Total cost of ownership
Total cost of ownership
It’s a common myth that electric vehicles (EVs) are more expensive than their internal combustion engine (ICE) equivalents. We’ll explain why this isn’t true and how it’s straightforward to save money on your vehicle costs by turning electric.
You need to look at the total cost of ownership (TCO)
While EVs are currently more expensive to buy, lease and hire than ICE vehicles, this only tells half the story. Across the TCO, they can save you money because purchasing is only your first cost. The TCO considers the added costs of using and maintaining the vehicle, which quickly increase over time. In these departments, EVs are more cost-effective than ICE equivalents.
How are EVs cheaper?
EVs are significantly cheaper to power than ICE equivalents.
The Energy Saving Trust found that fuel costs are often three to four times more expensive than driving the same distance via electric. It’s also the case across other areas, as Mercedes has proven. They compared the cost of three of their electric vans alongside the ICE version comparison, looking at three essential vehicle costs. These costs included the amount spent powering the vehicle, joined by the cost of servicing it and road tax. Mercedes found that each van was cheaper to run by more than £2,000 per year.
It’s also worth noting that the study was conducted in 2020 when diesel prices fluctuated between £1.24 a litre and £1.12. By 2022, it had risen to in excess of £1.70. Even considering the increases in electricity costs, using petrol or diesel has become even more expensive to fuel your car.
But surely EVs are more expensive for insurance?
EVs historically were more expensive to insure, but now that trend is also being reversed. Data from GoCompare (analysed by Hey Car) and Comparethemarket found that EVs have consistently cheaper premiums, and have been since 2020.
How does that relate to leasing?
As we explained earlier, it costs more to lease an EV. The TCO shows that it’s considerably cheaper annually when looking at tax and the power running costs. Using the above Mercedes data and our pricing, the table below shows how much cheaper an eSprinter works out over a year than the ICE equivalent – saving you £1,838.39 a year*.
Additional savings could also be made when daily congestion and ULEZ charges are considered (more info below). All cost savings are indicative and exclude insurance. Servicing and maintenance are included in the hire charge.
* Savings based on Mercedes-Benz eSprinter PROGRESSIVE L2 H2 (55kWh) van running costs vs the nearest diesel equivalent Mercedes-Benz Sprinter 314 CDI L2 H2 Auto. All cost savings are indicative. Source: Mercedes-Benz.co.uk (Jan 2021) and Radius Vehicle Solutions offers April 2022.
**Energy cost calculated using the cost of energy updated annually by VCA (12.5p/kWh as of April 2020).
Are there other ways to save money on your EV?
There are more ways to reduce the cost of EVs even further. The OZEV (Office for Zero Emission Vehicles) grant, also known as the workplace charging scheme, enables you to secure up to £350 per socket towards the cost of installing charge points at your business premises.
On top of this, many public places such as supermarkets and gyms supply free charging. You may need to use their services to do so, but providing you plan to do this, charging your EV while shopping or working out can work out cheaper overall.
Finally, if your business drives vehicles in ULEZ (Ultra Low Emission Zones) or CAZ (Clean Air Zone), EVs pay no charges, and diesel vans will pay the highest costs. The UK government are only likely to increase the cost of ownership and use of ICE vehicles in the future, making an EV a sound investment for both financial and green reasons.