The best way to finance an electric car
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.
Key takeaways
Financing an EV follows a similar process to traditional car financing
When looking into getting a car on finance, consider initial deposit, monthly payments, and potential balloon payment (for PCP)
Factor in the cost of charging, including electricity rates and charging infrastructure availability, especially if you’re installing a home charger
It’s no secret that electric vehicles come with an expensive price tag and these types of cars are a significant outlay for most people. The average price of electric car insurance alone is £963.65[1]In 2024, the average monthly premium price of an electric car is £80.30 and the average annual price is £963.65. , plus all the initial set up costs that come with it such as installing home chargers.
This is why electric car finance is a popular choice for those on a budget looking to avoid the initial upfront cost.

What is electric car finance and how does it work?
Electric car finance works in the same way as traditional car finance and can help you spread the cost of the car you wish to purchase by making payments over an agreed time period.
Depending on which type of car finance you use, you pay a deposit and pay the remainder off, typically within 24-48 months.
What are my options for financing an electric car?
Your options for financing an electric vehicle (EV) include hire purchase (HP), personal contract purchase plans (PCP) and car leasing contracts:
You pay a deposit (normally 10%) and then monthly repayments to the car finance company. Once you’ve made the final payment, you own the car.
You put down a deposit and borrow towards some of the remaining value of the car, then make fixed monthly payments until the contract ends. PCP deals usually last for 3 to 5 years and you have the option to own the car at the end of the contract by making one large ‘balloon’ payment.
You pay an upfront fee to lease the car and decide the contract length and annual mileage limit. Once you take out a contract, you pay fixed monthly payments until your contract ends. After the final payment, you return the car to the dealer or take out another lease.
Hire purchase (HP)
Personal contract purchase (PCP)
Car leasing
Which type of electric car finance is right for me?
It can be difficult deciding which type of car finance is the best option for your personal circumstances. In this table, we outline some of the key differences and similarities of each option to help you make a decision:
HP | PCP | Lease | |
---|---|---|---|
Do I need to pay an upfront deposit? | Yes | Yes | Yes |
Are my monthly payments fixed? | Yes | Yes | Yes |
Can the car be taken away if I fall behind on repayments? | Yes | Yes | Yes |
Are there any annual mileage restrictions? | No | Yes | Yes |
Do I have own the car at the end of my agreement? | Yes - you'll own the car once you've made the final payment | Yes - you can pay a balloon payment and keep the car or return it | Some give you the option to buy your car but you usually give it back |
Are there any fines for excess wear and tear? | No | Yes | Yes |
Are there charges for ending the agreement earlier? | Yes | Yes | Yes |
If you're still unsure, our HP vs PCP guide will help you understand the differences between these two types of car finance.
Pros and cons of financing an EV
As with every type of finance, there are pros and cons to financing an electric car, including:
Pros
It's a cheaper option than having to buy the car outright or organise a loan
Access to a wider range of vehicles
Improve your credit score if you keep up with payments
Option to keep the car
Fixed monthly payments help you stick to a budget
Cons
Higher interest rates
Longer term debt agreements compared with other options
PCP agreements have strict mileage restrictions and wear and tear policies
Risk of car depreciation and negative equity
Can have a negative impact on your credit score if you miss payments or pay off the agreement early
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, including:
Typically, lenders require you to be at least 18 years old and in some cases you may need to be over 21
Whether applying for car finance or a loan you will need sufficient income, once your existing expenditure has been taken into account, to be able to afford repayments
A good credit score helps show you are financially responsible and gives lenders and finance providers confidence you won’t default on your debt
The bigger the loan or finance deal, the more your finances will be stretched. Lenders might have different criteria for small and large loans
Only applicable to car finance, putting down a bigger lump sum deposit means you won’t have to borrow as much and should increase your chances of being approved for finance
By putting down collateral such as your house, you may be able to achieve better terms on a secured loan or be offered a larger total amount
Age
Affordability
Credit history
Loan amount
Downpayment
Security
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 get a loan to buy an electric vehicle?
Yes, you can get a car loan to buy an electric vehicle, it all depends on your personal circumstances and which option you think it's best for you. Read our guide about whether car finance or bank loans are better to find out more.
Is it possible to 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.
Does electric car finance affect my credit score?
Applying for electric car finance can affect your credit score in a number of ways:
When you apply for car finance, lenders typically perform a soft credit search to assess your eligibility. A soft search doesn't affect your credit score and won't show up on your account.
If your application is approved, the lender will perform a hard credit search, which is visible on your credit report. A hard search stays on your credit file for two years.
If your application is declined, your credit score could be temporarily negatively impacted, especially if you keep facing declines.
If you're approved and make on-time payments, your credit rating could improve. Missed payments can leave a long-lasting mark on your credit file.
If you voluntarily end your car finance before the agreement, it can result in your credit score taking a temporary hit.
Soft credit search
Hard credit search
Declined applications
Missed payments
Ending your contract early
Can I get EV finance if I have poor credit?
Yes you can still get car finance. However, 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.
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.