Should I buy or lease an electric car?

Should I be buying or leasing a new electric car?

The old debate of buying vs leasing doesn’t seem to have dissipated in light of the electric car revolution currently occurring within the UK. We are still getting a swathe of enquiries from our personal customers asking about which is better and which is cheaper for them.

Some of the issues of this debate are that the information on finance products is somewhat lacking, or overcomplicated, which leads to misconceptions and untruths. To clarify before we go any further… buying or leasing car will cost you money and there is no magic formula for procuring a brand-new car for yourself!

Why would I lease an electric car? What is contract hire?

The main funding product e-car lease offer is contract hire. Put simply, this is a usership product, meaning you will never own the car. The contract is fixed for 2, 3 or 4 years based on your annual mileage (choose between 5,000 and 50,000 miles per annum) and the monthly rental you pay will be calculated according to your initial rental/deposit requirements, taking into account any additional options, extras or funder maintenance packages.

When you review electric car leasing deals, you have the opportunity to select a profile which meets your requirements. There is no one profile which is popular, it is simply about selecting something which actually reflects your needs. With many warranty periods being around 3 years, some of our more risk averse customers will lean towards the 3 years.

But isn’t leasing expensive considering you don’t own the car?

This has always been one of the main objections from customers, in that they want to feel like they have value or “something to show” at the end.  However, the discounts we get in our industry are usually far greater than the ones a customer could achieve when they buy a car privately, which we can then pass on to our car lease customers. From the outset, you have the advantage of having procured the car at a lower price.

You also need to carefully think about the argument of having value; at the end of many personal contract purchase (PCP) and hire purchase (HP) agreements, the final payments/balloons are often similar to the value of the vehicle.

In these cases, the customer either sells the vehicle or hands it back to the finance company without the benefit of equity. With contract hire you are effectively paying an amount equivalent to the deprecation, so it is a more honest and more cost-certain product. You also have to spin this argument and think, what would I do if the market changes and my car is worth less than I anticipated? With contract hire, this just isn’t a consideration as the vehicle is simply collected at the contract end. In contrast, a PCP and, more particularly, a hire purchase option, will push this risk to you.

The discounts we get in our industry are usually far greater than the ones a customer could achieve when they buy a car privately, which we can then pass on to our car lease customers.

So, an EV lease is the best way to go?

Again, it is about carrying out a balanced view of the product. Leasing is by no means a “perfect” solution. Unlike a PCP or HP agreement, the credit process is somewhat more stringent and this may not be suitable for those customers with weaker credit histories. Leasing is also a fixed contract, meaning that there are early termination penalties if you want to exit the agreement before it has ended.

Because it is mileage-based, should you return the vehicle with more miles than was agreed, the finance company will charge an excess mileage penalty for each mile. In contrast, when you hand the vehicle back with less miles, there is no financial benefit or reward to you as the customer. Should you not look after your lease car properly, you will incur charges for damage exceeding the fair wear and tear guidelines; this is not something you can negotiate.

So maybe buy the EV then?

With a PCP, you have an agreement which works quite similarly to contact hire in that it is a fixed contract for 2, 3 or 4 years based on your annual mileage (choose between 5,000 and 50,000 miles per annum) and the monthly rental you pay will be calculated according to your initial deposit requirements, taking into account any additional options or extras.

The key difference between a PCP and lease is that the PCP has a pre-agreed end value which allows you to buy, or sell, the car. This guaranteed future value, or balloon, is set out to you at the beginning of the contract. It has no relationship to the current market value.

With a PCP you can return the EV to the finance company. In contrast, a hire purchase is a straight finance agreement where you must purchase or sell the electric car at the contract end; there is no flexibility to return the vehicles. With both finance products you will often find that the discounts available are lower than on a leasing deal.

What will be the main funding product for an EV in the UK?

This is still an uncertain question and that is without taking into account other products like hire and subscription-based models which are now being devised. Much of the product choice will rely on what a customer wants - do you want to keep a vehicle for more than 4 years and want the ability to buy/sell it?

Or do you want to pass the risk of ownership to a finance company and want to change your vehicle every 2-4 years? The residual values and faith in the EV market will only increase, and this has a corresponding benefit for both products. Try not to rush into a decision based on a headline monthly rental or payment; make sure you consider the whole finance products, including its advantages and disadvantages

VW ID.3 Electric Hatchback 107KW Life Pro 62kWh 5dr Auto

In terms of the car shown, the VW ID.3 Electric Hatchback 107KW Life Pro 62kWh 5dr Auto, this is based on the following configuration:

• Moonstone Grey Solid Paint
• Fragment design cloth - Platinum grey/Soul black
• 18" Aero steel wheels
• Energy efficient heat pump
• Mode 3 32-amp / 7.2kW charging cable for charging at public charge points

As standard the car includes a 10” touch screen, adaptive cruise control including front assist, BLIS, Bluetooth, Body coloured externals, comfort pack, DAB radio, ESP, exterior e-sound, front and rear parking sensors, ID light, keyless go, lane assist, LED daytime running lights, sound system, touch control and wireless app connect. In terms of additional options on the ID3 Life Pro consider - floor mats, energy efficient heat pump and the design pack. 

On the technical side, company car and salary sacrifice drivers can note the P11d at £30,8880.01 and CO2 at 0g/km. The 58kWh usable lithium-ion battery delivers 143ps, 0-62 times of 9.6 seconds and top speeds of 99mph.

In terms of range, the ID3 will offer around 180 miles in winter and 250 miles in Summer based on a full charge. The ID3 Pro can charge at a maximum 11kW AC (which allows for 0-100% in 6 hours) and 120kW DC (which allows 10-80% in 30 mins).

For a complete analysis of charging times on the ID3 Life Pro on a AC charge point please see below:

For a complete analysis of charging times on the ID3 Life Pro on a DC charge point please see below: