key is to balance the monthly payments with your long-term vehicle aspirations.

Personal Contract Purchase: A Popular Route

Personal Contract Purchase (PCP) stands out as a popular financing option for EV enthusiasts. It's akin to having your cake and eating it too, offering lower monthly payments with a side of flexibility at the end of the agreement. When the contract concludes, you can either make a final balloon payment to secure ownership, trade in the EV, or simply return it and walk away.

Exploring Other Financing Avenues

The financial landscape for EVs is diverse, with options tailored to different tastes:

  • Car Loans: Think of these as the unsecured loans that hand you the keys to immediate ownership, with monthly repayments to follow.

  • Hire Purchase (HP): This is a straightforward deal – pay a deposit, follow up with monthly repayments, and the EV is all yours after the final payment.

  • Car Leasing: Perfect for those who prefer fixed payments and a deposit, but don't mind saying goodbye at the end of the term. Just keep an eye on those mileage limits.

The Benefits and Challenges of Going Electric

Driving an EV is not just about making a statement; it's about embracing a host of benefits like zero tailpipe emissions, the absence of fuel costs, and generally lower maintenance requirements. However, the road isn't without its bumps. The higher initial costs, a still-developing charging infrastructure, and longer 'refuelling' times compared to traditional gas pumps are considerations that need to be factored into the decision.

Weighing the Cost of Financing an EV

When you're crunching the numbers for financing an EV, remember to account for the initial deposit, the monthly payments, and, if you're going down the PCP route, the potential final balloon payment. A head-to-head comparison between PCP and HP can shed light on the long-term costs and help you steer towards the best choice for your situation.

Incentives to Jumpstart Your EV Journey

Governments worldwide are rolling out the red carpet for EVs, offering a suite of incentives to accelerate adoption. These can include plug-in grants to reduce the purchase price, charge point grants to assist with home installation costs, road tax savings, and tax benefits. Such incentives can significantly defray the costs of going electric, making it an even more attractive proposition.

Tailoring the Best Finance Deal for Your EV

The quest for the best finance deal for an EV is a personal one. It should reflect your individual needs, affordability, and long-term ownership plans. Whether you're looking to drive the latest model every few years or find a long-term electric companion, there's a finance option that fits the bill.

Budgeting Beyond the Purchase Price

When setting your EV budget, don't forget to include the cost of charging, especially if you're installing a home charger, and the potential for higher insurance rates, which may stem from the pricey battery replacement costs. These factors are essential to ensure a smooth and sustainable EV ownership experience.

To Lease or Finance: That is the Question

Your financial situation, car usage plans, and long-term cost considerations should guide whether you lease or finance an EV. Each option has its merits and should be weighed carefully against your personal circumstances and environmental aspirations.

Further Guidance on Car Finance

For those seeking deeper insights into car finance, there are comprehensive guides available. These resources can help you navigate the nuances between PCP and HP, explore interest-free finance deals, understand PCP car finance, and decide between car finance or a loan.

Find the Best Finance Deal with MoneySuperMarket's Motiv

MoneySuperMarket's Motiv service is an invaluable online tool for comparing HP and PCP deals and rates without impacting your credit score. It's designed to help you find the best finance deal, ensuring that you can make an informed decision on your journey to EV ownership.

Driving an EV is more than a mode of transportation; it's a commitment to a more sustainable future. With the right finance option, you can join the electric revolution in a way that's both economically and environmentally conscious. Let the power of finance electrify your journey to cleaner, greener driving.

Frequently asked questions

Can I get a 0% finance deal for a new electric vehicle?

You may be able to get a 0% finance deal for a new electric car, but you should fully research the purchase first and make sure you understand the terms and conditions.

While a 0% finance deal sounds like the ideal way to spread your payments, compare prices elsewhere to check if the car price hasn’t been ‘marked up’ or there aren’t better deals available. Also, take note of any other charges that might catch you out, such as excessively high fees for annual servicing.

Can I buy a secondhand electric vehicle with car finance?

The secondhand market for electric cars is growing and there are a range of used models available with a choice of car finance that works in the same way as for standard fuel-powered vehicles. However, while available for nearly-new models, you may find PCP finance harder to come by for older electric cars.

The cheapest models also sometimes come without batteries included in the price, so you may need to lease a battery separately. While this sounds like an added cost, if the capacity of your battery drops below a certain efficiency threshold, the car company should replace it for you (if you’re leasing), which wouldn’t be the case if you owned the battery.

Can I get a loan to buy an electric vehicle?

Yes, you can get a car loan to buy an electric vehicle.

Am I eligible to buy an electric car on finance?

Your eligibility to buy an electric car on finance will depend on a few factors. Usually, you’ll have to be a certain age (normally 18) to be eligible. Your credit score will also impact your eligibility. Generally, the higher your credit score, the easier it will be to be accepted for car finance.

If you have a low credit score, you may find you won’t be able to borrow as much money and you’re likely to have a smaller choice of electric cars available to you. The terms of any finance could also be more expensive, meaning a higher rate of interest or APR.

Can I pay off my electric car finance deal early?

You can pay off your electric car finance deal early, but you may have to pay your finance provider an early termination fee. Therefore, it’s important to check the terms and conditions of your car finance contract to know exactly what you might pay if you decide to end your car finance deal quicker than planned.

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