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Buying vs. Leasing an Electric Car

22nd Dec 2021
5min Read
Buying vs. Leasing an Electric Car

You’ve decided to get a new car and make the switch to an environmentally-friendly electric vehicle. You’ve done your research and picked the car that you want but you're not quite sure which is the best way to get it.

Leasing and buying outright each have their own advantages and disadvantages so we've put together this guide to help you decide which is the right option for you. Both usually entail fixed monthly payments, though the monthly cost will vary depending on whether you lease or buy. That said, car leasing is generally cheaper than hire purchase alternatives, but keep in mind you'll actually own the car.  

There are also a number of differences between personal leasing and business leasing so be sure to check our guides for each.

Should you lease or buy an electric car?

The Finance and Leasing Association (FLA) reports that almost 94% of new private cars are financed through leasing companies, making it the most popular way for drivers to get their hands on a new car, but we're a leasing company, so of course, we have to say that! 

So rather than just telling you, here's a quick summary for you...

 Benefit

 Leasing

 Buying

 Low upfront cost

 Brand new car

 Delivered to your door

 New car every few years

 You own the car

 You can sell the car

 No mileage costs

 

Advantages of leasing an electric car

There are many advantages to leasing your next car, particularly if you're going electric for the first time.  

1. Pay less upfront

Leasing a car rather than buying it outright means you'll pay significantly less upfront. Leasing deposits start from as little as just one month's payment allowing you to protect those hard earnt savings.  

2. It’s an affordable way to drive an electric car

Brand-new cars can be quite expensive, especially if you were buying outright. Leasing allows you to drive a new car at a much lower initial cost, without the stress of trying to get a bank loan or hire purchase agreement, which can have high monthly costs.  

3. A great way to drive a new car every 2 to 5 years.

Leasing a car is the most cost-effective way for people to drive new cars every few years. Because of depreciation levels, if you were buying the car outright you would end up losing a lot of money each time you bought a new car. Leasing also means that you can get all the latest technologies as well as the newest safety standards. 

4. Fixed low monthly payments

Your lease monthly payments are fixed for the duration of your agreement so you'll always pay the same amount each month. You always know how much to pay and when meaning you can stick to a budget and help manage your money.

5. There are no depreciation risks

Pretty much all cars depreciate in value (unless it's a rare or collectable car) and any vehicle's residual value will decrease the more you drive it. Leasing contracts have the depreciation costs built in so you don't need to worry about how much the car might be worth at the end of the agreed term. 

6. You can give the car back at the end of the agreement

With leasing, there’s no need to think about selling the car at the end. You can simply return the vehicle to the company when the lease term is over. This avoids any stress or time spent advertising the car or finding a suitable buyer. 

7. Road tax, breakdown cover, MOT are all included.

All new lease cars come with a manufacturer's warranty (usually at least 3 years) and most mechanical faults will be covered in this warranty. Other routine maintenance and repairs can also be covered in a maintenance agreement. Read our guide on electric car maintenance to make sure you know how to look after your new electric vehicle. 

And don't forget, all pure-electric vehicles, like the ones we lease at GRIDSERVE, are exempt from vehicle tax so there's no worries there either. 

8. You get to drive a better car than you’d expect.

Often with the low fixed monthly payments, you can afford to get a better car than you'd expect, and definitely better than if you were buying outright. For example, you could look at leasing a brand-new electric car worth £35,000 or more for less than £300 per month. 

Take a look at our latest special offers to see what you could afford.  

9. Escape the troubles and costs of ageing cars.

Leasing a factory-ordered car means you won't need to worry about the pitfalls of owning and driving an older car.

10. Tax benefits for businesses

Business leasing customers can take advantage of huge tax benefits, claiming back up to 50% of the VAT on a car or up to 100% of the VAT on commercial vehicles. Read our Business leasing guide for more detail. 

 

Things to consider when leasing an EV

1. You don't own the vehicle

Because you don't own the vehicle you have nothing to sell at the end of the contract.

2. You have to keep the car in good condition

You'll need to make sure you look after your vehicle and ensure it meets guidelines set out in the Fair Wear and Tear policy. 

3. You have to stay within the annual mileage limits

If you exceed your agreed contract mileage amounts you'll have to pay additional charges.

4. You may have to pay cancellation fees

If you want to get out of the contract or your circumstances change, you may face a cancellation charge. 

 

Sure you want to lease a new electric car? We're one of the few leasing companies in the UK to only offer electric cars because of our commitment to sustainability. Check out our latest special offers or configure for a deal that suits you. Alternatively, if you'd rather speak to somebody directly, just give us a call on 0333 1234 333 and one of our leasing consultants will help you find the perfect car. We're open Monday - Friday 8.30am - 5.30pm.

There are three main forms of electric vehicle financing;

There are lots of things to consider when looking at car finance. There are a few different options you can choose from, depending on how much you can afford to pay for your monthly payments, how long for, etc.

Personal contract purchase (PCP)

  • Personal contract purchase means you pay the difference between the car's purchase price and what it's predicted to be worth at the end of the lease agreement (usually two, three or four years). In short, you’re paying the depreciation at a consistent monthly cost. When the agreement ends, you can hand the car back with nothing else to pay (apart from the cost of any damage caused).
  • If you like the car and want to keep it, you make a final ‘balloon’ payment, based on the car’s guaranteed future value (GFV) and you own it outright.
  • Alternatively, you can trade the car in against a replacement, using any GFV equity in the car towards the deposit for your new car. This last option is a popular way for drivers to replace their new car every few years.

Personal contract hire (PCH)

  • Leasing a car through personal contract hire offers you fixed monthly payments for use of the car and, when the agreement ends, you just hand it back.
  • The name of this type of financing indicates the type of deal it is: you’re hiring a car for a few years.
  • PCH monthly payments are usually higher than for PCPs, but the total cost can work out cheaper.

Hire Purchase (HP)

  • Hire purchase is a long-established method of financing that involves hiring a car for a few years, with the intention of owning it outright at the end of the agreement.
  • It works like a personal loan because you're actually borrowing the money to buy the car and then paying it off.
  • But you won't own it until you've made the last monthly payment.

 

There are also two new types of contracts where PCP, PCH or HP doesn’t suit your needs;

Short-term hiring

  • Short-term hiring for just three, six, nine or 12 months is another possibility. It's not the cheapest option, but it’s convenient because you can swap your car every few months.

Subscriptions

  • Subscriptions are a new way of paying for the use of a new car. Car manufacturers such as Volvo are testing them out, which involves paying a monthly fee that covers pretty much everything, apart from your electricity.

 

One of the most appealing aspects of financing deals for car buyers is that they can drive a new car every three years, with less hassle than traditional ownership.

Leasing can seem like it's more expensive than buying outright when just looking at monthly payments, but when you factor in other costs such as servicing, MOTs, parts, balloon payments and, eventually, selling it, it often works out much cheaper in the long run. It's also a really simple and straightforward process – not too dissimilar to taking out a smartphone contract.

Not to mention that when buying an electric car, the Total Cost of Ownership (TCO) which includes fuel (or electricity) parts & maintenance and insurance, is significantly less than buying a conventional internal combustion engine car. 

 

Advantages of buying an electric car?

In a few cases, buying a car outright can be the right choice. Here are a few reasons why you may prefer to buy...

1. You own the car

Owning the vehicle means you have something to sell - an asset - whenever you want. 

2. You can sell the car whenever you wish

Should you decide you want a new or different car, or your circumstances change, you can sell the car any time you like and use the funds for whatever you like. 

3. You can make modifications to the car

If you're someone who likes to customise your car, owning it is the best way forward. You can make whatever changes you like (within the law) and make it your own. 

4. You can drive as many miles as you want or need. 

Owning your car allows you to drive as many miles as you want. You can be totally free to drive your car wherever without any worries of staying within a mileage limit. 

 

Should you lease or buy an electric car?

You'll need to ask yourself a few questions when making the decision as to whether to lease or buy an electric car.

  • Is a new vehicle important to you or would you be happy with a used car?
  • Are you happy with a lease agreement or would you prefer to own it?? 
  • Are you worried about potential ownership costs when things go wrong? 

Looking for a leasing company you can trust? You're in the right place. 

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New to electric vehicles and leasing? Let us guide you step by step. Just follow our guided question, and we will get you to what you are looking for.

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