Are electric vehicles really cheaper than their fuel equivalents?

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Thinking about an electric vehicle? There are a whole host of reasons to go green, but is saving money one of them? Let's take a look… 

  • Are electric vehicles (EVs) cheaper in the long run?
  • Are tax, servicing and insurance cheaper for EVs?
  • Is charging your car cheaper than filling it with fuel?

Are electric cars cheaper in the long run? 

The move towards greater electric vehicle (EV) adoption continues to gather pace with a 41% increase in electric car registrations throughout 2020 . However, one factor that can still put off potential EV drivers is the perceived high costs to buy or lease an electric car in the first place. 

But there’s more to driving costs than what you pay for a vehicle upfront.  LV=, in partnership with consultant battery electrochemist Dr. Euan McTurk of Plug Life Consulting, have examined the purchase (outright ownership), financing (lease and PCP) and running costs (fuel/charging, maintenance, insurance, tax) for nine popular electric car models and their petrol or diesel equivalents, to demonstrate the true cost of being an electric car driver.

LV= Electric Car Cost Index

The LV= Electric Car Cost Index compared nine electric cars against their petrol/diesel equivalents: 

Are electric vehicles cheaper to own and run than their fuel equivalents?

Based on average annual running costs, electric cars are 49% or £1,306 cheaper than petrol and diesel cars. Seven of the nine vehicles analysed also offer better value over a four-year lease. 

Find out how average purchase and running costs compare between electric cars and their internal combustion engine (ICE) equivalents to determine some of the most cost-effective car ownership options. 

Comparing ICE and electric car running costs
According to the LV= Electric Car Cost Index, electric cars are cheaper on average to own than petrol and diesel equivalents. Savings on electric cars are mostly down to their average annual running costs:

  • Electric cars – £1,304
  • Petrol and diesel cars – £2,610 

That’s an average saving of £109 a month for electric car drivers. Plus, electric cars traditionally have a longer life span and require less maintenance, which could result in even bigger savings.

You'll learn more about how much electric cars cost to buy and run and discover some of the main areas where you can save in the rest of this article...

Fuel and charging costs

The biggest savings on running costs are for fuel. Electric car drivers can save an average of more than £900 a year, based on an annual mileage of 12,000, compared to ICE equivalents. This considers the costs of charging an electric car both at home and in public, against the price to fill one up with petrol or diesel: 

  • Home charging – an average of £405 a year (90% of estimated charging) using a standard tariff. 
  • Public charging – an average of £105 a year (10% of estimated charging).
  • Petrol and diesel – an average of £1,435 a year.

Maintenance and servicing

Electric cars have fewer components than their ICE equivalents, which significantly reduces the risk of breakdowns as they age and makes them generally cheaper to maintain. On average, maintenance costs can be more than £272 cheaper annually for an electric car:

  • ICE vehicle – £657 a year
  • Electric car – £384 a year

When most petrol and diesel vehicles reach 84,000 miles or seven years old (whichever comes first) parts such as the timing belt, spark plugs and the exhaust gas regulator normally need replacing. These can cost hundreds of pounds each but aren’t found in electric cars, equalling an instant saving.    

Insurance and tax

Currently electric car owners are exempt from paying car tax, which can reach savings of around £1,000 over a seven-year ownership. Furthermore, since Benefit-in-Kind for electric company cars is taxed at just 1% in 2021/22, there are considerable additional savings for people able to purchase or finance a company car through their employer.

Depending on personal circumstances, the data shows that on average, electric cars could work out cheaper to insure than their ICE equivalents.

Electric car leasing costs vs purchase price

Three of the nine electric cars analysed work out cheaper to own whether bought outright, leased or via a Personal Contract Purchase (PCP). These offer the best value against their ICE equivalents, mainly due to far lower average annual running costs, and are the:

  • Nissan Leaf
  • W ID3
  • MG ZS EV

Mostly due to the lower running costs, if you buy an electric car outright you can expect to make significant savings over a seven-year ownership compared to buying a petrol or diesel alternative. 

Electric cars on a lease or PCP deal

Leasing an electric car can cost £2,871 more over the course of a standard four-year lease (£718 more a year), according to insight provided by Drive Electric. That’s £376 a month for an electric car lease, compared to £317 for a petrol or diesel equivalent.

However, lower annual running costs can mean you end up saving an average of £2,058 over a four-year lease when choosing electric over ICE. That saving – £43 a month – accounts for the running costs covered above.

It’s a similar story with PCP. Electric car drivers can expect to pay £4,095 more over a three-year period – £571 a month for an electric car PCP compared to £458 for an ICE equivalent. Factoring in running costs brings it down so electric cars are £316 more expensive on average a year, a difference of only £26 a month.

Top 5 cost-effective electric cars

You can read the full LV= Electric Car Cost Index report or find out how LV= is electrifying car insurance

Not only did the report compare the price to lease, buy and run electric cars and petrol or diesel models, it also determined the following electric cars offer the best total cost of ownership - take a look at the image below...

All figures are correct as of April 2021

How does owning an electric vehicle stack up?

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