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 £1,500), annual running costs are significantly less with an EV—even with the recent rise in electricity prices.
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||£899||£4,493|
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
|Emissions||Year 1||Years 2 - 6||Years 7 and beyond|
|Petrol (list price up to £40,000)||1 to 50g/km||£10||£155||£155|
|51 to 75g/km||£25||£155||£155|
|76 to 90g/km||£115||£155||£155|
|91 to 100g/km||£140||£155||£155|
|101 to 110g/km||£160||£155||£155|
|111 to 130g/km||£180||£155||£155|
|131 to 150g/km||£220||£155||£155|
|151 to 170g/km||£555||£155||£155|
|171 to 190g/km||£895||£155||£155|
|191 to 225g/km||£1,345||£155||£155|
|226 to 255g/km||£1,910||£155||£155|
|Petrol (list price over £40,000)||1 to 50g/km||£10||£490||£155|
|51 to 75g/km||£25||£490||£155|
|76 to 90g/km||£115||£490||£155|
|91 to 100g/km||£140||£490||£155|
|101 to 110g/km||£160||£490||£155|
|111 to 130g/km||£180||£490||£155|
|131 to 150g/km||£220||£490||£155|
|151 to 170g/km||£555||£490||£155|
|171 to 190g/km||£895||£490||£155|
|191 to 225g/km||£1,345||£490||£155|
|226 to 255g/km||£1,910||£490||£155|
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 11.8 pence per mile driving an electric car compared to an ICE car if they charge their EV at home. This holds even with the recent rise in electricity prices in early 2022, because petrol prices have risen in parallel with the unit cost of electricity. 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 £900 per year. For example, someone driving 7,600 miles per year would spend around £636 per year on home-charging electricity costs vs £1,535 on petrol:
|Fuel Savings by Driving an Electric Vehicle^|
|Annual mileage||7,600 miles|
|Annual Petrol Cost for Petrol Car||£1,535|
|Annual Electricity Cost for Electric Car||£636|
|Fuel Savings per Year||£899|
|Total Fuel Savings over 5 Years||£4,493|
The average cost to charge an electric car is around 7.5p - 9p per mile (e.g., the cost to pay for the electricity at home assuming you pay 28 pence/kWh, which is the average unit cost of electricity). This is 58.5% cheaper than the average cost of petrol per mile of driving (20.2p 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 government grant, which is 35% of the purchase price, up to a maximum of £1,500:
- Zero tailpipe CO2 emissions
- Can travel at least 70 miles between charges, without any emissions at all
- Cost under £32k (this refers to the recommended retail price including VAT and delivery fees)
Click here to learn about which exact vehicles are eligible for the grant.
^ Assuming petrol cost of £1.6/l, fuel efficiency on a petrol car of 37 mpg, annual mileage of 7,600 and electricity cost of 28p/kWh.