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How Much Can You Save with an All-Electric Car?

Can you save money each year by driving an all-electric car? Yes. Even though electric cars cost more to buy than comparable internal combustion engine (ICE) cars (despite the government grants that can reduce the purchase price of an electric vehicle by £2,500), annual running costs are significantly less with an EV.

Annual Savings with an Electric Car

You can save around £1,000 a year in annual running costs with an electric car, which helps to offset the more expensive purchase price, through reduced vehicle taxes and fuel costs.

Electric Car vs Petrol Car: Annual Savings^Per YearOver 5 Years
Vehicle Tax Savings (depends on year and vehicle list price)£150£775
Estimated Fuel Savings£858£4,290
Total Annual Savings£1,008£5,065

Vehicle Tax Savings with an Electric Car

Most zero emissions electric cars don't pay any vehicle road tax, saving you hundreds of pounds. Road tax is largely a function of CO2 emissions—the lower the emissions, the lower the road tax. List price of the car plays a role, too.

Electric Car vs. Petrol Car: Vehicle Tax Rates

Year 1Years 2 - 6Year 7 and Beyond
Electric car£0£0£0
Petrol car (emissions of 130 g/km, list price <£40k)£180/year£155/year£155/year
Petrol car (emissions of 130 g/km, list price >£40k)£180/year£490/year£155/year

With an average emissions of 130 g/km, most cars on the road fall into the £180 vehicle tax band for the first year, then £155 in Year 2 and beyond. Over five years the typical ICE car tax tallies to £800 (£180 plus 4 times £155). Over five years of driving an electric car and not paying any road tax, you could therefore save £800 in vehicle road tax alone.

Fuel Savings with an Electric Car

A driver can save around 11 pence per mile driving an electric car compared to an ICE car if they charge their EV at home. For the typical British driver who logs an average mileage of 7,600 miles a year, the fuel savings for an EV can add up to around £850 per year. For example, someone driving 7,600 miles per year would spend around £342 per year on home-charging electricity costs vs £1,200 on petrol:

Fuel Savings by Driving an Electric Vehicle^
Annual mileage7,600 miles
Annual Petrol Cost for Petrol Car£1,200
Annual Electricity Cost for Electric Car£342
Fuel Savings per Year£858
Total Fuel Savings over 5 Years£4,290

The average cost to charge an electric car is around 4p - 5p per mile (e.g., the cost to pay for the electricity at home assuming you pay 16.3 pence/kWh, which is the average unit cost of electricity). This is 72% cheaper than the average cost of petrol per mile of driving (£0.158 per mile).

Government Grants to Reduce Purchase Price

To motivate drivers to buy low-emission cars, the government is offering grants which effectively reduce the purchase price of a new car. The car dealer will reduce the price by the amount of the grant, so you don't need to do anything extra to get the grant money—you simply pay less for a new electric car.

Which electric cars are eligible for the government grant?

EVs must meet the following requirements to be eligible for the £2,500 government grant:

  • CO2 emissions of less than 50g/km
  • Can travel at least 70 miles between charges, without any emissions at all
  • Cost under £35k (this refers to the recommended retail price including VAT and delivery fees)

Which electric cars are eligible for the government grant? to learn about which exact vehicles are eligible for the grant.

^ Assuming petrol cost of £1.1/l, fuel efficiency on a petrol car of 37 mpg, annual mileage of 12,000 and electricity cost of 16.7p/kWh.


The typical British driver can save around £1,000 a year on running costs (tax and fuel) with an electric car compared to a petrol or diesel car. This figure reflects charging at home. Drivers who use more expensive rapid-charge networks will pay more for charging their EVs and will save less money each year.
Electric cars don't pay vehicle road tax.