Buying vs. Leasing an Electric Car

So, you want to make the switch to an electric car. You’ve read the reviews, done the research, picked your model and are ready to part with your hard-earned cash. But how should you pay?

Your options are either leasing or buying outright. Each has its advantages and disadvantages and ultimately the choice you make will be determined by a range of factors, including your financial situation, what model you want and the flexibility you’d like over ownership.

We’ve compiled a complete guide into purchasing a new electric car so you can make an informed decision as to whether you lease or buy. And if you’re interested in leasing an EV for business, then make sure you check out our guides on the differences between personal leasing and business leasing.

Should you lease or buy an electric car?

Leasing a car is by far the most popular way to get behind the wheel of a new car. Don’t just take our word for it though, the data from the Finance and Leasing Association (FLA) shows that over 90% of new private cars are financed through leasing companies, just like GRIDSERVE Car Leasing.

The answer to which is right for you comes down to personal circumstances. Here’s a quick summary to show you the pros and cons…

What are the advantages of leasing an electric car

There’s a whole range of benefits to be had when leasing an electric car, from cost to convenience.

You pay less upfront: Compared to buying outright, you’ll start making savings straight away with a lease. Deposits start from as little as one month’s payments rather than having to stump up upwards of £40,000 for a new electric car.

It’s an affordable way to drive a new car: As upfront costs are lower and you’re spreading the cost, it means you’ll be able to drive a much better electric car with the latest technology and safety kit than if you were buying outright.

You won’t get stung by depreciation: With a lease you never own the vehicle which means the depreciation a new car experiences as soon as it’s driven won’t affect you. There’s no need to worry about residual values and how much the car will be worth after three years.

You don’t need to worry about selling: When you want to switch cars, it’s as simple as handing it back at the end of the contract rather than having to advertise or visit a dealer to trade-in and haggle over prices.

Road tax, breakdown and MOTs are included: All new lease cars are covered by a manufacturer’s warranty (at least three years as standard) which means most mechanical faults will be fixed. Road tax, breakdown cover and MOT costs are included in your lease payments, too, meaning you’ll only have to worry about routine servicing and maintenance.

You can cover maintenance in a lease: While the list above is included, you can also buy an inclusive servicing package, which will spread the cost of maintenance over the lease, giving you complete peace of mind for the length of the contract.

You can take advantage of tax benefits: Electric cars have zero road tax, and if you’re a business user, then they have attractive Benefit-in-Kind (BiK) rates. Leasing electric compared to a petrol or diesel can save you money right away.

When is it best to lease an electric car?

1. You want to drive a brand new car for a lower price
2. You want to avoid the stress of selling the vehicle
3. You don’t want to be stuck driving the same car for longer than you’d like
4. You don’t want the hassle of maintaining the car

Things to consider when leasing an electric vehicle

Like any financial commitment, you need to make sure that a lease deal is right for you. The benefits are big but it’s not for everyone – especially if your financial circumstances or vehicle requirements are likely to change during the course of a lease, as exit fees can be expensive. Here’s a few other things to consider before signing on the dotted line:

• Know your budget: Leasing is an affordable way to get into a high-end, new vehicle but don’t stretch yourself. Be realistic about both your deposit (don’t empty all your savings) and what monthly payments you can afford, considering that you’re committed to this repayment for several years.
• Do you need GAP insurance?: Guaranteed Asset Protection (GAP) insurance protects you bank balance if your lease car is stolen or written off. Your insurer will only pay out on their valuation of the car (which will take into account depreciation) and this will be significantly less than the amount it’s worth to the leasing company. GAP insurance will pay you the difference so you’re not out of pocket. It’s not essential but speak to your leasing company about their T&Cs to understand if it makes sense to take out cover.
• Don’t underestimate your mileage: Excess mileage fees at the end of a lease can be an unpleasant cost when handing the car back so making sure you’ve agreed a realistic mileage limit at the start of the contract is vital. Think about your yearly mileage over the years and consider if your circumstances are likely to change – generally speaking a 6,000-a-year mileage limit is enough for most people.
• Long or short contract?: As a general rule, a longer term lease will mean lower monthly payments across the length of a contract, but it also means you’re committed to that vehicle for that length of time. Think about how things might be different for you – both work and private life – to see if shorter term flexibility is more important than initial monthly savings. Cancellation fees can be expensive.

Is it worth getting maintenance on a leased car?

With a lease your new electric car will be covered under a manufacturer warranty, which means most mechanical faults will be fixed for you. Road tax, MOT and breakdown are all included in your lease, too, but scheduled servicing and maintenance is not. That means if you want to budget for this too, then look at taking out a pre-paid plan for the duration of the lease which will spread the cost of servicing over the period.

Good news, though. With an electric car, maintenance is cheaper as there’s fewer mechanical parts for things to go wrong. Check out all you need to know in our maintenance when leasing guide.

What are the three main forms of electric vehicle financing?

If you’ve decided that leasing is for you, then you now need to consider the type of finance agreement that suits you best; Personal Contract Hire (PCH), Personal Contract Purchase (PCP) and Hire Purchase (HP).

Personal Contract Hire (PCH)

PCH is a hire plan that can offer attractive monthly payments but you do not own the car at the end of the agreement. There’s likely no deposit although you may have to pay a rental fee upfront (normally equivalent to a few months of instalments).

Before your lease you’ll agree annual mileage, fixed monthly payments and term. At the end of the contract – normally between two and four years – you hand the car back.

Personal Contract Purchase (PCP)

PCP is a purchase plan where customers have the option to buy the car at end of the contract. You’ll likely have to put down a deposit, anywhere from 0 to 40% of the car’s value, with monthly payments making up the remainder of the lease.

You agree annual mileage, fixed monthly payments and length of lease up front. When the contract ends, unlike a PCH, you’ll have the option of making a “balloon payment” – at which point you’d keep the vehicle and be the new owner. This final payment is optional and if you choose to hand the car back, you can use the value of the car towards the deposit of a new lease.

Hire Purchase (HP)

HP is for those who know they want to own the vehicle at the end of the payment term. It’s a bit like a mortgage on a new house, you simply spread the cost of your new vehicle over a period of time – normally two to four years.

Once you’ve completed your monthly payments, you own the car – there’s no “balloon payment” to pay at the end like there is for a PCP deal. Because of this, you’ll often find the monthly payments are higher than a PCP over the course of the contract as you’re paying off the full amount.

What are the advantages of buying an electric car?

Of course, you may decide leasing is not right for you but you still want to go green and buy an electric car. The benefits of this are that you’ll get all the advantages of EV ownership: lower running costs, eco motoring and a smoother driving experience.

Buying rather than leasing means you’re the owner so it gives you greater freedom when it comes to how long you keep the car for, plus there’s no mileage limit on usage. If you're a business user, you can take advantage of tax benefits even when you’re buying as well.

Should you lease or buy an electric car?

For many motorists in the UK, the answer is leasing with so many people choosing it in recent years. For you, leasing is right if you want to drive away a brand new electric car for a lower overall amount and are not worried about owning the vehicle. It’s also a smart move if you’re keen to regularly switch into a different EV in a few years and don’t want the hassle of trying to sell a vehicle when you’ve had enough.

Why not check out the latest GRIDSERVE Car Leasing deals to find your next electric car?