Is it really cheaper to own an electric car?

In this guide we take a look at how the cost of owning an electric car compares to a petrol or diesel car.

Published: 22nd July 2020

With no cost at the fuel pump, how does the cost of owning an electric car compare to a petrol or diesel car? And what other savings can be made by switching to an EV?

Electric vehicles (EVs) are undoubtedly much kinder to the environment than petrol or diesel cars – aka internal combustion engine (ICE) – to the extent that the UK government has pledged to ban the sale of all ICE and some hybrid cars by 2035.

EVs are improving all the time. One of the big areas that still puts people off is the higher initial cost compared to a petrol or diesel alternative, but the ongoing costs of owning an EV are so much lower that it makes excellent financial sense to switch.

For vehicles with a purchase price of less than £50,000, the UK government offer a £3,000 grant on electric cars, with manufacturers and dealers likely to offer additional incentives to purchase. You can also get a grant of up to £350 towards the cost of installing a charging point at your home, although this will sometimes be included by the garage.

With cars at the cheaper end of the spectrum, the cost difference can still be quite significant: the Renault Zoe starts at £26,495 whereas a Clio can be as low as £15,295 (RRP). With more high-end vehicles, the difference diminishes somewhat with a BMW i3 starting at £35,120 compared to £29,990 for a BMW 318i.

It’s been suggested that by 2024, with greater technological advancements and increasing demand, we’ll be able to buy an EV for the same cost as a petrol car.

Whilst the upfront cost is unavoidably higher, the rest of the motoring costs are substantially lower meaning that overall, you will make a saving by buying an EV – let’s take a look at some of the savings!
 

Electric Renault Zoe V Petrol/Diesel Renault Clio
 

Insurance

This is one area where EVs tend to be more expensive. Sources vary but a Renault Zoe is in insurance category 16-20 while the Clio is in group 7 – it’s always worth shopping around.

The higher insurance premium is due to the fact that electric cars are made from more expensive materials (carbon fibre, aluminium) and so it’s more expensive to repair any damage.

The lithium-ion battery can be a headache for insurers if the car is involved in a collision. They are concerned that any damage from impact could cause a fire later on, and the cost of replacing the battery is steep.

On the other hand, EVs are less likely to be stolen and are usually driven by older, more experienced motorists.

Annual Insurance cost

Renault Zoe: £448
Renault Clio: £351

Zoe = £97 more expensive

(based on 35 year old insurance advisor with no claims, accidents, convictions or penalty points)
 
Insurance
 

Tax

All pre-2017 EVs are exempt from vehicle excise duty, or road tax – no exhaust emissions means no road tax.

Although new electric cars still don’t have to pay VED, since 2017 a new law came into force which meant that any car worth more than £40,000 incurs a premium tax of £320 per year regardless of whether it is electric or ICE.

For a petrol, diesel or hybrid model, this would be in addition to the standard road tax cost each year.

Annual Vehicle Tax

Renault Zoe: £0
Renault Clio: £135

Clio = £135 more expensive
 

Tax
 

Routine servicing and maintenance

Electric cars require less routine maintenance than petrol or diesel cars, as they have fewer parts in the engine that can break down or that need replacing. The difference in maintenance costs over time increase as more of the parts in an ICE vehicle start to wear out.

Research suggests that EV maintenance is estimated to be around 30% lower than an ICE vehicle maintenance – although a government campaign said this could be a saving of up to 70%. There are no oil or filter changes, no need to replace belts and can be a big saving compared to standard vehicle ownership.

Servicing is also more straightforward for this reason and service plans from certain manufacturers can be cheaper.

According to motoringresearch.com drivers spend on average £192 each year on routine maintenance and servicing, while nimblefins.co.uk estimate a figure of almost £280! If we reduce these figures by 30% for EVs the costs would be between £134 and £196 – although with the government’s suggested 70% savings costs could be significantly lower!

Annual vehicle maintenance

Renault Zoe: £134 to £196 (could be as low as £57.60 to £84.00)
Renault Clio: £192 to £280

Clio = up to a possible £200 more expensive
 

Routine servicing and maintenance
 

Loss of value

Historically electric vehicles were heavily hit by depreciation, and an EV’s value often plummeted by up to 70% by the time it was 3 years old.

New generation EVs are generally holding their value as well as, and in some cases better than, the petrol or diesel equivalent.

As more models are available on the market and more people are buying electric, EV residual values will be much better than when EV technology was new and interest was low.

Renault Zoe, registered August 2017:
Original list price £24,000, currently worth £13,650 – 49.2% reduction

Renault Clio, registered August 2017:
Original list price £15,935, current value £8,460 – 53.1% reduction

Clio = 3.9% worse depreciation
 

Loss of value
 

Fuel

This is the big saving with electric cars – the cost of charging an electric vehicle and how long that charge will last i.e. the range, compared to the money paid at the fuel pump and MPG.

The first “fuel” related cost for an electric car is installing a home charger – these are the most efficient way of charging the vehicle and the government provides a grant of £350 to use towards this. Budget charges could cost around £300 whereas a more powerful charger could set you back around £1,000.

The average cost of electricity in the UK is 14p per kWh. To work out the cost to charge an electric car we simply have to multiply the kWh capacity of the battery by the cost of electricity and this will give us the total cost of a full charge.

The savings with an electric car over a petrol option in terms of fuel vs charging costs are quite apparent, and whilst this is just one example the savings do apply to EVs across the board!

  Renault Zoe Renault Clio
Battery/fuel tank capacity (kWh/litres) 52kWh 42 litres
Fuel cost (kWh/pence) 14p 113p
Cost of full charge/tank £7.28 £47.46
Range (miles) 146** 451**
Cost per mile 5p 10p
Annual cost based on 10,000 miles £500.00 £1000.00

A charger is provided and installed free of charge with a Renault Zoe so this would negate any upfront charging cost, meaning a whole £500 in your pocket in fuel savings per year!

This doesn’t account for cheaper overnight electricity tariffs, meaning potentially higher savings!

Annual charging/fuel cost:

Renault Zoe: £500
Renault Clio: £1,000

Clio = £500 more expensive
 

Fuel
 

Savings on congestion charge

Electric cars are exempt from the congestion charge in London – almost all other motorists have to pay the daily fee of £15 – this could be a saving of over £3,900 per year if you work in and have to drive into the City. Add to that the ultra-low emission zone charge for central London which is £12.50 per day. Assuming an average number of working days in the year, this could be a huge expense and the Zoe is going to be the clear winner!

Annual Congestion/ULEZ charge:

Renault Zoe: £0
Renault Clio: £3915/£3262.50

Clio = up to £7,177.50 more expensive
 

Savings on congestion charge
 

Benefit-in-kind

For the financial year 2020/2021 all electric vehicles are exempt from benefit-in-kind tax. This will rise to 1% and 2% in subsequent years. Prior to 6th April 2020 the Zoe would have cost up to £1,023 per year in BiK tax, and the exemption really incentivises opting for an electric company car.

Annual Benefit-in-Kind tax:

Renault Zoe: 0%
Renault Clio: currently 26%, up to 28% benefit-in-kind tax by 2023

Clio = £4020.90 more expensive (increasing each year)
 

Benefit-in-kind
 

*correct as of publication
** based on real world range test results from ALA partner What Car?

Published: 22nd July 2020
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