When it comes to the current vehicle market, one of the hottest topics on everyone’s lips is the contrast in cost between electric vehicles and ICE (Internal Combustion Engine) vehicles, also known as ‘fossil fuel’ vehicles. This doesn’t just start and stop with the initial purchase cost, but also includes the difference between running costs, maintenance costs and operational costs.
There are a lot of misconceptions surrounding the whole topic, and in reality, the comparison between the costs of these two types is changing all the time as infrastructure gets built and technology progresses. Let’s examine what it means for you as the buyer, and score EVs versus traditional ICE vehicles
I’m moving to an EV for the first time – what can I expect?
You’ve just got your very first electric vehicle, and you’re beginning to wonder what it actually looks like for you on a day-to-day basis. First and foremost, you have one thing you simply can’t do with ICE vehicles – the luxury of being able to refuel at home. While it’s true that the charging station network across the country is still developing, there’s a significant convenience to be able to leave your home with a vehicle that has its maximum range, every single time.
To be able to charge your car at home you’ll need to buy a home charger. And with a whole range of home charging options on the market, choosing the right one can be tricky. You can expect the average cost of a home charger to be somewhere between £500 – £900, depending on what you want to get out of your charging station, such as something small and simple for an overnight charge or one that’s more powerful for a rapid charge.
What will my EV running costs be like?
One of the most prolific topics of debate between electric vehicle owners and ICE owners is how much it costs to run an EV compared with a fossil fuel vehicle. This is a difficult question to answer, as EVs vary hugely. It’s important to try and maintain a fair baseline for comparisons so you can make the correct decision. Luckily for you, we’ve created a useful calculator for you to do exactly that. This will help you get a true cost per mile based on your driving habits, your EV and your electricity prices.
Besides the obvious price difference between charging your EV with electricity instead of filling your ICE vehicle with petrol or diesel, there are still maintenance costs associated with any vehicle to account for normal wear and tear on perishable components. The good news is that there are far fewer moving components on EVs compared with ICE vehicles, which will reduce your maintenance costs. It’s worth noting that given the high torque figures of electric vehicles, some individuals might find they’re changing tyres more frequently than before. This, however, is heavily influenced by driving habits and annual mileage. If worrying about maintenance isn’t for you, then don’t forget that with our P+B Salary Sacrifice scheme, we take care of the maintenance of your vehicle and replacement tyres for you.
One expenditure that gets brought up fairly frequently when talking about EV running costs (even though it’s by no means a running cost, or an annual cost) is the price of a replacement battery. While it’s true these can be prohibitively expensive, be aware that many EVs enjoy battery warranties of 8 years or 100,000 miles, which should put the average buyer at ease.
Are there any other costs besides charging my EV?
Of course, as with any vehicle, you’ll have to insure and tax your EV in order to use it safely and legally on UK roads. So what’s the difference in these costs for EVs compared with ICE vehicles?
EVs are exempt from VED (vehicle excise duty) until 1 April 2025. New zero-emission cars registered on or after 1 April 2025 will be liable to pay the lowest first-year rate of VED (which applies to vehicles with CO2 emissions 1 to 50g/km), which is currently £10 a year. Generally speaking, this is significantly cheaper than taxing a fossil fuel vehicle, where rates are directly tied to vehicle emissions for cars registered after March 1 2001, and to engine size for vehicles registered before that date. Zero and low-emission cars first registered between 1 March 2001 and 30 March 2017 that are currently in Band A will move to the Band B rate, which is currently £20 a year. All in all, this is significantly cheaper than the equivalent ICE VED cost, even if EV VED is set to increase.
What about insurance?
As for insurance, there are many factors that brokers use to determine risk and therefore rates when insuring your vehicle – purchase cost, the likelihood of your vehicle being in a collision according to statistics, likelihood of your vehicle being stolen or damaged, annual mileage and of course your record as a driver. Generally speaking, electric cars are on average 10-15% more expensive to insure than petrol or diesel alternatives, though this can vary greatly from model to model. If this sounds like a headache to you, then don’t forget that with our P+B Salary Sacrifice scheme, we take care of the insurance for you, and protect against any insurance rises with a fixed fee for the duration of your contract.
For example, Tesla models tend to command a higher premium than a similar non-Tesla alternative (though this is tricky to accurately quantify because there is no non-electric Tesla). This makes sense considering Teslas are a premium EV, with new costs on the higher end of the market compared with other alternatives. For cars such as the BMW 5 Series/i5, Volvo XC40 and Mercedes-Benz E Class/EQE, where there are usually electric, petrol and diesel vehicles, the difference could be as high as 20%, but in some cases, it’s actually cheaper to insure the EV.
As so much depends on the specific EV model and driver circumstances. It’s not possible to make a blanket statement on insurance costs due to so many variables at play. With electric vehicles becoming more popular and their purchase price falling, combined with more insurers entering the market, EVs have become much cheaper to insure, now often cheaper than petrol or diesel equivalents. Research conducted by used car dealer heycar revealed that in 2020 drivers of the EV Nissan Leaf paid an average of £394 per year for car insurance, while owners of Ford Fiestas paid an average of £550 per year, despite the Fiesta being smaller and cheaper to buy. The Tesla Model 3 however is still expensive to insure, which can be expected for an EV vehicle at the higher end of the market, but premiums have fallen steeply- from £1464 in 2019 to £1223 in 2020, which puts the car’s insurance costs in line with luxury fossil fuel vehicles. There is some more useful information in this article about the differences in insuring EVs compared with fossil fuel models.
How expensive are EVs to buy?
When the EV market was in its infancy, many motorists simply shrugged them off as unaffordable to purchase. And while EVs are on average still more expensive than their ICE counterparts, this difference has significantly reduced in recent years, thanks to improved supply chains, manufacturing scale and technological developments.
If your heart is set on an EV but you’re still considering the impact on your wallet, it might be worth noting that Dacia is about to launch a compact city car, with prices starting at just £14,995. At the other end of the spectrum, if you want to drive away a premium EV, such as a Tesla Model 3, you can expect prices to start from approximately £39,990.
The good news is that the EV market is increasingly dynamic, and as it develops and new models are released to market, the consumer is set to reap the benefits of a more competitive EV market with greater choice, lower costs and more innovative technology.
How else can I get an EV?
But outright purchasing a new EV is by no means the only way to find yourself in the driver’s seat. With the government having implemented various incentives for many years now in order to try and encourage us to move away from fossil fuels and reduce our carbon emissions, there are a whole host of methods you can use. One of the best methods, and one we promote here at P+B, is the EV Salary Sacrifice Scheme.
This scheme allows business and individuals to get brand-new vehicles with cost savings for both parties that are only available when switching to EVs. For example, as a business you can enjoy certain tax breaks if you move your vehicle fleet away from ICE technology and replace it with EVs. If you’re an employee looking for a new EV, not only do you get access to great deals on EVs via a Salary Sacrifice Scheme, but you also get to enjoy a lower BIK (Benefit In Kind) rate of just 2%. Compare this with fossil fuel vehicles, where you can expect to pay a rate of up to 37% for the most polluting vehicles.
The verdict, how do the costs associated with EVs stack up against ICE vehicles?
| ICE | EV | EV Salary Sacrifice | P+B analysis. | |
| Purchase Price | ❌ | ❌ | ✅ | Whilst more and more EVs are being brought to market as opposed to just luxury brands, the average cost of EVs are decreasing, but are still more expensive than ICE vehicles, unless you take advantage of the savings from salary sacrifice, which beats everything. |
| Running Costs | ❌ | ✅ | ✅ | As home charger technology improves and becomes cheaper, it’s even easier to recharge your vehicle in the comfort of your own home, and EVs triumph when calculating the equivalent cost per mile compared to using fossil fuel alternatives |
| Major Repairs | ❌ | ❌ | ✅ | Although costs for average wear and tear remain more or less the same across both types of vehicles, it is usually much cheaper to deal with an engine issue in an ICE vehicle, as opposed to a battery issue in an EV, although we don’t envision this being the case forever as technology develops. However taking advantage of an EV Salary sacrifice scheme where repairs are included, trumps any other option. |
| Insurance | ✅ | ❌ | ✅ | EVs are generally 10 – 15% more expensive to insure than ICE counterparts, a figure primarily driven by the value of the vehicles being insured. With so many cheap ICE vehicles on the road, it would make sense that the average cost to insure them would be lower. EV Salary Sacrifice may end up cheaper here as your insurance cost is fixed at the start of your lease, protecting you from any future rises. |
| Tax | ❌ | ✅ | ✅ | Thanks to government incentives, EVs are incredibly cheap to insure when comparing to ICE vehicles in a similar class of luxury or performance, with the difference sometimes stretching to more than £2000 between the two. |
All in all, the field is fairly balanced between the two when you look at the whole picture. However, if you’re part of our P+B salary sacrifice scheme, then you don’t have to worry about insurance or major repairs, as we take care of that for you. The cost to you to drive an EV will be significantly lower than purchasing the equivalent vehicle on a contract, so all you have to worry about is running the EV, and that’s where the cost difference really makes itself known, and to your benefit.
A significant cost saving, while still being able to drive a premium vehicle? This sounds like the perfect solution. Talk to us today to find out more about our EV Salary Sacrifice scheme.
