With news last week that used electric car sales grew by 56.5% in the first 3 months of 2023, we assess whether now is the right time to replace your petrol or diesel with a battery electric car.
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What’s happening in the market?
Overall more car buying and selling is happening
The UK’s used car market grew 4.1% in the first quarter of 2023 following three successive quarters of decline according to the Society of Motor Manufacturers and Traders (SMMT). There were 1.8 million used car transactions taking place with almost 73,000 more cars being bought and sold than in Q1 2022.
A sellers market – supply of cars remains low
Despite growth in the amount of trade taking place, the number of transactions remain 8.6% lower than before the pandemic. There is strong demand for vehicles, but overall not enough vehicles in supply. This is limiting sales. With the global production of new cars falling short since 2020, fewer vehicles have been entering the used car market. The knock on effect is that used vehicle values overall remain high. The used car market is a ‘sellers market’, with many vehicles holding their value.
Petrol and diesel vehicles commanding a price premium
There are a range of used petrol and diesel models that are either holding their value or actually increasing in price. Last month Auto Trader confirmed that on their own platform searches for petrol vehicles had increased by 8% and supply was down 16% on April 2022. Diesel was similar with demand up 8% and supply down 19%. More demand and less supply = higher prices.
Used electric vehicle (EV) prices fall as supply is healthy
With UK Government and industry committed to moving to electric, the number of EVs sold will only increase. In 2022 only 1% of the UK car market was made up of battery electric cars, but this is growing quickly.
Earlier this year an unusual move was made by Tesla who decided to significantly reduce the list price of several of their models. It was a knee-jerk reaction to some negative news about how people were losing favour with EVs. While similar moves have not yet been seen by other manufacturers, this only serves to put pressure on lowering electric car prices. In the used market EV prices have fallen considerably anyway because of a steady stream of supply. Auto Trader said last month that over three times as many used EVs were advertised on its platform compared to April 2022.
In Q1 2023 Battery Electric Vehicle (BEV) transactions increased by 56.5% to 26,257 units, now making up 1.4% of the market – up from 0.9% last year. Plug-in hybrids (PHEVs) also changed hands in greater volumes, rising 13.9% to 16,006 units. As a result, plug-ins comprised 2.3% of sales, up from 1.7% last year as increasing numbers of zero emission vehicles entered the second-hand market. Hybrids (HEVs) also grew, by 38.2% to 49,182 units (source: SMMT).
To learn more about the different types of electric vehicles please visit our Electric Vehicle Data page.
Does it make sense financially to buy an electric car now?
Buying/financing
Based on the above trends you would think the answer may be ‘yes’. If you kept your petrol, diesel or hybrid in good condition then it is likely to have held its value. This means more to put towards a new electric car. There’s many more used EVs in supply and these are coming down in price. So far so good.
But you also need to think about what happens to the car’s value in the future. If it’s value keeps tumbling over time then it could be worth much less when you come to sell it. If financing the vehicle under a PCP agreement this could mean you run into ‘negative’ equity’. This means there will be no value left in the vehicle to put towards a deposit for your next car. This shouldn’t put you off buying an EV, but make sure you plan for this eventuality.
Cost of fuel/electricity
On average, the cost of charging an EV is half the cost of fuel for petrol or diesel vehicles if charging from home. But if you need to rely on public charge points then you may make little or no fuel savings. The Government’s energy price guarantee at means at home you will pay around 33p per kWh of electricity on a standard tariff. Public charge points can be 60-80p per kWh.
Vehicle Excise Duty (VED)
At the moment keepers of BEVs with zero emissions at the tailpipe pay no VED. But from 1st April 2025 they will be required to start paying a ‘standard annual rate’ of at least £165 . See our blog that covered this from November last year.
Whereas those running petrol/diesel vehicles are required to pay between £30 and £2,605 in the first year. What is due depends on how much carbon and nitrogen oxide the vehicle emits. In the second year and thereafter the charge is between £170 and £190.
Vehicles that cost £40,000 or more when new are currently required to pay an additional £390 a year. This supplement is not applicable to EVs, but will be from 2025.
So unless the VED system changes further there won’t be a huge incentive to save road tax from 2025 by using an EV.
Is it practical to buy an electric car now?
Charging from home
If you have a charge point installed at home then the answer is probably ‘yes’. Most new EVs have a range of between 150 and 300 miles when fully charged. Range anxiety is not as prominent an issue as it was a few years ago.
Public charge point numbers and cost
There are over 42,000 public charge points across the UK. They are popping up everywhere including in local car parks, retail parks and supermarkets and petrol stations. But many more are needed to help those who rely on charging their vehicles in public spaces. Government has rolled out funding to local councils to help them install new charge points in public spaces. However, the costs for public charging (as above) are considerably higher – sometimes double the rates you pay for electricity at home.
Charging times
One of the key reasons why more charge points are needed is the speed it takes to charge a vehicle. If you have a petrol or diesel car you can fill up usually in 5 minutes. Most EVs take 30-40 minutes to reach 80% charge with 10% left in the battery. If slow charging this can take hours. The charge speed is another reason that makes it less practical to juice up EVs in public.
Charge point concentration
If you live in a big UK city or in the South East you will also have better access to charge points than you would in non-urban areas and some regions. Zap Map displays all public EV charger points in the UK. The Government is working with local authorities and businesses to improve the spread of charge points across the UK. But much more needs to be done in the lead up to 2035. This is when all new cars and vans will need to be zero emission at the tailpipe and the demand for public chargers will reach new heights.
Maintenance costs
Compared to internal combustion engine vehicles EVs have less moving mechanical parts and are cheaper to maintain. There is much less metal on metal wear and tear which means many of the constant in use parts last longer. Batteries are guaranteed usually for a minimum of 5 years by manufacturers. Tests have shown that new batteries lose only 5-10% of their capacity over vast distances have been travelled (200,000 miles+).
Insurance
Generally it is more expensive to insure electric cars. They are faster and pricier than petrol or diesel equivalents. But as more EVs enter the market and insurance companies have better historical data about them, premiums aren’t as high as they used to be. There are also several hatchbacks and mini hatchbacks that are some of the cheapest to insure on the road.
Summary
- It’s becoming more affordable to buy an electric car – new and used EV prices have fallen and are under pressure to fall further. Buoyant petrol/diesel car prices are helping to provide car buyers with funds to put towards their first EV.
- But if you purchase one now it could lose its value fast – this means once you come to sell you could have little to put towards your next vehicle. Although it is likely this value loss issue with EVs is with us to stay while we make the shift to net zero. Not a reason to hold off buying necessarily.
- Running costs remain lower for EVs but have crept up – the savings of recharging versus refilling are not as big as they used to be. Petrol and diesel prices having fallen over the last 6 months while household and public electricity tariffs remain high.
- From 2025 the road tax system (as it’s designed currently) provides less of an incentive to run an EV – electric car keepers will need to start paying a standard annual sum and many vehicles will attract an additional supplement for at least 5 years (where the brand new list price exceeds £40,000).
- If you can’t charge from home then the public charge point infrastructure still has a long way to go and is expensive – you will need to check what is available to you locally to recharge your vehicle.
- Maintaining an EV is cheaper – it is less likely to come with a pricy repair bill unless you have an accident.
- Insurance premiums are generally more expensive for larger electric cars, but reasonable for many hatchbacks / mini hatchbacks
Conclusion
The charging infrastructure remains the biggest barrier to moving to an electric car. If you can charge from home and can afford to buy the model you like then we say go for it now. You will save on running costs and can enjoy the benefits of new tech that electric cars bring as well as help save the planet.
But if you can’t charge from home then we advise you do some serious research first. Otherwise you may actually be paying more to run an electric car and it may be less practical to use. It may be better to wait a while until the public charging infrastructure improves. Look into the cost of charging locally to where you live and establish if this is practical and cost efficient for you compared to your current vehicle. Finally, enquire with your local council to see what options you have for getting access to a street charger outside your house, and see what other plans there are to bring in new charge points locally.
