Electric Car Finance Deals: What You Need to Know

Why This Guide Matters

Choosing to go electric is no longer just about environmental ideals—it’s a practical financial decision for many UK motorists. Electric vehicles (EVs) are increasingly visible on British roads, and the government’s push towards net-zero emissions has only sharpened buyers’ focus on EVs as the next logical step. Yet, the upfront cost of an electric car can be daunting. That’s where finance deals come in, offering a route to ownership that’s manageable and, potentially, cost-effective. This guide is crafted to demystify electric car finance deals, explain their structure, and help you decide if they’re right for you.

The Basics Explained

Electric car finance works much the same way as finance for petrol or diesel vehicles, but there are a few nuances. The most common finance options include:

• Personal Contract Purchase (PCP): Pay a deposit, followed by monthly payments, with the option to buy the car at the end.

• Hire Purchase (HP): Spread the cost over fixed monthly payments; you own the car once all payments are made.

• Personal Leasing (PCH): Rent the car for a set period and return it at the end.

The key difference with EV finance is the government incentives. For example, there are no longer grants for new electric cars as of 2022, but you may still benefit from lower running costs, reduced road tax, and exemptions from congestion charges. Finance lenders may also offer specific EV deals, such as lower APRs or tailored packages for home charging installation.

Creditworthiness, deposit size, and the value of the vehicle all play a part in the rates you’re offered. It’s crucial to compare offers across the market to ensure you get the best terms.

How It Affects You

Opting for electric car finance has a direct impact on your monthly outgoings, long-term savings, and mobility.

Monthly Payments: While EVs tend to have a higher upfront price than their combustion-engined counterparts, competitive finance deals can bridge the gap. Monthly repayments can be similar or, in some cases, even lower due to strong residual values of popular electric models.

Running Costs: The savings don’t stop at the dealership. Electric cars cost less to maintain—there are fewer moving parts, no oil changes, and brakes last longer thanks to regenerative braking. Charging at home can also be significantly cheaper than refuelling at the pump.

Taxation and Charges: Pure electric vehicles are exempt from vehicle excise duty and London’s congestion charge, which can add up to hundreds of pounds saved each year.

Resale Value: The residual value of EVs is improving as demand grows and the technology matures. However, battery longevity and perceived obsolescence can still influence future values.

In short, the effect on your finances is multi-layered. Carefully examining finance terms, understanding the total cost of ownership, and factoring in ongoing savings are vital before making your decision.

Our Approach

At Kandoo, we believe that motor finance should empower, not encumber. Our approach to electric car finance is built on transparency, choice, and tailored support.

• Comprehensive Market Comparison: We work with a wide range of lenders, ensuring our customers have access to competitive rates and flexible terms tailored to electric vehicles.

• Specialist Advice: Our advisors are trained to understand the nuances of EV finance, from battery warranties to charging infrastructure. We help you factor these into your decision.

• Clear Explanations: Finance agreements are explained in plain English, with all fees and charges detailed upfront.

• Support for Green Initiatives: We highlight deals that support the transition to electric, such as those including home charger installation or green energy tie-ins.

• Customer-Centric Process: Our platform is designed for ease—quick eligibility checks, no impact on credit score to get quotes, and personalised recommendations.

Consider the example of a customer looking to finance a family EV. They come to us with a set monthly budget and a preference for PCP. We compare available deals, taking into account their annual mileage, expected residual value, and the latest manufacturer incentives. The result: a tailored finance solution that fits their needs—and their environmental ambitions.

We’re committed to transparency and customer empowerment at every step. That means no hidden costs, no jargon, and ongoing support throughout your finance agreement.

Before You Decide

Before signing up for an electric car finance deal, ask yourself the following:

1. What’s my real budget? Consider the deposit, monthly payments, and running costs.

2. How long do I plan to keep the car? Some deals are better suited to short-term use, others to long-term ownership.

3. Is my driving pattern suited to electric? Think about your typical journey length, access to charging points, and home charging capability.

4. What’s the total cost of ownership? Factor in maintenance, insurance, and potential charging upgrades.

5. What happens at the end of the agreement? Will you want to own the car, or return it and upgrade?

By scrutinising these factors, you can better assess whether an electric car finance deal is truly in your favour.

What’s Real, What’s Hype

There’s a buzz around electric cars, but not every claim stands up to scrutiny.

• Real: Lower running costs, tax benefits, and environmental advantages.

• Hype: That all EVs are cheap—upfront costs remain high, and the used market is evolving.

• Real: Finance deals can make EVs more accessible.

• Hype: That every finance deal is a bargain—terms and interest rates vary widely.

A measured approach, grounded in your own needs and circumstances, is essential for separating signal from noise in the fast-evolving EV market.

Pros & Cons

Carefully weighing these factors will help you determine if electric car finance is the right route for you.

Other Options to Consider

If traditional finance doesn’t suit, there are alternative ways to go electric:

• Salary Sacrifice Schemes: Some employers offer EVs as a benefit, allowing you to pay via your gross salary, saving on tax and National Insurance.

• Car Subscriptions: All-inclusive monthly payments cover the car, insurance, maintenance, and often charging.

• Used EV Finance: The used electric car market is expanding, and finance deals are available for nearly-new models.

• Bank Loans: An unsecured personal loan can sometimes offer lower rates and more flexibility.

Each alternative comes with its own benefits and drawbacks. Compare options, considering your employment status, cash flow, and personal preferences.

FAQs

Are electric car finance deals more expensive than petrol car finance?

Not necessarily. While electric vehicles often have higher list prices, strong residual values and manufacturer incentives can mean monthly payments are competitive with, or even lower than, equivalent petrol or diesel models.

Can I get a finance deal with a poor credit rating?

Options may be limited, but some lenders specialise in providing finance to those with less-than-perfect credit. Expect higher interest rates, and ensure repayments are affordable.

What happens if I exceed my mileage allowance on a PCP?

Exceeding agreed mileage can result in excess mileage charges. Be realistic about your driving habits when arranging your finance deal.

Are there any government grants for electric cars?

The plug-in car grant ended in June 2022, but other incentives—such as grants for home chargers and exemptions from road tax—remain.

Is it better to lease or buy an electric car?

Leasing may suit those who prefer to upgrade regularly or want to avoid concerns about battery depreciation. Buying (via HP or PCP) suits those seeking eventual ownership.

What about battery warranties?

Most manufacturers offer separate warranties for EV batteries, typically 8 years or more. Check the details before committing.

Do I need a special home charger?

A dedicated home wallbox is recommended for faster, safer charging. Some finance deals include these as part of the package.

Next Steps

Ready to explore your electric car finance options? Start by comparing deals, considering your budget and driving patterns. Kandoo can help you navigate the choices—get in touch for a tailored quote or browse our latest offers online. Make your move to electric with confidence and clarity.