The Ultimate Guide to Financing: Electric Vehicles

The Ultimate Guide to Financing: Electric Vehicles

The electric vehicle (EV) revolution is well underway, with more drivers making the switch to eco-friendly transportation. From reducing carbon emissions to saving on fuel costs, the benefits of owning an EV are undeniable. However, while the long-term savings are appealing, the initial cost of purchasing an electric vehicle can seem daunting. That's where financing comes in.

This guide will walk you through the ins and outs of financing electric vehicles, from understanding the various options available to considering how Kandoo, a UK-based retail finance broker, can help you find the best deal for your needs.

Why Consider Financing an Electric Vehicle?

Electric vehicles tend to have a higher upfront cost compared to their petrol or diesel counterparts. This is largely due to the advanced technology and the cost of lithium-ion batteries that power EVs. However, the total cost of ownership, including fuel savings, tax exemptions, and lower maintenance costs, often makes EVs more affordable in the long run.

Financing allows you to spread the cost of purchasing an electric vehicle over time, making it more accessible to a wider range of buyers. Instead of paying the full price upfront, you can break it down into manageable monthly payments, allowing you to get behind the wheel of an EV sooner rather than later.

Types of Financing Options for Electric Vehicles

When it comes to financing an electric vehicle, several options are available, each with its pros and cons. Here are the most common methods:

1. Personal Contract Purchase (PCP)

PCP is one of the most popular ways to finance a car, including electric vehicles. With this option, you pay a deposit (usually 10% of the vehicle's price) followed by monthly instalments. At the end of the contract term, you have three options:

• Pay a balloon payment to own the car outright.
• Return the car with no further financial obligations.
• Trade in the car for a new one and start a new PCP agreement.

The monthly payments for PCP are generally lower than other types of finance because you're only paying for the car's depreciation over the term, not the full value. However, you will need to factor in the balloon payment if you want to keep the car at the end of the term.

2. Hire Purchase (HP)

Hire Purchase is another common method of financing an electric vehicle. With HP, you pay an initial deposit, followed by fixed monthly payments over an agreed period. Once all the payments are made, the car is yours to keep. Unlike PCP, there’s no balloon payment at the end.

HP agreements tend to have higher monthly payments than PCP, but you’re working towards full ownership of the car from the start. This option is ideal for those who are certain they want to keep the car long-term.

3. Personal Loan

A personal loan allows you to borrow a lump sum to purchase an electric vehicle outright. You then repay the loan in fixed monthly instalments over an agreed period. This option gives you full ownership of the car from the beginning, with no mileage restrictions or balloon payments.

Personal loans can offer more flexibility, as you can choose your loan term and shop around for the best interest rates. However, you’ll need to have a good credit score to qualify for competitive rates.

4. Leasing (Personal Contract Hire)

Leasing is another option for financing an electric vehicle. With leasing, you don’t own the car but instead pay a fixed monthly fee to use it over a set period. At the end of the lease, you return the car to the leasing company.

Leasing can be a good option if you like the idea of driving a new car every few years and don’t want to deal with the hassle of selling or trading in. However, you won’t own the vehicle at the end of the lease, and there may be mileage restrictions.

Government Incentives and Grants for Electric Vehicles

The UK government is committed to promoting electric vehicles as part of its efforts to reduce carbon emissions. As a result, there are several incentives and grants available to help make purchasing an electric vehicle more affordable.

1. Plug-in Car Grant

The UK government offers a Plug-in Car Grant to reduce the cost of purchasing eligible electric vehicles. This grant can cover up to 35% of the vehicle’s purchase price, capped at £1,500. The grant is applied directly at the point of sale, reducing the price you pay upfront.

It’s important to note that not all electric vehicles are eligible for the grant, so it’s worth checking the government’s list of qualifying vehicles before making your purchase.

2. EV Homecharge Scheme

The Electric Vehicle Homecharge Scheme (EVHS) provides a grant for homeowners to install a home charging point. The grant covers up to 75% of the installation cost, capped at £350. This is a great way to make charging your electric vehicle more convenient and cost-effective.

3. Road Tax Exemption

Fully electric vehicles are exempt from road tax (Vehicle Excise Duty), which can save you hundreds of pounds per year. Plug-in hybrid vehicles may also qualify for reduced road tax rates, depending on their emissions.

4. Low Emission Zones and Congestion Charges

Electric vehicles are often exempt from charges in low emission zones and congestion charge areas, such as London’s Ultra Low Emission Zone (ULEZ). This can result in significant savings if you frequently drive in city centres.

The Role of Kandoo in Electric Vehicle Financing

Navigating the world of vehicle financing can be overwhelming, especially with so many options available. That’s where Kandoo comes in. As a trusted retail finance broker in the UK, Kandoo specialises in helping consumers find the best financing deals for their specific needs.

Kandoo works with a panel of reputable lenders, ensuring you get competitive rates and terms tailored to your financial situation. Whether you’re interested in a PCP, HP, or personal loan, Kandoo can help you compare your options and secure the financing that works best for you.

Here’s how Kandoo can help you finance your electric vehicle:

• Access to multiple lenders: Kandoo has partnerships with a range of lenders, allowing you to compare deals and find the best rates.
• Tailored advice: Kandoo’s team of experts can guide you through the financing process, helping you understand your options and choose the right one for your needs.
• Quick and easy process: With Kandoo, applying for vehicle finance is quick and straightforward, with many customers receiving decisions within minutes.
• No impact on your credit score: Kandoo offers a free eligibility check that won’t affect your credit score, so you can explore your options with confidence.

By using Kandoo, you can take the guesswork out of financing your electric vehicle and focus on enjoying the many benefits of driving an eco-friendly car.

Factors to Consider When Financing an Electric Vehicle

Before committing to a financing option, there are several factors you should consider to ensure you’re making the right decision for your financial situation and driving habits.

1. Deposit Size

The size of your deposit will impact your monthly payments and overall cost. A larger deposit will reduce your monthly payments, but it’s important to balance this with your immediate financial needs.

2. Mileage Limits

If you’re opting for a PCP or lease agreement, be aware of any mileage limits. Exceeding the agreed mileage can result in additional charges, so it’s essential to choose a mileage allowance that reflects your driving habits.

3. Interest Rates

The interest rate on your financing agreement will affect the overall cost of your electric vehicle. It’s worth shopping around for the best rates or using a broker like Kandoo to help you find competitive deals.

4. Maintenance and Running Costs

Electric vehicles typically have lower maintenance costs than petrol or diesel cars, but it’s still important to factor in running costs such as insurance, charging, and servicing. Some finance agreements may include maintenance packages, which can help you budget for these expenses.

Conclusion

Financing an electric vehicle can make the transition to greener driving more accessible and affordable. With various financing options available, including PCP, HP, personal loans, and leasing, there’s a solution to suit every budget and lifestyle.

By taking advantage of government incentives and grants, as well as working with a trusted finance broker like Kandoo, you can find the best deal and drive away in your new electric vehicle with confidence. Whether you’re looking for lower monthly payments or full ownership, Kandoo’s team of experts is here to help you navigate the process and secure the financing that works for you.

As the UK moves towards a more sustainable future, there’s never been a better time to switch to an electric vehicle. And with the right financing plan in place, you can enjoy all the benefits of driving an EV without breaking the bank.