UK Leasing

Will an electric car save you money? A look at the numbers

Until recently, electric vehicles were unaffordable for most drivers, with prices 37% higher than gasoline or diesel models.

But with prices at the pump approaching £2 for a liter of petrol, the balance is changing.

Even with the 5p per liter tax cut announced by Chancellor Rishi Sunak last week, the cost of petrol and diesel have risen by 8p and 16p per liter respectively since the start of this month alone.

New figures for The Mail on Sunday reveal fuel savings for switching to electric have reached an all-time high of £779 a year on average for petrol drivers – £738 for diesel drivers.

Decision time? : As electricity prices soared, gasoline and diesel costs rose faster

The economy has increased by £157 and £165 respectively over the past year, according to transport research firm New Automotive. While electricity prices have skyrocketed, gasoline and diesel prices have risen faster.

This, combined with other incentives and tax breaks, means that for a growing number of drivers, it may now make financial sense to bump up the higher upfront cost of an electric car in exchange for lower day-to-day running costs.

Steve Tigar, managing director of car rental company, said: “People are having the pain of handing over £90 to fill up their cars and are going home to search for electric cars online.

“We have seen increased interest in the past month as gasoline prices have risen sharply. The initial cost of £40,000 or £50,000 means electric cars are out of reach for most households. Still, there are ways to cut costs, while everyday savings are increasingly attractive.

Lack of access to charging stations has been a barrier to going electric for many drivers. However, the government responded to this concern last Friday by setting a new target to increase the number of chargers tenfold to 300,000 by 2030.

Electric cars vs petrol cars: how to work out the numbers

Although shrinking, there is still a significant “green premium” on electric cars. Not only are new electric cars more than a third more expensive, used electric cars also tend to cost £8,000 more on average, according to Auto Trader.

Additionally, the number of models priced below £20,000 has fallen from 11 in 2020 to just three last year, the Motor Market reveals.

However, the government wants to encourage drivers to choose greener options, so there are several generous incentives available.

There is no electric vehicle tax, a saving of £155 a year. Additionally, there are grants of up to £1,500 off the purchase price of certain electric cars. These are available on cars with an RRP under £32,000 including VAT and delivery.

The Electric Vehicle Homecharge Scheme provides financing of up to 75% of the cost of installing a charging station in your home.

However, from next month, the scheme will only be open to landlords who live in apartments or people renting.

There is also no congestion charge to get to the city centers. The congestion charge for London is currently £15 per day. Bath, Birmingham, Bradford and Bristol are set to introduce similar clean air zones.

Electricity costs are rising due to rising wholesale prices. However, tariffs for electric car users, which offer cheaper energy when charging at night, remain competitive.

For example, EDF has a tariff for electric car users which provides half price electricity at 11.5 pence per kilowatt hour between 9pm and 7am and all weekend.

Octopus Energy has a similar tariff which offers electricity at 7.5p per kWh per night between 12.30am and 4.30am.

By comparison, from next month most suppliers will charge households ordinary tariffs of 28.3 pence per kWh under the new price cap.

To get cheap overnight charging on a home rate, you need to be able to charge your car at home.

If you pay for public charging stations, the costs are higher and vary wildly. New

Automotive has a calculator that lets you fill in your vehicle details and figure out if you could save money by going electric. Go to:

Hooking up saves me £50 a month

Technician Adrian Willett prefers the feeling of driving a gasoline-powered car to that of driving an electric car. But, when he realized he was spending over £100 a week on fuel, he decided it was time for a change.

He says: “I went from a petrol-loving Audi to an electric Kia e-Niro about four weeks ago, which turned out to be good timing with the way the world is going at the moment. .”

“I think I will save over £50 a month with my electric car.

Switch: Adrian Willett realized he was spending over £100 a week on petrol, he decided it was time for a switch

Switch: Adrian Willett realized he was spending over £100 a week on petrol, he decided it was time for a switch

“Yes, I find a car with a combustion engine more fun to drive, but I enjoy the experience of going electric.”

Adrian, left, travels to engineering firm Dash-CAE in Abingdon, Oxfordshire, from his home in Banbury – a 66 mile round trip. He estimates he can go around 120 miles on a single charge.

He says: ‘I charge my car at work, where it costs around £10 and takes just over eight hours. I do this a few times a week.

“If I charged it at home with a normal socket, it would take 38 hours. I have not yet installed a special charging station at home, which would reduce the time considerably.

Adrian uses a wage sacrifice scheme to lease his Kia, resulting in the monthly cost being £385 instead of the £560 it would have been otherwise.

“It’s a big monthly bill, but it includes insurance and maintenance, so it’s still a big savings,” he says.

“Every penny counts these days.”

How to reduce costs – and can you make wage sacrifices?

For most drivers, the upfront expense is the biggest barrier to owning an electric vehicle. To circumvent this problem, one option is to rent an electric car. You must return the vehicle or pay the balance at the end of the lease term.

In contrast, you only pay a monthly cost to drive one. Many leasing services include insurance and maintenance costs, saving you a lot of additional costs.

A little-known tax break could help cut costs even further – in some cases by almost half. Many earners are familiar with wage sacrifice plans as a way to buy a new bike or get cheap childcare vouchers because the government allows you to avoid the usual tax contributions. The same scheme can be used with electric cars.

Loveelectric, which supplies electric cars in this way, says a higher-rate taxpayer earning more than £50,271 a year could cut the cost of renting a Tesla Model 3 from £615 to £320 a month by sacrificing his salary.

A base-rate taxpayer earning between £12,571 and £50,270 could lease an electric Fiat 500 hatchback for £197 a month, up from £340 a month if he didn’t use a wage sacrifice scheme.

Both examples assume a lease term of four years and an agreed mileage of 5,000 miles per year.

Salary sacrifice means that monthly rental payments are deducted from your gross rather than net salary.

This means you save on income tax, while you and your employer pay less national insurance contributions.

Since the payments are taken directly from your salary, before signing up you should check what happens with the contract if you quit your job. People on defined benefit pension plans should also check whether their final pension will be affected.

> Electric vehicles eligible for government grant for plug-in cars: models eligible for the £1,500 grant

Should you buy a used electric car?

Until recently, the second-hand market for electric cars was small. But Ben Nelmes at New Automotive thinks that will change later this year.

He says: “To date, the majority of electric cars have been purchased by commercial fleets and it was around 2020 that we saw a huge growth in the number of electric cars they were buying.

“Commercial fleets typically hold cars for two years. So based on that, we expect these cars to hit the used market soon. This will boost the used market.

Nelmes says that in the past, drivers might be hesitant to buy a used electric car in case the battery capacity is impaired.

But studies show that today’s car batteries typically retain 95% of their capacity after driving 100,000 miles.

Could the prices of electric cars drop further?

Ben Foulser, UK head of future mobility at management consultancy KPMG, believes the purchase price of electric cars should match that of petrol and diesel by 2025, as the price of batteries – the component the most expensive – is falling.

And factories are ramping up production to meet the ban on sales of new petrol and diesel cars by 2030, creating economies of scale.

However, as prices fall, subsidies to encourage going electric may well be phased out, he warns.

“A key question is how long these incentives will continue,” he says. “There are already calls for a national road pricing system to replace lost Treasury revenue and to manage demand for road space.

“The benefits of electric company cars could be enhanced as the government encourages the use of public transport, walking and cycling.”

Supply chain issues could also lead to higher prices and delays on some models. Earlier this month, Tesla hiked prices in the UK, with its cheapest vehicle, the Model 3, rising by £1,000 to £43,990.

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