With the UK government’s move towards a greener future, all sales of new petrol and diesel cars are to end in 2030. The aim of which is to encourage the nation towards an electric vehicle revolution (which is already in full force).

In fact, SMMT, the Society of Motor Manufacturers and Traders, revealed that in 2021 alone, the electric car sales in the UK made up 11.6% of the country’s total new car sales, a 5% increase from what we saw in 2020. And two-thirds of which were bought by businesses.

However, for some avid motorists and car enthusiasts, the news hasn’t been as favourable.

Petrol and diesel are out… electric is in

In March 2022 alone, British motorists bought more new electric cars than in the whole of 2019.
However, the main concern about fully moving over to electric vehicles mainly stems from the cost and the infrastructure needed to charge them.

But are they really valid concerns?

When electric vehicles were first introduced to the market (and for many years after), the main selling point was that despite them having a higher price to purchase, you could end up offsetting it by having lower running costs (i.e – charging costs instead of petrol and reducing your servicing needs).

But, with the introduction of more attractive deals, upfront costs are becoming cheaper meaning even more savings!

Buying an electric vehicle through a business or company car scheme

Being able to purchase an electric car through a business or company car scheme can be one of the best ways to save money when branching into the electric vehicle world, mainly because you can write off the car’s value against profits for corporation tax purposes in the first year of ownership.

You can also make use of Benefit in Kind (BIK) tax which is imposed on the driver as personal income tax if the car is also used for personal travel.

Benefit in Kind can be worked out by taking a percentage of the car’s value, and dividing it by the personal tax rate and splitting it by twelve months.

*For electric vehicles, the tax rate is only 1% of the car’s value per year.

Purchasing an electric car through a business or company car scheme can also allow for salary sacrificing wherein lease deducting, insurance and several other costs can be taken out of basic pay before income tax.

Business markets have many opportunities to take advantage of cheaper costs when it comes to electric vehicles, however the same can’t necessarily be said for those wanting to purchase them privately.

Buying electric vehicles privately

When buying an electric vehicle privately, you, unfortunately, don’t get any tax breaks, however, there are some grants available.

One current grant offered by the government is the ‘plug in’ car grant which ends in March 2023 and allows you to receive a discount of up to £1,500 off of the price of a brand new low-emission vehicle. You don’t have to do anything, as if you qualify, then the dealership you are making the purchase through will account for this in your price breakdown.

A low emission vehicle is one that is classed as only emitting 75g (or less) of CO2 per km.

Because you get less help with buying cars privately, most of the money you are able to offset by having an electric vehicle is made through charging vehicles at home overnight.

If you’re able to have a home charging kit installed on your own driveway, then it can be a great way to cut costs (or make up costs) as VAT sits at 5% on domestic electricity. Otherwise, you would have to rely on public charging ports where VAT is higher at 20%.

However, sometimes it may be necessary to charge up your vehicle while on the road, and with the move towards an electric future, the government has pledged for up to 145,000 extra charge points to be installed across England each year in the run-up to 2030.

Will electric vehicles hold their value and will their batteries last?

Another concern about purchasing electric cars is how they hold their value over time.

Traditionally speaking, most petrol cars are purchased using finance products which are based on the value that they lose over time (the PCP).

PCP stands for Personal Contract Purchase and is where the finance lender calculates the value of a car’s depreciation in value during the contract in question, then adds interest with the figure then being broken down into monthly costs.

Compared to conventional cars where it is relatively easy to calculate how much a car’s worth deteriorates over time, electric vehicles are a lot harder to work out.

This is because electric vehicles have significantly less parts than petrol cars and the main depreciation will be in the battery.

Electric vehicle batteries, much like the ones in our phones, lose their ability to charge to full capacity over time which makes it harder to work out the depreciation. This also isn’t helped due to the lack of long-term data and makes the financing of electric vehicles a lot higher than petrol cars. Driver behaviour also plays a huge part in the deterioration of the battery too.

However, general battery performance is readily improving though, and some companies such as Nissan have begun to offer warranties for up to 100,000 miles.

This does come with a disadvantage though as with rapidly increasing technology, older models are becoming outdated quicker which also may play into a car’s general depreciation.

Experts suggest that electric vehicle owners should learn how to charge their cars properly, favour the use of ‘slow’ chargers and also not continuously charge their cars up to the max in order to extend their car’s battery life by miles. Superchargers have also been encouraged to be used sparingly.

Final thoughts…

The move towards electric vehicles is one of the Government’s leading steps to achieving a greener future for the country, however, it has been met with some scepticism.

Businesses are being encouraged to work alongside the government to achieve this goal, and in doing so have many chances to take advantage of cheaper costs when it comes to electric vehicles.

However, if you are choosing to purchase an EV privately, then you may find that costs are steeper. This is greatly because of the difficulties in assessing how much value an electric car will lose over time, especially as a lot of it can be down to customer use and habits.

Coffey Brooks are a team of Independent Financial and Mortgage Advisers based in Clacton-On-Sea, Essex and are directly authorised and regulated by the Financial Conduct Authority.