How to Finance an Electric Car

Why UK Drivers Are Financing Electric Cars

The electric car market has shifted from niche to mainstream in the UK, with more buyers attracted by lower running costs, zero-emissions driving, and government incentives. Models such as the Tesla Model 3, Nissan Leaf, and Kia e-Niro now command strong demand, with average new prices ranging from £28,000 to £45,000. For many motorists, the upfront cost of an EV is significant—making car finance a practical route.

Many drivers opt for finance to spread the cost and keep cash flow manageable, especially with the rapid depreciation that can come with new technology. Whether it’s a high-spec Tesla or a modest Renault Zoe, electric car buyers are often motivated by fixed monthly payments, the ability to upgrade more frequently, and preserving capital for other needs. Flexible finance options like PCP (Personal Contract Purchase) or HP (Hire Purchase) are frequently chosen to suit different budgets and preferences.

Your Electric Car Finance Options Explained

Navigating electric car finance can be straightforward with the right information. Here are the main routes UK buyers consider:

Personal Contract Purchase (PCP)

With PCP, you pay a deposit and fixed monthly instalments over 2–4 years. At the end, you can either:

• Return the car

• Pay a final balloon payment to keep it

• Part-exchange for a new model

PCP often offers lower monthly payments compared to HP, making it appealing for those eyeing higher-spec electric vehicles. However, mileage limits and condition clauses apply, and the balloon payment at the end can be substantial (often £10,000–£15,000 on a new EV).

Hire Purchase (HP)

HP splits the cost of your EV into a deposit (usually 10%) and equal monthly payments over 2–5 years. At the term’s end, you own the vehicle outright—no large final payment.

• Pros: Straightforward, no mileage limits, full ownership at term end

• Cons: Higher monthly payments than PCP, less flexibility to swap cars early

Lease or Personal Contract Hire (PCH)

Leasing is essentially long-term renting. You pay an initial rental plus monthly fees, then hand the car back at contract end. It suits those who don’t want to own and prefer to always drive the latest model.

• Pros: No worries about depreciation; fixed costs; easy upgrades

• Cons: No option to buy, strict mileage limits, return condition checks

Personal Loans

Some buyers use unsecured personal loans to buy electric cars outright. This route offers flexibility and outright ownership from day one, but the interest rates can be higher, especially if your credit is less than stellar.

Example: A £30,000 EV on PCP might cost £350/month, while HP could be closer to £500/month. Lease deals might start from £300/month for popular models, but with no chance of ownership.

How to Get the Best Deal on Electric Car Finance

Securing the best electric car finance deals in the UK requires a strategic approach. Here’s how to maximise your chances:

1. Compare Lenders and Brokers: Start by comparing offers from main dealers, specialist brokers like Kandoo, and online aggregators. Each lender may have different rates and acceptance criteria, so shopping around is crucial. Search for “best electric car finance deals UK” to see current offers.

2. Check Your Credit Score: A higher credit score often unlocks better APRs. Use free services to check your score and correct any errors before applying.

3. Negotiate Dealer Finance: Dealers may offer special rates on in-stock cars or end-of-quarter deals. Don’t be afraid to ask for extras—charging points, servicing packages, or a deposit contribution.

4. Consider Deposit Size: A larger deposit reduces monthly payments and total interest paid. Aim for at least 10%, but more if possible for improved terms.

5. Time Your Purchase: Look for offers around new registration plate releases (March and September), Black Friday events, or the end of the financial quarter, when dealers are keen to meet targets.

6. Compare PCP and Lease Offers: Use phrases like “compare electric car PCP offers” to find the latest deals. Ensure you factor in any admin fees or balloon payments when comparing headline rates.

7. Read the Fine Print: Check for early settlement penalties, excess mileage charges, and the cost of optional extras like maintenance or insurance.

Top tip: Using an online broker gives you access to a panel of lenders, increasing your chances of approval and finding the most competitive rate—without multiple credit checks.

Eligibility & Credit Check Tips

Lenders assess several factors when you apply for electric car finance:

• Income and affordability: Do your earnings comfortably cover monthly payments?

• Employment status: Full-time, part-time, or self-employed all considered, though proof of income may be needed.

• Credit file: A strong history opens more doors, but specialist lenders cater to those with missed payments or thin credit files.

• Existing commitments: Current loans, mortgages, and outgoings are factored into affordability checks.

Even if you have bad credit, Kandoo can help match you with lenders who may still approve your application. Soft searches are often used initially, so comparing deals won’t harm your credit score. Check your report with Experian or Equifax and address any errors before applying. Having key documents—like payslips, proof of address, and ID—ready can speed up the process.

Example Finance Scenarios

Let’s say you’re buying a nearly-new Nissan Leaf for £20,000. Here’s how PCP and HP options might look:

PCP: Lower payments, but you’ll need to pay £8,000 to keep the car after 4 years; otherwise, hand it back or part-exchange.

HP: Higher monthly payments, but you own the car outright at the end with no final lump sum.

Lease: You return the car at the end—no ownership, but you always drive a recent model.

These figures are illustrative; real quotes will vary based on your credit profile, lender, and market conditions.

Common Questions About Electric Car Finance

Can I get 0% APR on an electric car? Some manufacturers offer 0% APR finance deals on select new EV models, usually with significant deposits and short terms. These are rare and often tied to end-of-line stock or specific trim levels.

Is it cheaper to lease or finance an electric car? Leasing can be cheaper per month, but you’ll never own the car. Financing (PCP or HP) gives the option of ownership, which may be more cost-effective if you plan to keep the car long-term. Always compare total costs, including deposits, fees, and potential balloon payments.

Can I get electric car finance with bad credit? Yes. Specialist lenders and brokers, including Kandoo, work with a range of credit profiles. While rates may be higher, there are options for those with missed payments or CCJs.

Can I refinance my current electric car? Refinancing is possible, especially if you want to reduce monthly payments or switch from PCP to HP. Check for early repayment penalties in your existing agreement and compare offers from multiple lenders.

What’s better: PCP or HP for an electric car? It depends on your priorities. PCP suits those seeking flexibility and lower monthly payments, while HP is for buyers who want to own the car outright and avoid balloon payments.

How Kandoo Can Help

At Kandoo, we work with a panel of trusted UK lenders to help you find the best electric car finance deals—quickly, securely, and with no impact on your credit score. Whether you’re after a new Tesla, a used Nissan Leaf, or anything in between, our team can match your needs with competitive offers from across the market.

Ready to take the next step? Compare electric car finance deals now and drive away in your ideal EV, with the confidence that you’ve secured a great deal for your circumstances.