Electric cars cheaper on average than petrol and diesel over ownership period

• The LV= ‘Electric Car Cost Index’ explores purchase price, tax, insurance, fuel and maintenance costs for nine electric cars vs their petrol/diesel equivalent to establish the total cost of ownership

• Savings driven by average annual running costs, which are 49% or £1,306 cheaper than petrol and diesel cars

• Seven out of nine electric cars evaluated offer better value over a four-year lease, while six provide a saving over seven years of outright ownership

• Of the cars compared, the Nissan Leaf, VW ID3 and MG ZS EV offer best value vs their equivalent petrol or diesel cars for drivers considering making the switch

Over a seven-year period of owning a car¹, electric vehicles such as the Nissan Leaf, VW ID3 and the MG ZS EV are more cost effective than internal combustion engine (ICE) equivalents, due to lower annual running costs, according to the ‘Electric Car Cost Index’ from LV= General Insurance (LV= GI), one of the UK’s largest insurers of electric cars.

The analysis², done in partnership with consultant battery electrochemist Dr. Euan McTurk of Plug Life Consulting, examines 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 EV driver. [Full annual and monthly costs available in Notes to Eds] ³

Three of the nine electric cars  – Nissan Leaf, VW ID3 and MG ZS EV – work out cheaper whether bought outright, leased or via (PCP), while the MG ZS EV offers the biggest long-term savings – £13,316 on outright purchase over seven years, £5,772 via a standard lease agreement over four years and £2,320 via a standard PCP arrangement over three years.

The savings on electric cars are heavily driven by lower average annual running costs  - £1,304 compared to £2,610 for a petrol or diesel car. This means that electric car drivers save an average of £109 a month. Within seven years of purchase, electric cars owners who buy their vehicle will save money compared with those who purchased a petrol or diesel car, due to the regular saving that comes with  lower running costs. Additionally, with electric cars traditionally having a longer life span and requiring less maintenance, the savings can be even bigger.

Vehicle comparisons

Costs and financing for an electric car

Drivers who lease an electric car can expect to pay £2,871 more over the course of a standard four-year lease (£718 more a year), according to insight provided by vehicle leasing experts Drive Electric. This equates to £376 a month for electric car lease costs as opposed to £317 for a petrol or diesel car. However, due to the impact of lower annual running costs, electric car drivers leasing a vehicle will end up on average saving £2,058 over this four-year period, a saving of £43 a month. The difference in costs for leased vehicles is most significant for the Nissan LEAF 40 -  £1,766 less a year than its equivalent petrol car, the Ford Focus.

When it comes to Personal Contract Purchase (PCP), electric car drivers can expect to pay £4,095 more than petrol or diesel drivers over a three-year period. This equates to £571 a month for electric car PCP costs as opposed to £458 for a petrol or diesel car.  However, when the impact of running costs is applied, electric cars are only £316 more expensive on average a year, a difference of just £26 a month. There are some examples where electric cars financed using PCP are cheaper than their ICE equivalent, such as the Tesla Model 3, £376 cheaper a year than the BMW 320i M Sport, or the MG ZS EV, £773 cheaper a year than the Seat Ateca.

Running costs

Fuel offers the biggest saving, with electric car drivers saving over £900 a year, based on an annual mileage of 12,000.⁵ Home charging (accounting for 90% of estimated charging) using a standard electricity tariff costs an average of £405 a year, public charging (accounting for 10% of estimated charging) costs an average of £105 a year, while the average annual cost for petrol or diesel is £1,435

Fuel savings are particularly significant when comparing larger saloon cars, such as the Tesla Model 3 (£453 per year) vs the BMW 320i M sport (£1,608), or 4x4 cars such as the VW ID4 (£510 per year) vs the VW Tiguan (£1,782). Even the smaller EVs offer great savings on fuel, with the VW ID.3 almost £600 cheaper to run than the VW Golf 2.0.

Maintenance costs, such as service and replacement tyres and brakes, also work out cheaper for electric car drivers, mainly because they have very few moving components, making them considerably less likely to break down as they age and much cheaper to maintain. For an ICE vehicle, average maintenance costs amount to £657 a year, whilst for an electric car it’s £384, over £272 cheaper. With certain vehicles, the difference can be even bigger; the service costs for the MG ZS EV electric car are £494 cheaper than its ICE equivalent, the Seat Ateca.

Savings on maintenance are likely to increase even more so over time. As an ICE vehicle approaches seven years or reaches 84,000 miles, several components which aren’t found in electric vehicles may need to be replaced such as the timing belt, spark plugs and the exhaust gas regulator, which can cost hundreds of pounds each.

Nearly all the electric cars analysed are cheaper to insure than their ICE equivalent. Data from LV= GI shows that the VW ID.3 costs £288, compared to £342 for the VW Golf. Similarly, the VW e-Up! costs £226 to insure, as opposed to £314 for the petrol powered Up!.

Electric vehicle owners currently also benefit from not having to pay car tax, meaning that over the a seven-year ownership period they can save over £1,000 (£1,274).⁶ 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. People looking to lease an electric car can save even more money by using a workplace salary sacrifice scheme to pay for an electric car lease pre-tax.

Alex Borgnis, Head of Motor Underwriting at LV= General Insurance, commented: “With this new Electric Car Cost Index we’re really trying to show, in the most comprehensive way, how the costs breakdown for people considering taking the plunge and making an electric model their next car. While the initial purchase will seem intimidating for some, once you break down the monthly costs, especially on a lease or PCP, and then throw in the lower running costs each year, suddenly it becomes something that provides great value over the course of the ownership period. You really don’t need to remortgage to get yourself on the electric car ladder!”

Consultant Battery Electrochemist Dr Euan McTurk of Plug Life Consulting, commented: “Having driven electric cars for the past ten years, these results are not in the least bit surprising.  My own electric car saves me £800 per year in fuel, tax and maintenance vs even the most efficient hybrid on the road.  Comparing it to an equivalent, 5-seater family car, that saving is nearer £1,300 per year.

“The good news is that the cost of new electric cars is coming down, and should reach parity with petrol and diesel cars by the mid-2020s.  Also, such is the reliability of an electric vehicle’s components, including the battery, it is entirely feasible to buy an electric car, van, taxi, bus etc and run it for hundreds of thousands of miles, much longer than you’d run a petrol or diesel car.”

In April 2019, LV= GI launched the UK’s first car insurance product developed solely for electric cars.. The product provides tailored cover to meet the specific needs of electric car owners and includes cover for home charging cables and wall boxes, the supply of electric or hybrid courtesy cars and access to a network of specialist electric car repairers across the country.