Electric Car Finance: How EV Deals Work in 2025

Why This Guide Matters

As more UK drivers look to make the switch to electric vehicles (EVs), understanding how to finance an electric car in 2025 has never been more important. The landscape is shifting rapidly: government incentives are evolving, battery technologies are advancing, and lenders are tailoring new products specifically for electric cars. Yet, with choice comes complexity. Whether you’re considering your first EV or thinking of replacing an existing one, the financial considerations differ from those of petrol or diesel models. This guide is here to give you a clear, detailed, and practical view of how electric car finance works in 2025—so you can make decisions with confidence, not confusion.

The Basics Explained

Electric car finance, at its core, isn’t vastly different from traditional car finance. The familiar products—Personal Contract Purchase (PCP), Hire Purchase (HP), leasing, and personal loans—are all available, but the terms and incentives may differ. Here’s what you need to know:

• PCP (Personal Contract Purchase): You pay an initial deposit, followed by monthly payments. At the end, you can either make a final ‘balloon payment’ to own the car or hand it back.

• Hire Purchase (HP): After a deposit, you pay off the car’s value in fixed instalments. Once the last payment is made, the car is yours.

• Leasing (Personal Contract Hire): You pay to use the car for a set period, then return it—ownership never transfers.

• Personal Loans: A traditional loan to buy the car outright, giving you full ownership from the start.

With EVs, lenders often offer lower interest rates, longer terms, or added perks like free home charging installation. Some deals even factor in the expected higher residual value of EVs, reflecting their slower depreciation compared to petrol cars. Government grants, while more limited than in previous years, still play a role in reducing upfront costs for certain models.

How It Affects You

Switching to an electric car can have a significant impact on your monthly outgoings and long-term financial commitments. While the upfront costs of EVs remain higher than their combustion counterparts, monthly finance payments can be more competitive thanks to tailored deals. Here’s what to consider:

• Running Costs: Electricity is usually cheaper than petrol or diesel, and EVs require less regular maintenance (no oil changes, simpler mechanics). Factor these savings into your budget.

• Residual Value: EVs are holding their value better as demand grows, meaning your car may be worth more at the end of a PCP or lease, potentially lowering your overall costs.

• Insurance: Premiums for some EVs can be higher, particularly for new models, owing to repair costs and parts availability. Always check insurance quotes before you commit.

• Charging Infrastructure: More finance providers now offer packages that include home charger installation or public charging credits, which can offset initial expenses.

• Government Incentives: While the plug-in grant for cars has ended, there are still schemes for vans and electric taxis, and tax breaks remain in place for company car drivers.

In short: the real cost of EV finance in 2025 isn’t just the monthly payment—it’s the whole-life cost, from charging to residual value and beyond.

Our Approach

At Kandoo, we recognise that the move to electric vehicles is about more than just environmental benefits—it’s a financial decision that needs clarity and support. Here’s how we help UK drivers navigate EV finance in 2025:

1. Comprehensive Product Range: We work with a panel of lenders who understand the nuances of electric cars. This means access to competitive PCP, HP, leasing, and loan options designed specifically for EVs.

2. Transparent Guidance: Our advisers take the time to explain every step—from eligibility and credit checks to residual values and end-of-term options. Every product’s costs and benefits are clearly laid out.

3. Incentive Navigation: We keep up to date with government incentives, local council schemes, and manufacturer offers—so you don’t miss out on potential savings.

4. Charging Solutions: We partner with charging infrastructure providers, meaning some finance packages may include home charger installations or discounted public charging. This helps smooth the transition to EV ownership.

5. Whole-life Cost Analysis: We help you compare not just monthly payments but also running costs, insurance, tax, and likely depreciation. This holistic view is essential for making a sound financial decision.

6. Personalised Service: Every customer’s needs are different—whether you’re a city commuter, a family needing space, or a business user with specific requirements. Our tailored approach ensures you get the right deal for your circumstances.

A quote from one of our recent clients:

“Kandoo made the switch to electric simple. They explained the finance, sorted my charger, and kept me updated on every step. I felt in control throughout.”

Before You Decide

Before signing any finance agreement for an electric car, consider these practical steps:

• Budget Realistically: Factor in all costs—monthly payments, insurance, charging, maintenance, and any early settlement fees.

• Check Incentives: See if you’re eligible for local or workplace schemes, or if the manufacturer is running special promotions.

• Research Charging: Assess your home charging suitability and public charging network in your area. Does your finance deal include any assistance?

• Read the Fine Print: Pay close attention to mileage limits, excess wear charges, and balloon payments, especially with PCP and leasing.

• Compare Offers: Don’t just look at the headline rate; compare the total amount payable and the flexibility of each deal.

A well-informed decision today could prevent costly surprises down the road.

What’s Real, What’s Hype

There’s a lot of noise surrounding electric cars and their finance deals. Here’s what to trust—and what to view with scepticism:

• Real: EVs typically have lower running costs, and finance deals often reflect higher predicted residual values.

• Hype: Claims of ‘free motoring’ are overstated. Charging, insurance, and maintenance still add up.

• Real: Government tax incentives for company car drivers remain attractive.

• Hype: Not all deals include home chargers or public charging credits—always check the details.

The key is to focus on total cost of ownership, not just marketing headlines.

Pros & Cons

Carefully weigh these points against your driving patterns and financial circumstances.

Other Options to Consider

Financing an electric car isn’t your only route to EV motoring. Explore these alternatives:

• Salary Sacrifice Schemes: Increasingly popular with UK employers, these enable you to lease an EV using pre-tax salary, often resulting in significant savings—especially for higher-rate taxpayers.

• Used EV Market: As more used electric cars enter the market, so do finance deals for pre-owned models. These can offer lower monthly payments and less depreciation risk.

• Subscription Services: Some providers now offer all-inclusive monthly subscriptions, covering the car, insurance, servicing, and sometimes charging. This can be ideal for drivers seeking maximum flexibility.

• Short-term Leasing: For those wanting to try EVs before committing, short-term leases or flexible rentals are available from specialist firms.

Each option has its own pros and cons—consider what fits best with your financial goals and driving habits.

FAQs

1. Is it cheaper to finance an electric car than a petrol car?

The monthly payments can be similar or slightly higher for an EV, but lower running costs often make the total cost of ownership competitive or even lower over a typical three- or four-year term.

2. Do I get a government grant for electric cars in 2025?

The main plug-in grant for new cars has ended, but grants remain for electric vans, taxis, and some wheelchair-accessible vehicles. Tax incentives for company car drivers are still in place.

3. What happens at the end of a PCP or lease?

You can either return the car, pay a final balloon payment to keep it (PCP), or start a new agreement. Check for any excess mileage or wear charges.

4. Are EVs more expensive to insure?

Some models are, due to higher repair costs and parts, but insurance prices are gradually falling as EVs become mainstream. Always compare quotes before deciding.

5. Can I get a home charger as part of my finance deal?

Some finance deals now include home charger installation or provide discounts. Ask your broker or lender for details.

6. What credit score do I need to finance an EV?

Requirements are similar to traditional car finance. A good credit score improves your chances of approval and better rates, but options exist for those with less-than-perfect credit.

7. Can I finance a used electric car?

Yes. As the used EV market grows, more lenders offer finance products tailored to pre-owned electric vehicles.

Next Steps

Ready to explore your electric car finance options? Start by researching models, comparing finance quotes, and checking for any available incentives. Speak to a specialist broker like Kandoo for tailored advice—and drive into the future of motoring with clarity and confidence.