Leasing an Electric Car vs Buying: Which Is Better?

Benefits of leasing an EV

Leasing typically works out cheaper than buying

Electric cars tend to have a higher list price than similar petrol or diesel cars. When you lease an EV, you're essentially renting it for a fixed period, often 2–3 years. You pay an initial deposit and set monthly payments as part of your leasing agreement. This typically works out cheaper than buying a new EV using other financing options.

Depreciation is not a concern

Cars depreciate in value over time, and in the first few years, your car loses most of its value. Numbers show that a petrol or diesel car that was bought new is worth up to 60% less three years after leaving the dealership. So an ICE car that was brand new three years ago could be worth less than half of its original purchase price.

In contrast, EVs depreciate in value at a slower rate than petrol or diesel cars. By year three, an electric car only loses 40 to 49% of its value.

When you lease, the responsibility for the car’s resale value does not fall on your shoulders. This gives you the flexibility to upgrade your electric car once your lease ends without having to worry about the resale value.

Choose from a wide range of EVs

Leasing offers a broad range of EVs to choose and test, including the latest models with advanced features and technology. When your circumstances change, it’s easy to also change the type of car you drive at the end of your lease.

Maybe you want to size up from a hatchback to an SUV to fit a growing family, or pick a model with more range to take you further on your journeys. Leasing lets you try the car out first without having to commit to the full cost of buying.

Avoid an ageing and degrading battery

An EV battery starts to degrade as soon as it’s manufactured, but your use of the car impacts the rate at which battery capacity reduces. If you drive a lot, regularly use rapid chargers, and heavily accelerate and brake, the battery will wear out quicker.

While most EV batteries are covered by a 7- or 8-year warranty, repairs or replacements typically only happen once the battery’s initial capacity drops below 70%. When leasing, you don’t have to worry about an ageing battery and likely won’t feel the effects of degradation, as you get to change your car every few years.

Option to add a maintenance package

As part of a lease agreement, you’re generally required to service your EV every 12 months. You may have the option to add a maintenance package to your lease which commonly includes servicing, MOTs and breakdown recovery.

A maintenance package helps you spread the cost of routine servicing and maintenance over the period of your lease, meaning you won’t have to save for these expenses.

Enjoy the latest EV technology

Leasing allows you to experience the latest EV technology, because innovation in this space moves at a rapid pace. As electric car batteries evolve constantly, you’ll be able to benefit from an ever-increasing range when you change your leased EV every few years.

From battery type to infotainment equipment, so much can change in just a few years and leasing gives you the option to make the most of it.

Reducing environmental impact

If you switch from an internal combustion engine (ICE) car to an electric car, you’re eliminating the CO2 emissions that come from your tailpipe, improving air quality in your immediate area. Just one journey in an EV means one less journey in a petrol or diesel car.

It benefits you and your family’s health, and brings everyone closer to phasing out petrol and diesel vehicles, as new sales will be banned in the UK from 2035.

Drawbacks of leasing an EV

Set mileage limit

Lease agreements typically have mileage limits, and exceeding them can result in additional costs. You’ll be charged a set fee for every mile over the limit, typically around 3 to 30 pence per mile.

Mileage penalty charges ultimately lead you to pay more than you would have if your mileage limit was set correctly in the first place. To avoid excessive charges, carefully consider your average weekly mileage and any longer road journeys you’re expecting during the lease to set your limit accordingly.

Charges for excessive damage

During a lease, the dealership expects a normal amount of wear and tear to happen, but any damage beyond normal usage can lead to additional charges when the lease is up. This applies to electric cars as well as petrol and diesel vehicles.

Your leasing partner will use the British Vehicle Rental and Leasing Association (BVRLA) Fair Wear & Tear Guide to fairly assess the returned car. Damage outside of wear and tear will result in end of contract charges.

Additional battery leasing

You may need to pay a separate fee to rent your EV's battery, also known as battery leasing. It’s an extra cost to consider, but this option is becoming increasingly rare. Renault currently offers full battery purchase and battery leasing for its battery electric car Zoe.

Are other finance options available?

Hire purchase (HP)

With HP, you make fixed monthly payments for 1 to 5 years until you've paid off the entire cost of the car, after which you own it outright. A key benefit of a hire purchase is the unlimited mileage you get as a result of full ownership.

Lenders charge interest on HPs, so you’ll pay more throughout the contract than if you had bought the car outright. As with any financing option, if you miss a payment, the car can be taken away.

It’s worth taking note that if you purchase an EV using HP, the car’s technology and battery may not be up-to-date by the time you’ve fully paid it off. If you want to upgrade, you’ll have to take that into account that the resale value will be reduced.

Personal Contract Purchase (PCP)

PCP combines leasing and buying. You make lower monthly payments and have the option to purchase the car at the end of the agreement or simply return it.

The deposit you pay at the start of the PCP and monthly payments equal the car’s estimated depreciation over the financing term. Similar to a lease, you’ll have the benefit of switching to a different EV at the end of the PCP term if you want the newest technology or more space.

Alternatively, if you’re happy with the car and want full ownership, you pay the remaining sum and the car is yours.

Salary sacrifice

Salary sacrifice allows you to lease an EV through your employer's scheme. The monthly leasing fee is deducted from your gross pay, resulting in Income Tax and National Insurance savings.

Salary sacrifice schemes offered through employers typically include a maintenance package, so your servicing, MOTs and breakdown cover are included in the price. Thanks to the tax benefit, this option is cheaper than leasing the same car directly from a dealership.

When you end your employment, you will likely have to end your lease through the salary sacrifice scheme, unless your new employer is willing to take on the lease.

Learn more about salary sacrifice in our guide.

Is leasing cheaper than buying an EV?

The answer to this question is not a simple yes or no. Whether leasing or buying an EV is cheaper depends on your individual circumstances, driving habits, and financial goals.

Leasing offers lower upfront costs than buying and can come with lower monthly payments depending on the make and model whilst letting you test the waters with an EV first, making it a more affordable choice for some.

However, if you plan to keep the vehicle for an extended period of time and are concerned about mileage limits, buying might be a more cost-effective option in the long run.

Which option is better?

In the end, whether leasing or buying an electric car is better for you depends on your personal situation and priorities. Consider factors like your budget, how long you plan to keep the car, your driving habits, and your desire for the latest technology.

By weighing these factors up carefully, you can make the choice that suits your needs and contributes to a more sustainable future.