Author: Beth Twigg | Reading Time: 12 minutes | Published 03/01/2024

Author: Beth Twigg
Reading Time: 12 minutes
Published 03/01/2024

Your guide to electric and hybrid lease cars

It’s no secret that electric, battery-powered and hybrid cars are growing in popularity on UK roads.

This growth has been fuelled in part by our collective environmental consciousness, as well as investment in improved technologies, and a wider appreciation for the unique driving performance offered by electric-powered cars.

But despite this growing interest, the perceived expense of going electric means that many of us write off choosing an electric car.

Leasing an electric car – or even a hybrid – minimises the required initial investment and allows you to spread the cost into affordable monthly payments. At a time when technology is advancing faster than ever, it also protects you from damaging and unpredictable depreciation and resale risk while enabling you to get behind the wheel of the latest, and best, EV models.

Read on to find out everything you need to know about electric car leasing.

Porsche first electric car

1898 - Porsche's first electric car

The history of electric cars

Though you can spot an electric car around pretty much every corner now, electric vehicles are actually much older than you might think.

The first attempts at electrifying transport can be traced back to over one hundred and fifty years ago, when Gaston Plate created the first rechargeable battery in 1865. It wasn’t long after this that William Morrison, in 1891, built the first electric car.

The top speed?

12mph.

However, Porsche soon got in on the action, producing their first EV in 1898. It had a top speed of 22mph, a range of 50 miles, and a 3bhp electric motor.

Though the EVs we’re more familiar with now blow these very first attempts out of the water, it’s clear that since we’ve had cars, manufacturers have been trying to turn them electric.

But with the tech not really where it needed to be, the combustion engine has reigned supreme for many years.

It wasn’t until the 1960s and ‘70s when electric cars started to gain popularity again, fuelled for the most part by the beginnings of the climate crisis. Consumers wanted – and still want – an alternatively fuelled vehicle.

Which brings us to today.

Every automotive manufacturer has at least one electric offering in their line-up, and the rise of brands only offering EVs – with Tesla, BYD, and Polestar among those – is only going to grow.

Skoda Octavia

Hybrid vs electric cars

One of the first decisions you’ll need to make is whether you want to dip your toe into the electric world, or whether you want to dive right in.

A plug-in hybrid (PHEV) vehicle combines both combustion and electric power, making it the perfect compromise.

It offers the best of both worlds, and you’ll want to opt for a hybrid lease if you want the benefits of electric driving, but without having to fully commit.

The engine will initially fire using electric power if the battery is charged, and then switches between fuel types. The combustion engine will kick in on longer journeys or when the battery runs out of juice, whichever comes first.

With PHEVs like the fan favourite SKODA Octavia PHEV boasting claimed ranges of up to 50 miles, you might find that most of the time you're using the electric engine – it’ll help keep both your fuel costs and tailpipe emissions down.

You might also see that some cars are advertised as being a ‘mild hybrid’. These also use a combination of a combustion engine and an electric motor to increase fuel efficiency and decrease emissions, but unlike a PHEV, there’s no way to plug in and recharge.

The electric motor and battery in mild hybrids are smaller, offering gentle electrical assistance to the engine rather than taking over completely.

Tesla Model Y

What is electric car leasing?

Leasing an electric car is like ‘renting’ a brand-new EV for an agreed term. You’ll pick an annual mileage allowance and pay an initial rental upfront, before continuing to pay the fixed monthly cost until the end of the contract.

Once your deal ends, you simply hand the car back and you’re free to move into a new model.

It’s a hassle-free way of getting behind the wheel, especially if you’re not sure about committing to an electric car long-term, or you want the freedom of being able to drive the latest models every two to four years.

And with electric technology advancing so quickly, you’ll never be left behind. Every time your contract comes to an end you can switch into a newer model, benefiting from the latest technologies and enjoying the best of electric driving every time.

How does electric car leasing work?

Once you’ve picked your electric car lease deal, you’ll need to decide on how long your contract will last, your annual mileage allowance, and how much you’re willing to pay upfront.

Generally, an electric lease will last between 24 and 48 months. Your fixed monthly payment will be based on the above criteria, as well as the depreciation of your chosen car, but it won’t change throughout your lease.

For the length of your agreement, the car is yours.

You’ll basically be able to treat it as though you’d bought it, though you will have to bear in mind that any damage that falls outside of the BVRLA’s fair wear and tear guidelines or any excess mileage might result in additional fees at the end of your lease.

You can even bolt on a maintenance package to the price of your lease, which will cover many of the disposables like tyres and windscreen wipers, to make budgeting your automotive costs even easier.

Benefits of leasing an electric vehicle

Benefits of leasing an electric car

There are many benefits to leasing an electric car. These include:

  • Fixed monthly payments for easier budgeting.
  • Access to a wide range of brand-new EVs.
  • Reduced running costs.
  • Maximise your buying potential.
  • Lower carbon emissions.
  • Can switch into a new car every two to four years.

Electric leasing is a winning combination for your purse strings, your driving pleasure and your environmental consciousness.

It’s no big secret that electric cars come with a substantial price tag.

But by choosing an electric lease, you can access the newest – and safest – EVs on the market for a more affordable price. Leasing also lets you personalise that cost, by allowing you to pick the length of your lease, your annual mileage, and your upfront payment.

If you don’t want to invest huge amounts initially, you can even take advantage of no-deposit leasing options.

You’ll likely also find that your running costs are reduced with an electric car lease.

Not only is it generally cheaper to charge your car at home overnight than it is to fill it with petrol or diesel, but EVs also have fewer moving parts. This means that they tend to require less servicing, and there’s no oil or the like to keep an eye on.

You’ll also be exempt from congestion charges and fees in Ultra Low Emission Zones – particularly handy if you’re often driving in and around these areas – along with benefiting from free parking and charging in selected places.

Many supermarkets and some big carparks are supporting the switch to electric, and you’ll find that in many of these places you can charge your car for free (though you'll have to check whether parking charges still apply) while you do your shopping.

And if you’re leasing an electric car for your business, you’ll be able to take advantage of the lower Benefit in Kind tax rates.

Just bear in mind that from 2025, electric vehicles will be subject to Vehicle Excise Duty (VED) – or road tax – for the first time.

Volkswagen ID.3 charging

Are electric cars cheaper to lease?

Leasing an electric car normally works out cheaper than buying, whether that’s outright or on a finance plan like Personal Contract Purchase or Hire Purchase.

EVs are more expensive to buy upfront than their petrol or diesel counterparts, but spreading the cost across a fixed period can make it much more affordable.

The cost of your lease is based on the depreciation value of the car, not it’s full value and the interest you pay reflects that. This is what makes leasing a more affordable proposition, and is also the reason why you normally won’t have the option to buy when your lease is up.

And because the depreciation risk sits with the funder, and not with you, an electric lease is less risky on your part. There’s no worrying about what your car could be worth in the future, and no faff of having to sell it when the used EV market is still so new.

Instead, you can upgrade your electric car every few years. You’ll get all the benefits of driving the newest models, and any risk is out of your hands.

You can also save money on the running costs, because EVs are generally cheaper to fuel, even with current high electric tariffs, and don’t need to be serviced as much. And, because EVs tend to be exempt from congestion charges, you’ll save money here too if you live near or drive in a clean air zone.

BYD Dolphin

How much does it cost to lease an electric car?

The cost of your electric car lease will vary depending on several factors.

The first of these is the actual car you pick.

More premium models, like the Tesla Model Y or Fisker Ocean, will demand a higher monthly price, while more affordable EVs, like the BYD Dolphin or the Volkswagen ID.3, will cost less.

Alongside the make and model of the electric vehicle, the length of your lease, your annual mileage, your initial rental and whether you want a maintenance package will all impact your ongoing monthly payments.

But the electric car market has never been in a better place – with so much choice, from the tiny Fiat 500e to the imposing BYD Seal, there’s sure to be an EV that suits your lifestyle and your budget.

Is it better to buy or lease an electric car?

Whether buying or leasing an electric car is better for you is going to depend on your specific circumstances.

For a flexible way to drive a brand-new vehicle without having to worry about depreciation and what you can ultimately sell the car for when you’re ready to move on, you’ll want to look at EV leasing.

You will be sacrificing ownership for the ease of leasing – and it generally works out cheaper – but if you’re not fussed about the car ever being yours, then it’s not a deal breaker.

Leasing also works if you want to drive electric but you’re not quite ready to commit.

You can pick the length of your deal, and if you decide at the end of the term that electric driving isn’t for you quite yet, then you can easily hand your car back to your funder and move into something that is right for you.

Leasing really is hassle-free - and it allows you to drive the latest models without the same upfront price tag.

Genesis GV60

Things to consider before leasing an electric car

There are several questions you’ll want to keep in mind when you’re deciding which electric car lease deal is right for you.

These include:

  • Does the car you’re looking at have a big enough range?
  • How will you charge your car - can you install an at-home charger or will you have to rely on public charging?
  • Does your workplace have an EV charger you can use?
  • Are you mainly driving around town, or will you need to factor in frequent long motorway journeys?
  • If you’re in the position to do so, it is worth considering electric business leasing for the tax benefits?

You’ll also want to consider the excess charges that you could be liable for at the end of your contract.

Make sure that you’ve chosen the right annual mileage limit for you and your lifestyle. If you go over this, you’ll be charged a price in pence per mile (worked out at the beginning of your lease).

This is because the mileage can affect the depreciation of the car, and your mileage limit affects how much your monthly rental is.

You’ll want to make sure that you’ve chosen one that works for your lifestyle right now and any potential lifestyle changes, or chose an annual limit with a bit of wriggle room.

Excess damage outside of the BVRLA’s Fair Wear and Tear guidelines can also result in additional charges at the end of your lease.

You’ll need to consider keeping the car properly maintained and serviced through the course of your lease, as well as fixing any major damage before you hand it back. A maintenance package can help spread some of these costs, but be sure to properly check your EV over before handing it back to your funder.

Tesla Model 3 line-up

Why should businesses choose electric car leasing?

There are additional incentives for business electric leasing on top of the normal benefits.

There is a big push for businesses to switch to EVs, and the Government have consistently released funding grants and tax reliefs for companies choosing to make that switch.

Right now, the Benefit in Kind (BiK) rate for all electric cars is fixed at 2% until 2025, when it’ll increase by 1% each year until 2028 where it tops out at 5%.

So, for example, if you leased the petrol Vauxhall Mokka, which is in the 30% BiK band, you’d be forking out £121 if you’re in the 20% tax bracket. It’s even higher if you’re a 40% tax payer, with a monthly BiK of £243.

But the Vauxhall Mokka Electric, in the 2% BiK banding, would cost you a mere £13.73 each month.*

That’s a saving of over £100 every month, just by making the switch to electric.

You could save even more cash with a salary sacrifice scheme.

It’s a great way to lease a new car for a smaller price tag. The scheme works by you 'sacrificing’ a portion of your salary to cover the net cost of the EV lease. Your maintenance costs and insurance are covered, and you’ll also pay less tax and NI on your salary.

If you’d like to see how much you can save, take a look at our salary sacrifice calculator and compare different cars.

There are also grants available for businesses to install charging points at work, which help to support the upfront cost of purchasing and installing electric vehicle charge points for eligible businesses.

It’s called the Workplace Charging Scheme (WCS), and it can reduce the initial investment by up to 75%.

If your business is eligible for the scheme,  you can get up to £350 per socket for a maximum for 40 sockets. You don’t have to install 40 at once – you can apply to the WCS as many times as you need to until you hit that limit.

So, whether you’re only looking to dip your toe into the EV world with one or two chargers to start, or you’re diving right in and installing all 40 in one go, the WCS is one way to save some serious cash and provide an incentive for your employees to charge at work.

*Prices correct at time of publication

MG4 EV

Which electric car has the best mile range?

These are the best long-range electric cars to lease if being able to rack up the miles without stopping to charge is your biggest priority:

What is the cheapest electric car lease?

If you’re on a tighter budget, but still want an excellent electric car lease, these are our top picks for you:

What is the best compact electric car lease?

If you need your new EV lease to fit into the tightest of parking spots without breaking a sweat, these are the cars to look at:

What is the best high-performance electric car lease?

If you don’t want to give up the thrill of driving in the pursuit of zero emissions, these are the five high-performance electric lease cars you’ll want on your wish list:

Ready to start your own electric leasing journey?

Beth Twigg

Beth Twigg

Beth is our Content and Paid Media Specialist, tasked with creating great articles to keep you both entertained and informed. She has two years previous experience, but has been writing and scribbling for much longer.