If you're thinking about buying an electric car, you might be wondering whether they offer good value for money. We look at the costs versus savings and if it is worth buying one
Should I buy an electric car? It’s a question many people are asking themselves in today’s more environmentally-conscious world. While electric vehicles have made their way into the mainstream, it is worth considering the pros and cons before you splash the cash on one.
The theory is simple. Buying an electric car means leaving petrol and diesel costs in the rearview mirror – an idea which could sound particularly appealing if the government decides to hike fuel duty at the upcoming Autumn Budget.
Unfortunately, the trade-off is more complex than you might think. Dividing the cost of your electric vehicle by your annual petrol bill won’t give you an accurate picture of how many years it will take to pay off your initial investment.
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On top of this, the government is cutting back on e-vehicle incentives as electric cars become more common on the road. The road tax and congestion charge exemptions are both set to come to an end in 2025.
Research from Compare the Market earlier this year suggested you could save around £525 per year over the long run by switching to an electric car. We take a closer look at the upfront costs versus the potential savings.
Is it worth buying an electric car?
Buying a car rarely comes cheap, but EVs are generally more expensive than their petrol and diesel counterparts – a quick Google search will show you that much.
A Tesla Model 3 starts at £39,990, a Tesla Model Y will set you back at least £44,990, and even the comparatively affordable Nissan Leaf will set you back £27,290. Data compiled annually by the Society of Motor Manufacturers and Traders (SMMT) shows these were the three most popular electric cars on UK roads at the end of 2023.
Evidence suggests cost is one of the biggest barriers to EV adoption. In a 2023 survey from S&P Global, almost half (48%) of the 7,500 respondents said they considered EV prices to be too high. In fact, consumers were more concerned about affordability than other key issues like range and charger availability.
The good news is that the second-hand EV market continues to grow, even if it does remain immature compared to the used-car market for combustion engine vehicles. Figures released by the SMMT earlier this month showed a run of six consecutive quarters of growth.
What’s more, drivers might find they can secure decent value for money on the second-hand EV market. “The used car market is showing interesting trends, with petrol and diesel vehicles becoming more expensive, while EV prices are seeing significant decreases,” says James Hosking, managing director of AA Cars.
The most popular second-hand petrol and diesel cars went up in price by 3.5% between the first and second quarters of 2024, according to the latest AA data. Meanwhile, EVs and hybrids fell by 12% over the same period, Hosking says.
Electric vehicle financing schemes are also available for those who want to switch to an electric car, but can’t afford to pay the upfront cost in one lump sum.
How much does it cost to charge an electric vehicle?
EV drivers on standard rate domestic tariffs are currently paying less than 5p a mile for electricity, according to the AA. The organisation has based this figure on the July-September Ofgem energy price cap.
“Driving an EV for less than five pence a mile is a landmark moment and shows just how cheap running an EV can be,” says Jack Cousens, head of roads policy at the company. “As this is the cost based on the Standard Variable rates, savvy EV drivers will have scoped out the best deals across energy providers to bring their costs down further,” he adds.
By comparison, petrol currently costs around 141p per litre in the UK (which is around 642p per gallon). If your car does around 50 miles per gallon, that means you will be paying just under 13p in petrol costs per mile – so significantly more.
The bad news for EV drivers is that energy prices are set to go up again this autumn, with the Ofgem price cap rising by 10% from 1 October. However, the cost of electricity per mile will remain cheaper than the cost of petrol – particularly if fuel duty goes up in the Autumn Budget. Some think fuel duty is a likely target for Rachel Reeves as she looks to balance the country’s books.
What’s more, there are some steps EV drivers can take to bring charging costs down, such as opting for an EV energy tariff. Energy companies target these specifically at EV drivers, giving them discounted electricity unit rates for charging their vehicle during off-peak hours – usually overnight.
Technological innovations can help bring prices down further still, according to charging solutions companies like Pod Point. The company has launched a home charger which is designed to be integrated with domestic solar panels.
“Once installed, solar energy is essentially ‘free’ for the consumer and, over time, could help drivers offset the upfront costs of their charger and solar panels,” says James McKemey, Pod Point’s head of policy and public affairs.
There are also clear environmental benefits. “Given the pace of innovation, we could easily get to a future where it's possible for homes to become low, or even zero carbon, in which they utilise solar panels, batteries, heat pumps and more,” McKemey adds. “These are all exciting solutions that make the switch to green energy easier and more affordable for consumers.”
What is the cost of installing an electric vehicle charger?
First of all, there is the cost of the charger itself (around £500-£1,200) and then there are installation fees to consider as well. Some charger providers will install the device for free when you buy it from them but, for others, you will need to hire a qualified electrician.
Depending on where you live, you might be able to secure a government grant to offset some of these costs. For example, if you own and live in a flat or rent any residential property, you can get 75% off the cost of buying and installing a socket, up to a maximum of £350.
To qualify for the scheme, you will need to own an eligible vehicle and have access to an off-street parking space. If you are currently renting, you will also need to get permission from your landlord.
Do you have to pay road tax on electric cars?
Currently, you don’t have to pay any road tax on electric vehicles in the UK – part of a government incentive to encourage road-users to go green. However, drivers should be aware that this is changing from 1 April 2025.
What’s more, if your e-vehicle has a list price of more than £40,000, you will need to pay the expensive car supplement from your second tax payment onwards.
Auto Express editor Paul Barker says that this will not only impact buyers of new EVs, but also those looking to purchase used electric cars under five years old, damaging attempts to move more drivers into EVs to help meet strict uptake targets.
“Regardless of the price paid for a used EV, the car will be liable if it was originally bought for more than £40,000, and the vast majority are going to be caught up in this extra charge,” he adds.
On top of this, the London congestion charge will also be payable by e-vehicle drivers from 25 December 2025, delivering little in the way of Christmas cheer.
Are electric cars worth it?
Compare the Market crunched the numbers earlier this year, giving a side-by-side comparison of the total running costs of an electric vehicle versus a petrol vehicle. They found that drivers can currently save around £525 per year in total by going green.
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Cost
Petrol car
Electric car
Insurance
£545
£740
Fuel
£930
£400
Estimated VED (road tax)
£190
£0
MOT
£55
£55
Total cost per year
£1,720
£1,195
Assuming all other running costs were to remain the same, this saving would fall to £345 from 1 April 2025 (once the £180 road tax for electric vehicles kicks in).
Of course, it would take a significant amount of time for these savings to cancel out the upfront costs associated with buying the car (i.e. the premium you pay for an electric vehicle versus a petrol one, plus the cost of purchasing and installing the charging point). However, it is important to look at your individual circumstances before making a decision. For example, if you drive a lot, your savings on fuel will be more significant. You might also be happy to opt for a cheaper EV model rather than buying a premium brand like Tesla.
Similarly, if you live in London and are already looking to buy a new vehicle because your old one isn’t Ulez compliant, it might be worth thinking about going electric. The Ulez charge is currently £12.50 per day. Through the Ulez scrappage scheme, you could even claim up to £2,000 from the government to help offset the costs of upgrading your vehicle – but you will need to act fast as this closes to new applications on 7 September 2024.
Another important factor to consider is that, from 2035, the sale of new petrol, diesel and hybrid vehicles will be banned in the UK. In other words, the future is electric.
Once this deadline comes in, you will still be able to buy and sell combustion-engine vehicles second hand. However, it is likely they will fall in value considerably on the second-hand market as they become less desirable – meaning you could get less for your vehicle when you decide to sell.
If the government decides to impose financial penalties on drivers of polluting vehicles, it will only exacerbate this effect.
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Katie has a background in investment writing and is interested in everything to do with personal finance, politics, and investing. She enjoys translating complex topics into easy-to-understand stories to help people make the most of their money.
Katie believes investing shouldn’t be complicated, and that demystifying it can help normal people improve their lives.
Before joining the MoneyWeek team, Katie worked as an investment writer at Invesco, a global asset management firm. She joined the company as a graduate in 2019. While there, she wrote about the global economy, bond markets, alternative investments and UK equities.
Katie loves writing and studied English at the University of Cambridge. Outside of work, she enjoys going to the theatre, reading novels, travelling and trying new restaurants with friends.
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