Myths of Electric Vehicles and Leasing

Myths of Electric Vehicles and Leasing

Like the growth of many products, the more popular it gets, the more questions, queries and misnomers arise. EV’s have been no different and we have heard a lot of questions from potential and existing customers about electric cars (and vans) while witnessing a lot of information being disseminated in the media; some of it true and some of it not. The idea of “maintenance” has been an ongoing point of contention in contract hire and leasing for some time. The immediate view seems to be that when you lease a car, everything is included and there is no obligation on a customer to manage the service or operation of the vehicle from day to day. To be clear, this is not true.

How does leasing and maintenance work?

To help provide more clarity to customers, you will see two key phrases being used in our industry – 1) driver-maintained; and 2) funder-maintained. With regard to option 1, this is a contract where the customer accepts the responsibility for all maintenance and upkeep of the vehicle. While vehicles are generally brand-new, or pre-registered within the last 3-months, you need to distinguish what is the warranty and what is the maintenance.

A warranty is there to protect a customer against any issues, defects or faults which arise with a vehicle through no fault of their own. Most manufacturers set a 3 year warranty period from the date of registration (this is why pre-reg vehicles need to be more carefully analysed and considered by a customer). Some manufacturers are now setting 4, 5 and 7 year warranties on their product to provide complete consumer confidence. However, the warranty is there to support against any issues.

Every vehicle will need regular servicing and this is available online or in the manufacturer’s handbook. Essentially, every 12-24 months, or after x thousand miles, the car will need to be taken to an appointed manufacturer representative, or a garage using genuine parts, to undergo servicing works. This may include pollen filters, brakes, oil replacements and vehicle software updates. It is important that you do service the vehicle correctly as this is what preserves the manufacturers warranty and this also prevents you from being charged at the end of the contract by the finance company for failing to look after your vehicle properly.

While e-car lease will send you a 12-month reminder from the date of delivery, the car will generally indicate when it needs servicing to be arranged – do not ignore these warnings! Additionally, you will also need to ensure the tyres are replaced at the correct juncture (2mm tread is the limit set by most finance companies) or when you get a puncture / need repair. Tyres must again meet manufacturer recommendations, so do not replace with part-worn or budget tyres. These are costs you must budget into the decision making process.

What is a funder-maintained arrangement?

If you decide to use option 2, the funder-maintained route, you pay an additional amount per month to have much of the above included. Because we work alongside a number of finance companies, they each can operate using slightly different rules when it comes to maintenance. However, the general position is that the cost of all servicing, tyres and maintenance elements are taking into account by the finance company.

You simply need to ring their maintenance number and they will help you to organise your service or tyre replacements. In some cases the finance companies will arrange tyre replacements for punctures not just for wear and tear items. They will even organise a mobile tyre replacement service so you don’t need to incur the time or hassle of arranging this yourself. Another advantage of maintenance is for when the car goes out of its warranty period, which it will do in the case of pre-reg vehicles or on 4 year leasing arrangements.

When a car goes outside the warranty, you are at a higher level of risk and for customers who do not have that appetite, the funder-maintained lease can remove most of their concerns. While the driver is still responsible for organising this, there are no additional costs to be incurred. Funder-maintained arrangements ensure that you simply pay for windscreens and fuel – a true definition of fixed cost motoring!

Do you have to maintain and service an EV?

So do I need a maintenance package for an electric vehicle/EV? The notion of whole of life costs is something which is becoming more prevalent in our industry. Over the last few years, the fixation has been more on the monthly rental and “best-price” achievable. With comparable petrol and diesel cars, this has been an acceptable way of doing things, as all the constituent elements are very much known risks.

However, with electric cars there are new facets which need extra consideration in order to make an informed decision. The obvious comparable is the cost of fuel i.e. electricity vs petrol/diesel. The cost of “fuelling” an EV, particularly at home, is somewhat cheaper than the cost of a full tank of fuel – think £5 to charge an EV against £60/70 to fuel a petrol/diesel car. But add to that the normal running costs of a vehicle and you get a better picture of what the entire arrangement is costing you or the company.

This is even more important for salary sacrifice and company car users where Benefit in Kind, allowable rentals and National Insurance are present. But what about servicing and maintenance of an EV? Like a combustion vehicle, an EV does need servicing, maintenance and tyres. It is not true to say that EV’s do not require any maintenance at all. However, an EV has far less moving parts than a combustion alternative and therefore the servicing obligations are somewhat reduced – the service intervals are generally longer and the costs of carrying them out are lower.

Much of the crucial work to be undertaken with an EV is its batteries, which are clearly the main component of the vehicle. While it has been suggested that tyres on an EV do wear/tear at a slower rate than on a combustion option, they still need to be properly managed i.e. if they incur a puncture or the tread falls below the legal limit, they must be replaced.

Like any vehicle, customers of e-car lease will be presented with the same two options – driver and funder-maintained. Using the information we provide, together with the cost analysis, we encourage a customer to take into account a whole of life cost analysis so they make a decision which meets their needs and requirements. There is no right or wrong answer with this, and each customer will have slightly different considerations.