Electric vs. Petrol: Which Lease Option is More Cost-Effective?

As fuel prices continue to surge and environmental consciousness grows, more drivers are facing a crucial decision: whether to lease an electric vehicle or stick with a traditional petrol car.

While the environmental benefits of EVs are well-documented, the financial implications of this choice aren't always clear. In this comprehensive guide, we'll break down the true costs of leasing both options to help you make an informed decision that aligns with both your budget and lifestyle.

The initial cost difference: More than just monthly payments

When you first start exploring lease options, you'll notice that electric vehicles typically command higher monthly payments than their petrol counterparts. A current market analysis reveals that a Tesla Model 3, for instance, leases for around £449 per month, while a comparable BMW 3 Series starts at £389. This £60 monthly difference might seem significant, but it's just the beginning of the story.

Let's examine the upfront costs for a typical 36-month lease agreement:

Electric Vehicle (Tesla Model 3 Standard Range)

• Initial payment (6 months): £2,694
• Documentation fee: £199
• Home charger installation: £1,200
• Government charger grant: -£350
• Total upfront cost: £3,743

Petrol Vehicle (BMW 320i)

• Initial payment (6 months): £2,334
• Documentation fee: £199
• Total upfront cost: £2,533

The higher monthly payments for EVs stem from their greater initial purchase price and the technology they pack. However, these upfront costs are often offset by significant savings in other areas.

Running costs: Where electric vehicles shine

The real financial advantages of electric vehicles become apparent when we examine the day-to-day running costs. Let's break down the monthly costs for a driver covering 1,000 miles per month:

Electric Vehicle Monthly Costs:

1. Lease payment: £449
2. Energy costs:
   • Average consumption: 3.5 miles/kWh
   • Monthly usage: 285.7 kWh
   • Home charging (80% at night rate £0.15/kWh): £34.28
   • Public charging (20% at £0.35/kWh): £20
   • Total energy cost: £54.28
3. Insurance: £65
4. Maintenance (averaged): £27
5. Road tax: £0
6. Total monthly cost: £595.28

Petrol Vehicle Monthly Costs:

1. Lease payment: £389
2. Fuel costs:some text
   • Average consumption: 40 mpg
   • Monthly fuel needed: 113.6 litres
   • At £1.65/liter: £187.44
3. Insurance: £55
4. Maintenance (averaged): £46
5. Road tax: £13.25
6. Total monthly cost: £690.69

This represents a monthly saving of £95.41 in favour of the electric vehicle, despite its higher lease payment.

Hidden costs and considerations: What the dealers don't tell you

Before you rush to sign that EV lease agreement, there are several important factors to consider. While public charging networks are expanding rapidly, most EV owners prefer the convenience of home charging. Installing a home charger typically costs between £800 and £1,500, though government grants can reduce this by up to £350. For renters, it's essential to check whether your landlord will permit charger installation.

Insurance presents another consideration. Electric vehicles typically cost 10-20% more to insure than their petrol equivalents. This higher cost reflects the more specialised repairs these vehicles require and the currently limited network of qualified technicians. However, as EVs become more common, these insurance premiums are expected to normalise.

Long-term value and future considerations

Let's examine the total costs over a three-year lease period:

Electric vehicle:

Year 1:

• Regular costs (£595.28 × 12): £7,143.36
• Initial costs: £3,743
• Total: £10,886.36

Year 2:

• Regular costs: £7,143.36
• Battery health check: £100
• Total: £7,243.36

Year 3:

• Regular costs: £7,143.36
• Extended warranty consideration: £299
• Total: £7,442.36

Three-year total: £25,572.08

Petrol vehicle:

Year 1:

• Regular costs (£690.69 × 12): £8,288.28
• Initial costs: £2,533
• Total: £10,821.28

Year 2:

• Regular costs: £8,288.28
• Major service: £299
• Total: £8,587.28

Year 3:

• Regular costs: £8,288.28
• Total: £8,288.28

Three-year total: £27,696.84

One common concern about electric vehicles is battery longevity. Modern EV batteries have proven remarkably reliable, typically retaining 90% of their capacity after five years and 80% after eight years. Most manufacturers back this reliability with comprehensive eight-year battery warranties, providing peace of mind for lessees.

Cost variables by usage pattern

Your actual costs can vary significantly based on your usage:

Annual mileage impact

• 5,000 miles/year: EV advantage = £450/year
• 10,000 miles/year: EV advantage = £900/year
• 15,000 miles/year: EV advantage = £1,350/year
• 20,000 miles/year: EV advantage = £1,800/year

Charging pattern impact

• 100% Home charging: Best case scenario
• 80/20 Home/Public: Typical scenario (+£15/month)
• 50/50 Home/Public: Regular commuter (+£40/month)
• 20/80 Home/Public: Worst case scenario (+£75/month)

Additional cost considerations

Potential EV savings:

• Government grants for charging installation: Up to £350
• Workplace charging benefits: Up to £500/year if available
• Clean Air Zone charges avoided: Up to £12.50/day in London
• Corporate tax benefits for business users
• Local parking discounts: Varies by council

Potential extra costs:

• Home electricity rate increases
• Public charging network membership fees
• Battery degradation impact on range
• Charging cable replacements
• Insurance excess differences

Making the smart choice: A personal decision

The decision between an electric or petrol lease ultimately depends on your specific circumstances. If your annual milage is more than 10,000 miles, have access to home charging, and primarily drive in urban areas, an EV lease could offer significant savings despite the higher monthly payments.

However, if you drive less frequently, lack home charging access, or regularly make long journeys, a petrol vehicle might still be the more practical choice. It's worth noting that the EV market is rapidly evolving, with expanding charging infrastructure, improving battery technology, and growing government incentives all tipping the scales increasingly in favour of electric vehicles.

Subscription vs traditional lease

Before diving into the EV versus petrol comparison, it's crucial to understand how car subscriptions differ from traditional leases. This newer model of car usage offers unique advantages that could influence your choice between electric and petrol vehicles.

Flexibility and commitment

Traditional leases typically lock you into a 24-48 month contract with significant penalties for early termination. Car subscriptions, however, offer much more flexibility:

• Minimum terms often as short as 1 month
• Ability to pause your subscription during extended trips
• Option to switch between different vehicles (including between EV and petrol)
• No long-term commitment or hefty exit fees

Inclusive costs

While lease payments cover just the vehicle and warranty, subscriptions usually include:

• Comprehensive insurance
• Road tax
• Routine maintenance
• Breakdown coverage
• Tyre replacements
• Some even include charging credits for EVs

For example, a £550 monthly lease might require additional payments of £80 for insurance, £13 for road tax, and around £40 for maintenance savings. A £650 subscription typically includes all these costs, potentially offering better value and certainly providing more predictability.

Vehicle switching

One significant advantage of subscriptions when considering the EV vs petrol decision is the ability to experience both:

• Try an EV during summer months for local driving
• Switch to petrol for long winter trips
• Test different vehicles before making a longer commitment
• Adapt to seasonal needs or lifestyle changes

Financial implications

The payment structures differ significantly:

• Leases: Large upfront payment (typically 3-6 months)
• Subscriptions: Often just one month upfront plus refundable deposit
• Leases: Fixed monthly payments for the entire term
• Subscriptions: Slightly higher monthly payments but includes more services

Impact on EV adoption

Car subscriptions are particularly advantageous for those considering an EV:

• Test EV lifestyle without long-term commitment
• Evaluate home charging setup viability
• Experience different EV models and ranges
• Switch back to petrol if needed without penalties

Provider considerations

When comparing EVs and petrol vehicles through subscription services:

• Check provider's EV-specific benefits (charging credits, home charger installation)
• Compare switching fees between EV and petrol models
• Verify availability of desired vehicles in your area
• Consider provider's charging network partnerships

Looking ahead: The future of car leasing

The automotive industry is undergoing a dramatic transformation, and lease options are evolving alongside it. Government policies increasingly favour electric vehicles, with new incentives and infrastructure investments being announced regularly. Meanwhile, rising fuel costs continue to make the economic case for EVs more compelling.

When making your decision, remember that market conditions and available deals change frequently. Take time to compare current offers from multiple lease providers, and consider your specific circumstances carefully. While the higher monthly lease payments for EVs might initially seem daunting, the potential savings in running costs could make an electric vehicle the more cost-effective choice for your next lease.

All costs and figures cited are based on UK market data as of 2024. Individual circumstances, location, driving habits, and available deals may affect actual costs. Consider consulting with multiple lease providers and financial advisors before making your final decision.

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