The popularity of electric cars is on the rise and more drivers may be considering an eco-friendly vehicle to reduce their carbon footprint. Electric cars can be more expensive to buy than their petrol or diesel equivalent, but many argue the running costs of an EV help to outweigh the purchase price. If you’re considering getting an electric car, there are many benefits for drivers but how can you decide how to fund your EV purchase? The guide below looks at both buying outright and splitting the cost with finance to help you decide which is best.
Why get an electric car?
Getting an electric car can not only help to promote cleaner air quality but it can also be better for your pocket too. There are so many benefits of driving an EV:
- They are better for the environment as no harmful emissions will be produced.
- Charge your EV overnight at home for pennies.
- Lower maintenance and servicing costs.
- No need to pay ULEZ or Clean Air Zone congestion charges.
- Experience a smooth and quiet ride.
- Free and priority parking spaces.
Buying an electric car with cash.
Buying any car with cash will always be the most cost-effective way to purchase. There’s no interest to pay, you aren’t restricted to where you can buy your car from and there’s no mileage or damage charges to adhere to. However, electric cars are some of the most expensive vehicles to buy. Due to the modern technology involved, the purchase price will usually always be higher when comparing to their petrol or diesel counterpart. Many EV drivers do argue the running costs tend to outweigh the higher purchase price in the long run though. This is because it costs considerably less to recharge your EV than it does to fill up a combustion engine vehicle with petrol or diesel.
Taking out an EV loan.
Electric car finance is becoming more popular to help spread the cost of ownership. An EV loan is when a lender gives you the money to buy an electric car and make monthly payments back to the lender. One of the biggest benefits of finance is the ability to spread the cost into more manageable chunks. The loan is paid back each month, usually with interest over a number of years.
Should you take out finance for an EV?
Financing an electric car can be attractive but its worth remembering finance is never guaranteed to anyone. No finance company can offer loans to every applicant as they need to stick to the rules of responsible lending, and it would be unethical to offer finance to anyone who can’t afford to pay it back. If you’re unsure of your eligibility for car finance, you can check with a lender to see if you would meet their criteria before you even apply. You should only take out a car loan you can afford to pay back and meet every single payment. You budget for a car loan should be realistic and always affordable too.
What to consider before financing an EV:
Whilst there are so many benefits of financing a car, there are a few factors to consider first to see if it’s the right choice for your circumstances.
Your credit score is really important for finance, and it can affect the likelihood of being approved for car finance and also the interest rate you are offered. Lenders use credit checks to see how you’ve handled your finance in the past and make predictions about how likely you are to pay their finance back on time and in full. A bad credit score usually means you have no previous credit history or have failed to stick to the rules of your previous credit agreements. It can be harder to get approved with bad credit or if you do, it could see you offered a higher interest rate which makes borrowing more expensive.
It can be possible to get interest free car finance deals for EVs, but they typically tend to be provided on brand new cars and those with excellent credit. It can be very beneficial to shop around for the lowest interest rate you can as choosing a higher interest rate can make your finance more expensive than it needs to be.