Electric Vehicles: Benefits of Leasing vs Buying

Should you lease or buy an electric car?

In the last few years, electric vehicles (EVs) have become more popular as the world’s transition to sustainable energy accelerates. In fact, the UK government has implemented a plan to ban the sale of new petrol and diesel cars from 2035 – so the ultimate dominance of the electric vehicle is inevitable.

There are many benefits to opting for an electric car over the traditional petrol or diesel model.

These include cheaper road tax, less maintenance, lower running costs, congestion charge exemptions, and, for those of us who are looking at electric business leasing, tax benefits. 

But despite the growing appeal of zero-emissions driving, many people are still unsure about making the switch because of how quickly the industry is moving forward, with anxieties about the higher up-front costs, the lack of charging points and range limitations. 

Choosing to lease or buy an electric car is a tough call for a lot of people.

Some may prefer to buy a vehicle because they want to own that asset. On the other hand, leasing can be the more enticing option because it offers a hassle-free way to drive a new vehicle for a set period, before you hand it back and you’re free to move on to the next. If you like to switch up your car every two to four years, then leasing is the more affordable option.

We’ve broken down five of the top reasons to lease an electric car, to help you make the decision.

1. Spread the cost of your electric car

One of the biggest benefits to electric car leasing is that you can avoid the big upfront expense that comes with buying an EV.

It’s no secret that electric cars are, on the whole, more expensive than their combustion engine counterparts. But because your lease payments are calculated on the expected depreciation of your electric car over the term of your lease, you can avoid paying out such a hefty sum. 

You’ll spread the cost of the lease across an agreed two-to-four year period, with fixed monthly repayments, and you won’t have to worry about selling on the depreciated asset at the end.

It’s a compelling option, especially if you’re unsure about committing to an electric vehicle for the longer term. You can essentially ‘try out’ electric car driving for your lease term, without tying up a huge wad of cash in a car that’s at risk of becoming outdated in a few years time.

2. Flexibility to upgrade your car

The electric car industry is upgrading at a rapid rate.

Every time you look at the news you’ve likely seen a new development in EV tech, and there seems to be a new manufacturer around every corner. Just last year many new makers appeared in the UK, including BYD and Fisker, set to rival old stalwarts like BMW and Volkswagen, as well as EV-only manufacturers like Tesla and Polestar.

Essentially, an electric car that’s brand-new today risks becoming outdated in the next five years. 

Leasing is another way to mitigate this, if you like to drive up-to-date cars with all the latest technologies and creature comforts, giving you the option to enjoy a brand-new car with the latest and greatest innovations both in the tech and the safety features every few years.

Then, by definition, not having to sell on an older car that is competing with newer rivals.

3. Electric car maintenance packages and fees

In general, electric vehicles have a lower need for ongoing servicing and maintenance. You’ll also be driving the car in its first few years of life, which are generally its most trouble-free years, before it starts developing its old age quirks and needs a little more TLC. 

This makes an electric car lease an even more cost-effective option.

But on top of the money you’re saving already just by leasing an EV, you can also add a maintenance package on top of your lease deal. These generally cover the perishables (like windscreen wipers, batteries and cam belts) as well as tyre repair, scheduled servicing, MOT tests, and more. 

It does add an additional cost to your monthly lease payment, but it also means you can bundle the majority of your automotive costs into one, to make for easier budgeting and peace of mind.

4. No concerns about battery degradation

Do you have concerns about your electric car battery dying over time?

The flexibility to upgrade also means that you don’t need to worry about the car’s battery degrading. Most EVs use lithium-ion batteries, and, although any degrading will be slow and gradual, over time they’ll become less and less effective.

Again, leasing an EV means that you can switch into a brand-new car - and therefore a new battery - every few years, so the decline in EV battery capacity wouldn’t be a cause for concern.

And with battery tech getting better with each year that passes, with brands like BYD investing heavily into new and innovative technologies, soon fears around battery degradation will be a thing of the past. 

5. No risks from vehicle depreciation

In a nutshell, vehicle depreciation is the difference between what your car was worth when you bought it, and how much it’s actually worth when you come to sell it.

When you lease an EV, your monthly payments are determined by what’s called the residual value (RV). This is what the funder believes your car will be worth at the end of the lease taking into account the expected depreciation from historical pricing data, vehicle condition and annual mileage. 

A higher RV means the monthly payments will be lower (as there is a smaller gap between the original and resale price), while a lower RV makes for a more costly lease deal. 

While lease vehicles aren’t exempt from depreciation, you are protected from the risks. If your car ends up being worth less than anticipated at the end of your lease, this isn’t your problem. Your funder shoulders the burden and your fixed monthly payments won’t change during the lease term.

What are the benefits of an electric car lease for businesses?

Businesses benefit from EV leasing in almost the same way that a personal lease customer will.

However, the biggest difference comes in the tax-saving benefits that businesses can benefit from. For example, you can reclaim 100% of the VAT charged on an electric car business lease if it is used solely for business journeys, and 50% if it’s also used for personal reasons.

As a business customer, you also pay a tax known as Benefit in Kind (BiK) on any company car also used for private use. This is because it’s seen as a benefit or perk on top of your salary. However, company car tax is based on the vehicle’s emissions.

Electric cars?

They don’t have emissions, making their monthly BiK tax much less eye-watering than their petrol or diesel counterparts. For example, a Tesla Model Y lease would set you back around £30 a month as a 40% tax payer in the UK, while something like the petrol Hyundai Tucson costs closer to £360 a month in BiK.*

That’s quite a substantial saving, especially when you multiply the cost across the whole life of the lease. 

Want to see how much you could save in BiK by making the switch? Check out our free company car tax calculator.

Electric car salary sacrifice schemes are another way of taking advantage of electric car leasing for businesses. It not only provides you with an attractive employee perk - your staff members can lease a car for less than it would be on a personal lease deal - while you can take advantage of further tax savings on National Insurance Contributions and Income Tax. 

There are also government schemes that can help you offset the initial investment that comes with electric car infrastructure. For example, the Workplace Charging Scheme is a voucher-based scheme that supports you with the upfront cost of installing electric car charging points at your workplace, with eligible businesses able to claim up to £350 per socket for 40 sockets. 

For businesses, electric car leasing is really a no brainer.

*Prices correct at time of publication