By Thom Groot, co-founder of the Electric Car Scheme
Drivers in the UK face a perfect storm. Petrol and diesel prices are through the roof. Second-hand cars are more expensive than ever to buy. And those who don’t already have a license face months-long waits or expensive services to get them an earlier lesson. These price increases come alongside the hikes that are happening for everything else.
Yet with more train strikes looming many people across the UK still need a car – at least some of the time – to get to work and play.
The simplistic answer to this problem is “buy an electric car”. But someone struggling to pay a higher fuel bill is unlikely to have the ready cash for most electric cars, which remain far more expensive than similar petrol or diesel vehicles, especially 2nd hand cars.
My solution is leasing an electric car, and using a little-known subsidy called salary sacrifice to make it far cheaper. How much cheaper? Let me show you.
How fuel prices have risen for the average driver – £325 in a year
Inflation and the war in Ukraine has put pressure on fuel prices unlike what many drivers have seen in their lifetimes.
We’re all used to “pain at the pump” stories, but a single litre figure can obscure just how bad things have got for the average driver.
Back before the pandemic in 2019 the average UK car was driven 7,200 miles a year. The average petrol car on UK roads gets about 36 miles per gallon, while a diesel vehicle gets 43 miles.
On petrol prices a year ago, that would cost the average petrol driver £1,020 a year, and the average diesel driver £870.. One year later that same petrol driver would face costs of £1,344, while a diesel driver would be splashing out £1,195.
That’s a difference of around £325 for both drivers.
An electric car is drastically cheaper, even with higher energy prices. Modern electric cars typically get around 4 miles per kWh, meaning each mile costs about 7p on current energy prices. That’s £504 a year for those 7,200 miles – a saving of £600 – £800 for an average driver. If you drive more, you will save more – and that’s with prices high currently, and no free charging at a workplace or cheaper charging off-peak. Real costs are likely to be even lower.
How car prices have risen – £2,392 in a yea
Buying a second-hand car is usual option for price-conscious drivers
It makes plenty of sense, as new cars almost immediately lose value while reputable second-hand car dealerships generally sell cars in very good condition.
But supply-chain issues and steady demand mean the price of second-hand cars in the UK has soared to an average of £17,173, up from £14,781 a year ago – a difference of £2,392. And that kind of price difference is not just seen in the average, even “like for like” comparisons from last year show a 19.5% spike. That means even cheaper vehicles are seeing a price rise of about a fifth.
Why buying an electric car is still out of reach for so many
The answer to high fuel costs is: “Buy an electric car!”
Charging an electric car off-peak at your home is certainly a lot cheaper than buying fuel. And some workplaces allow workers to charge their cars for free.
But while many would love to buy a snazzy electric car, the upfront costs are still eye-watering.
A used electric car cost an average of £27,720 in July, up almost £5,000 on the cost a year ago. And used electric cars do generally need to be charged somewhat more than newer electric cars, as the battery slowly degrades. This doesn’t mean you won’t be able to drive to the shop and back in anything that isn’t brand-new – but for people already worried about range and spending a long time charging their car up on longer trips, it’s a big barrier.
Leasing an electric car: Saves thousands of pounds
Leasing an electric car solves several of these issues at once.
Without that steep upfront cost you won’t be putting yourself into debt just to get a car.
Plus, you won’t have to worry about battery technology suddenly advancing at a rapid-rate, ruining the value of the car you own. If that happens you can just lease a newer car, no value lost.
Unfortunately, leasing costs for an electric car can still be quite high, typically upwards of £600 a month for a Tesla.
But there is a little-known Government subsidy scheme that can make that lease about half the cost, if your employer signs up.
It’s similar to cycle to work, and works via “salary sacrifice”.
Basically you pay for the lease by sacrificing a portion of your salary before it gets paid to you. Crucially, it also gets paid for before the income is taxed. Depending on your tax rate, that can result in some pretty serious savings.
How serious? That same Tesla would cost £402 – about £5,000 of saving over a typical lease. For someone happier with a cheaper vehicle the Vauxhall Mokka-e comes down to just £250 a month, a saving of about £3,000 over leasing without the subsidy.
Of course, convincing your boss to navigate a Government subsidy might be a bit tough, even if you convince them it will actually bring down company-wide emissions. That’s where the Electric Car Scheme comes in.
I attempted to use the Government subsidy a few years ago and found it horrifically complicated. Following this experience, I decided to build a company that would solve the issue for companies who are keen on signing up but don’t want the headache. Because of the subsidy, we offer this service at no cost to the companies. Employers who sign up will get someone at ECS dedicated to helping their employees into the cars, taking care of all the fiddly paperwork and giving them a catalogue of cars available.
Obviously a leased electric car isn’t going to make every cost of living pressure go away. But it could be a crucial way to keep costs down while staying on the road.