Should I Buy or Lease an Electric Car?

Find out whether you're best suited to buying or leasing an EV.

If you’ve decided that you want to join the EV revolution, you’ll need to weigh up the best way to go about it. Two of your options include buying or leasing an electric car.

There isn’t a correct answer to this question - it will depend on your personal situation. We weigh up the pros and cons of owning and leasing an electric car.

Buying Vs Leasing: What’s the Difference?

The biggest difference between leasing and buying a car comes down to ownership. If you buy, the electric car is yours. If you lease, you are simply renting the vehicle, which means any damage done could invoke a hefty fee.

But there are many pros and cons to both buying and leasing an electric car.

The Different Ways of Financing Your EV

There are several different ways of funding your new electric car. The one you choose will depend heavily on your personal situation.

Leasing

Leasing is most likely the most affordable way to drive an electric car. It is essentially renting the car for a number of years, and when the contract ends you return it and upgrade to a newer model if you wish. The downside is you never own the car.

If this doesn’t bother you, it is a good way to drive the newest, most modern models available. There are several considerations to be aware of, though.

Personal Contract Purchase

A PCP means that you only pay for the car’s depreciation over the length of the contract. This works out as the difference between the list price and the car’s expected value at the end of the agreement.

This can last anywhere from twelve months to five years and is paid by a small deposit and then fixed monthly repayments.

At the end of the agreement, you can pay off the remaining value of the car and own the vehicle or hand the car back.

Hire Purchase

HPs include spreading the cost of the car over several years. When your contract ends, you own the car and have nothing left to pay.

The issue with using a hire purchase contract to finance your EV is that the rate of development in the battery technology field is rapid, meaning that by the end of your contract, your car may be outdated in comparison to the newer models.

This may make it harder for you to trade in your vehicle should you want to do so.

Of course, you can also buy an EV outright. But due to the cost of a brand-new electric car, this is not a feasible option for the average person.

The Pros of Electric Car Leasing

The Cost

Since new electric cars are expensive, leasing is an affordable option for those who are not in the financial position to buy a new car outright. It brings previously unattainable cars into your reach.

Electric cars are also cheaper to run, as they use electricity instead of fuel. They also save you money in the London Congestion Charge zone and Clean Air Zones.

No Losing Out

Since you don’t own the car, you don’t need to worry about it depreciating in value – you can just hand the car back to the company you leased it from and get an upgrade if you wish to.

Your monthly fee is worked out with depreciation in mind.

You Enjoy the Best Part

New cars work their best during the first three years of their life when everything is brand new and less likely to break. With leasing, you’ll get to enjoy the benefits of a brand-new car, without worrying about costs in the future.

Plus, if you pay into a maintenance package with your lease, you won’t have to worry about servicing or fixing your car should something go wrong. This leads to stress-free driving.

There’s Zero Obligation

Unlike a PCP contract or full ownership, leasing a car means that once your contract is up, you have zero obligations. You don’t own the car at the end, so you can simply get a new contract with a newer electric car.

You don’t have to worry about selling it on or forking out for expensive maintenance jobs that come with owning a car for a long time. As long as you haven’t damaged the car or gone over your mileage you don’t owe any money after your contract ends and are free to move on.

The Cons of Leasing an Electric Car

Hidden Charges

Unfortunately like most contracts, there are potential hidden costs. If you damage the car or the company decides there is excessive wear and tear on the vehicle, you could be subject to a high charge.

If you exceed the agreed mileage of your contract, you’ll have to pay per mile for the extra miles you drove - this can cost anywhere up to £1 a mile. There is also a potential for high excess on your car insurancewith a lease.

You’re Locked In

If you decide that the vehicle you have chosen is not for you, you will have to pay a fee to leave your contract early. Since most contracts are around three to four years, you could end up stuck in a contract with a car you dislike for a couple of years.

High Upfront Cost

If your main reasons for choosing a lease over ownership are financial ones, you’ll be disappointed to learn that the upfront cost you have to pay at the beginning of your contract can be quite high.

It is usually a certain number of times the cost of your monthly lease agreement, so it could be anywhere up to £12,000! That's a lot of money for someone who’s trying to save.

The Pros of Buying an Electric Car

Car Ownership

If you buy an electric car, you own it entirely and are free to do as you please with it.

It is also an investment opportunity - you may decide to sell the car further down the line, as electric cars are becoming more popular.

Save Money in the Long Run

Although leasing a car will save you money in the short run, owning an electric car will put you ahead of the game. Electric cars are cheaper to run and maintain, and electric cars depreciate less than their ICE counterparts.

You may also be eligible for a plug-in car grant, as well as not having to pay for road tax or congestion charges and clean air zones.

No Restrictions

Unlike a lease, you are free to drive as many miles as you desire, so buying is best for drivers who enjoy long road trips or have to travel lots for work. You are also not restricted by a contract to make any modifications you might wish to.

The Cons of Buying an Electric Car

The Price

Electric cars are expensive, there is no doubt about it. Even if you decide to buy an EV, you will probably have to finance it, which means you’ll be paying into a contract, like you would with a lease (but after you’ve finished paying it, the car is completely yours).

You’ll likely need a loan to buy a brand-new electric car outright.

The Maintenance

The downside of owning an electric car is that you are responsible for anything that goes wrong. You won’t have the reassurance of a lease-owner who is paying into a maintenance package, and if it’s a large job such as the battery, you could have a hefty bill to be paid.

Being Tied Down

If you’re someone who enjoys owning new things, buying a car essentially ties you to that model until you can afford to sell and buy a new one.

If you are likely to get bored or want to upgrade after a couple of years, leasing may be more suited to your needs.

Things to Consider When Leasing an EV

As with any major financial decision, there are a list of considerations you should think about before jumping into an electric car lease deal.

Do you need GAP insurance? GAP insurance covers you if your lease car is stolen or written off. Speak to your leasing company to understand whether it is worth doing.
What’s your budget? Although it is considerably cheaper than buying an electric car outright, there are of course still price tags attached to leasing. Remember you’ll need money up front for the deposit, and you’ll need to pay every month on time. Ensure this is within your budget before signing any dotted lines.
How long do you want the contract to be? If you’re likely to want a new car after a couple years, a five-year contract probably isn’t for you - cancellation fees exist and can be expensive.
How many miles do you drive? Consider your weekly, non-negotiable journeys, such as your work commutes and essential trips. Doing some quick maths to ensure you don’t drive more than your contract covers you for can help save you money in excess mileage fees.

In Conclusion

Only you can decide whether you should lease or buy an electric car. It depends completely on your financial situation, your preferences and what you use your car for. If you enjoy new cars and use your car strictly for going to work or taking short journeys, then leasing may be in your best interest.

However, if you plan to have one car for many years, and have to drive hundreds of miles every week, it is probably more sensible to buy a car rather than lease one, as you are then not restricted by the number of miles you can drive.