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 £3,000), annual running costs are significantly less with an EV.
Annual Savings with an Electric Car
|Electric Car vs Petrol Car: Annual Savings^||Per Year||Over 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 1||Years 2 - 6||Year 7 and Beyond|
|Petrol car (emissions of 130 g/km, list price <£40k)||£175/year||£150/year||£150/year|
|Petrol car (emissions of 130 g/km, list price >£40k)||£175/year||£475/year||£150/year|
With an average emissions of 130 g/km, most cars on the road fall into the £175 vehicle tax band for the first year, then £150 in Year 2 and beyond. Over five years the typical ICE car tax tallies to £775 (£175 plus 4 times £150). Over five years of driving an electric car and not paying any road tax, you could therefore save £775 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 mileage||7,600 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 £3,000 government grant:
- CO2 emissions of less than 50g/km
- Can travel at least 70 miles between charges, without any emissions at all
- Cost under £50k
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.