EV Leasing vs Buying

Benefits of Leasing an EV

Lower Monthly Costs

One of the most common barriers to switching to an EV is the higher list price compared to comparable petrol or diesel ICE vehicles. Leasing your vehicle can circumvent this issue, thanks to the reduced monthly costs.

Rather than requiring a large deposit, EV leasing deals let you spread the cost of your purchase over manageable monthly payments, calculated based on the vehicle’s expected rate of depreciation. 

As EV leasing exists as part of a large and competitive niche, you may also have more flexibility to control your monthly costs compared to buying an EV.

Access to New Models More Frequently

One of the biggest benefits of electric car leasing is the increased access to different car models. When you choose to lease your EV, you’ll also have access to a range of vehicles, including more recent models equipped with the manufacturers’ latest technological features. 

Furthermore, when your lease ends, you’ll have greater flexibility to switch to a different model if your circumstances have changed. This flexibility makes leasing especially useful if you have a growing family and anticipate needing more space in the car soon.

Avoid Depreciation Risks

Buying a car outright or through finance means you’ll have to account for depreciation, with your car decreasing in value over time. 

When you lease an EV, the resale value of the vehicle isn’t your responsibility, and you’ll have the flexibility to upgrade your vehicle at the end of the lease without worrying about the resale value.

Flexibility in Contract Length

Contract length flexibility is another one of the biggest electric car leasing benefits to consider when you’re weighing up your options. Lease contracts for EVs typically last from two to five years, while purchasing an EV via a bank loan or HP agreement will often be spread over a longer term, typically five to seven years.

With the option for a shorter-term agreement, and more flexibility to return your car or upgrade to a different model, leasing promises much more flexibility to find contract terms that work for you.

Reduced Maintenance Costs with Warranty Coverage

Leasing your EV can also provide reduced maintenance costs, as many agreements include warranty coverage, providing added peace of mind. 

These warranties ensure that the leased vehicle is free of defects and material damage for a specified length of time or number of miles. If your car requires maintenance due to a mechanical fault and the affected component is covered under the warranty agreement, the manufacturer will replace it at no cost to you. 

Another key benefit of leasing a new EV is that you won’t need to worry about an MOT for the first three years, as this is a legal requirement only once a vehicle reaches its third year of registration. This means fewer routine checks and costs to consider during the initial lease period, making leasing a more convenient and hassle-free option for many drivers. 

Mileage Restrictions

One of the main drawbacks of leasing rather than buying an EV is that lease agreements usually come with mileage limits. Though exceeding these limits won’t void the agreement, it can incur additional costs, with some lease providers charging up to 30p per mile over the limit.

Bear in mind that these limits are set based on the information you share when the agreement is first put in place, and you can avoid these charges completely if your mileage restrictions are set correctly. When you’re shopping around for EV leasing deals, take some time to carefully consider your average weekly mileage, and any longer journeys you’re planning for over the course of your lease.

No Ownership at the End of the Lease

Perhaps the biggest disadvantage of leasing an EV is that you won’t own the vehicle at the end of your lease. 

Purchasing an electric car means you’ll have the obvious flexibility of selling whenever you like, allowing you to get a portion of your investment back or trade your car in for a new model. Leasing a vehicle, on the other hand, means the car will remain the property of the leasing company, and you’ll have nothing permanent to show at the end of the agreement. Think of it like a long-term car rental agreement. 

Potential Charges for Excessive Wear and Tear

Over the course of a lease, the lease company will expect some degree of wear and tear. However, any damage that goes beyond what the lease company deems to be fair use can result in additional charges.

To get a better idea of how much wear and tear your EV can take on before you start incurring charges, take a look at the BVRLA’s Fair Wear and Tear Guide. The BVRLA is the UK’s main trade association for fleet management, and most lease companies use their definitions of wear and tear to assess the condition of their cars and apply any additional charges.

Long-Term Costs Can Be Higher Than Buying

While the up-front monthly costs of leasing an EV can be much lower than purchasing a vehicle of a similar value, the amount you pay in the long run will generally wind up being higher compared to buying.

By leasing a vehicle, you’re essentially paying for the rate of depreciation over the predetermined length of the contract. 

However, with the additional expenses that can come from mileage limits, excess wear and tear, and end-of-lease fees, the long-term cost of leasing a car can easily add up to a figure that’s more expensive like-for-like compared to purchasing the same vehicle.

Generally speaking, leasing a car is only the more economical option if you’re planning to change to a new vehicle once every few years. For long-term ownership, however, buying an EV will almost always work out to be the more economical option.

Buying an EV Outright

Buying an electric car outright can be an attractive option for any driver who wants to own their vehicle while minimising the limitations that can come with leasing. When you buy an EV outright, you can do whatever you want with it immediately after purchase, and won’t need to worry about mileage limits, monthly payments, or the interest rates that come with buying a car on finance.

While there are several clear benefits of the full, immediate ownership that come with buying an electric car outright, you’ll need a substantial amount of money to be able to do this, which can be prohibitive for many drivers. Furthermore, if you’re looking to buy a brand-new EV, the value of the vehicle will depreciate after you purchase it, which may be a concern if you’re hoping to retain as much equity as possible in the long run.

Hire Purchase (HP) for EVs

When you buy an EV on hire purchase, you’ll make set monthly payments over a predetermined period, typically ranging from one to five years, until you’ve paid off the entire price of the car and own it outright. 

The fixed payments make it easier to budget for your purchase, and there will be no mileage limits to worry about over the course of your contract. However, lenders who sell EVs on hire purchase will charge interest as part of the agreement, which means you’ll always pay more for the contract compared to if you buy it outright. 

It’s also worth noting that any EV you purchase on hire purchase may end up with old technology, including its battery, by the time you pay off the car. If it’s important to you to drive a car that’s in-step with modern technological standards, leasing may be the better option.

Personal Contract Purchase (PCP) for EVs

Personal contract purchase (PCP) can be seen as a middle ground between buying your car and leasing it. 

Under a PCP contract, you’ll make lower monthly payments compared to other finance options, and you’ll also have the option to purchase the car at the end of the agreement, or simply return it to the dealership.

PCP agreements are often attractive to drivers who want to prioritise flexibility when finding their EV. The initial deposit and the ongoing monthly payments will be calculated based on the estimated depreciation over the total term of the contract. Once the term is up, you’ll also have the option to return the car and switch to a different model in the same way you would when leasing a car.

Despite this flexibility, you’ll still have to deal with mileage limits and other restrictions that won’t be an issue with hire purchase agreements. The final balloon payment you’ll need to make to own the car can also be expensive, as can the interest rates if you don’t have a strong credit score.

Comparing Initial Costs

When you’re buying an EV, whether outright or through a financing agreement, one of your biggest considerations will of course be the total purchase price. 

Like with conventional ICE cars, the price of EVs can vary considerably from small, economy models to luxurious high-end cars. Outside of the total price of the vehicle, you may also need to factor in additional costs like the initial deposit, registration fees, and installing a home EV charger if you don’t have one already.

Leasing an EV, on the other hand, will also require an initial payment, sometimes referred to as an initial rental, but this will generally be smaller than what would be required to purchase the vehicle. This is one of the ways that leasing makes EVs more accessible for drivers on a budget.

Long-Term Savings from Buying

While the initial costs of buying an EV are much higher than leasing one, the savings you can achieve by purchasing your vehicle often makes it a more economical choice in the long run if you want to own your car for more than 5 years.

Once you’ve covered all the payments through a HP or PCP agreement, you’ll own the car outright. This ownership will unlock several financial benefits, including:

• Not having to budget for monthly payments anymore.
• Not being restricted by mileage limits, or excessive fees for wear and tear to the vehicle.
• The freedom to either trade in your car or sell it privately when you’re ready for a new vehicle.

Though the expenses associated with vehicle ownership can vary greatly from one situation to another, these savings can make purchasing your EV cheaper in the long-run compared to leasing it.

Cost Breakdown for Leasing vs Buying

To give you a simplified understanding of the financial implications that come with leasing or buying an electric car:

Monthly Payments

When you buy an EV on an HP or PCP finance plan, the monthly payments will cover the loan amount plus interest set by the dealership. While these payments will generally be higher than the monthly payments you’ll make as part of a lease, once they’re all paid (including the final Balloon Payment if it’s on a PCP finance plan), you’ll own the car outright.

Though an EV lease’s monthly payments will generally be lower for the same car, you’ll never own the vehicle yourself, and any equity will remain with the business providing the lease. With leasing, you’re essentially paying for the permission to drive the car during the lease period - much like when you rent a car.  

Depreciation Costs: Understanding Value Retention in EVs

Like all vehicles, electric cars experience depreciation over time, meaning they gradually lose value as they age. While EVs have historically depreciated faster than petrol and diesel cars, this trend is evolving as demand for used electric vehicles grows and battery technology continues to improve. 

One advantage of leasing an EV is that depreciation isn’t something you need to worry about. Since the leasing company owns the vehicle, they take on the risk of depreciation, while you simply enjoy the benefits of driving a new EV. 

Additionally, stronger resale values are emerging for popular EV models, especially those with longer ranges and advanced battery warranties, making ownership a more viable long-term proposition than ever before. 

Maintenance and Repairs

When you buy an EV, you’ll be the sole owner, and responsible for all the ongoing EV maintenance and repairs. EVs have less moving parts compared to a petrol or diesel engined car, so you’ll generally have to budget less for maintenance. However, electric cars aren’t totally immune to mechanical issues, and having to pay for these repairs can still be very expensive.

Most EV leasing deals, on the other hand, can come with a maintenance package as part of your monthly payment. This means you’ll be covered for routine servicing as well as certain kinds of repairs, promising a little more peace of mind and one less expense to worry about. 

Though maintenance packages can certainly reduce the cost of repairs compared to owning the car outright, it’s important to note that every lease agreement will be different, and you may still be liable to pay for some maintenance. Make sure to check the terms of your lease agreement to understand how wear and tear is categorised and the kinds of repairs you may need to pay for.

Considering an EV Fleet for Your Business?

If leasing an EV sounds like the right choice for your personal driving needs, it may also be the ideal solution for your business. Corporate fleet leasing offers companies a cost-effective way to adopt electric vehicles while benefiting from lower maintenance costs, tax incentives, and reduced environmental impact.

Whether you're looking to upgrade your company cars or transition to an all-electric fleet, leasing can provide flexibility, predictable costs, and access to the latest EV models without the burden of ownership.

Explore our guide to corporate fleet leasing and discover how your business can benefit from EV leasing today.

When Buying is the Better Choice

If You Plan to Keep the Vehicle Long-Term

When you’re planning to drive your next EV for over 5 years, buying it will likely be the more economical decision in the long run. Once you’ve completed your loan payments, you’ll own the vehicle outright, and won’t have to worry about monthly payments, mileage limits, or other considerations that are tied to lease deals.

If You Cover High Annual Mileage

For many people their driving habits mean that owning a car with strict mileage limits is impractical. When you regularly clock a high number of miles, you could be at risk of breaching mileage limits on a regular basis, which will cause fees to build up and make leasing your car more expensive.

While owning a car means you’ll have to bear the brunt of depreciation costs, you’ll never have to worry about breaking mileage limits, and will have the freedom to drive however you like.

If You Value Ownership

Sometimes, the freedom of full ownership is enough to make buying a car the more attractive option than leasing in any scenario. Owning your EV gives you full flexibility to drive it as you like, modify it if you wish, and eventually sell it.

With leasing, the asset remains in the hands of the leasing company, and you’re only paying to use the vehicle for a set period of time.