Understanding the True Cost of Car Ownership

When we talk about whether an EV is cheaper than a petrol car, we’re not just looking at the sticker price. True cost of ownership involves a few key areas:

• Purchase Price: The initial amount you pay for the car.
• Fuel/Energy Costs: How much you spend to power the car (petrol vs. electricity).
• Maintenance: The cost of servicing, repairs, and replacement parts.
• Insurance: The premium you pay for coverage.
• Taxes and Incentives: Government grants, road tax, and other fees.
• Resale Value: How much the car is worth when you decide to sell it.

Let’s break down each of these to see where the savings (or extra costs) lie.

1. The Initial Purchase Price: The Biggest Hurdle?

It’s true that, on average, electric cars still tend to have a higher upfront purchase price than comparable petrol models. This is largely due to the cost of battery technology, which is a significant component of an EV’s manufacturing cost.

However, this gap is narrowing rapidly. As battery production scales up and technology improves, EV prices are becoming more competitive. Plus, government incentives play a huge role here.

Government Incentives and Grants

Many governments offer grants or tax credits to encourage EV adoption. These can significantly reduce the initial cost of buying an EV. For example:

• Plug-in Car Grant (UK): Historically, this grant has directly reduced the price of eligible new EVs. While the specific grant amounts change, it’s always worth checking the latest government schemes. Check the latest UK government schemes here.
• Tax Credits (USA): In the US, federal tax credits can reduce the purchase price of qualifying new EVs. State and local incentives may also be available.
• Other Countries: Similar schemes exist globally, often including purchase subsidies, tax exemptions, or reduced registration fees.

Example: Imagine a petrol car costs £25,000 and a comparable EV costs £30,000. If a government grant offers £5,000 off the EV, the effective purchase price becomes £25,000, making it equal to the petrol car.

It’s crucial to research the specific incentives available in your region at the time of purchase.

2. Fuel/Energy Costs: Where EVs Shine

This is where the most significant and consistent savings for EV owners typically occur. Electricity is generally much cheaper per mile than petrol or diesel.

How to Calculate:

• Petrol Car: Cost per mile = (Cost of 1 litre of petrol / Kilometres per litre) x 100
• EV Car: Cost per mile = (Cost of 1 kWh of electricity / Kilometres per kWh) x 100

Let’s look at some typical figures (these can vary greatly by location and time):

Note: These are illustrative examples. Actual costs will depend on your specific car’s efficiency, local electricity and petrol prices, and charging habits.

Home Charging vs. Public Charging

Charging your EV at home, especially during off-peak hours, is almost always the cheapest option. Public charging networks, particularly rapid chargers, can be more expensive, sometimes approaching or even exceeding petrol costs per mile, but they offer convenience for longer journeys.

The Impact of Electricity Prices: The cost of electricity varies significantly. If you have solar panels, your “fuel” costs can be drastically reduced. Smart tariffs that offer cheaper overnight electricity are also a major benefit for EV owners.

The average UK household electricity price in early 2024 is around £0.30 per kWh. Petrol prices fluctuate but are often over £1.50 per litre.

Even using public charging, the cost per mile for an EV can still be competitive, especially compared to less efficient petrol cars. The key is understanding your typical driving patterns and charging options.

3. Maintenance: Fewer Moving Parts, Lower Costs

Electric vehicles have significantly fewer moving parts than internal combustion engine (ICE) cars. This translates to lower maintenance costs over time.

What’s different?

• No Oil Changes: EVs don’t require engine oil, oil filters, or spark plugs.
• Brake Wear: EVs use regenerative braking, where the electric motor slows the car down and recaptures energy, sending it back to the battery. This significantly reduces wear on the traditional friction brakes, meaning brake pads and discs last much longer.
• Fewer Fluids: No transmission fluid, coolant for the engine (though there’s a cooling system for the battery and motor), or exhaust systems to worry about.
• Simpler Drivetrain: Most EVs have a single-speed transmission, which is much simpler and more robust than a multi-gear petrol engine gearbox.

Typical Maintenance Savings: While specific figures vary, studies often show that EV maintenance costs can be 30-50% lower than for comparable petrol cars over a year. This includes fewer routine services and a lower likelihood of major, expensive component failures like exhaust systems or clutches.

Of course, EVs still need checks on tires, suspension, cabin filters, and battery health monitoring, but the major service items are vastly reduced.

4. Insurance Costs: A Variable Factor

Insurance for EVs can sometimes be higher than for equivalent petrol cars, but this is not always the case and is a rapidly changing landscape.

Why might it be higher?

• Higher Repair Costs: The cost of replacing EV-specific components, like batteries or advanced electronics, can be higher if an accident occurs.
• Newer Technology: Insurers are still gathering data on the long-term accident and repair rates for EVs.
• Performance: Many EVs offer impressive acceleration, which can sometimes influence insurance premiums.

Why might it be similar or lower?

• Safety Features: EVs often come equipped with advanced safety technology.
• Fewer Accidents: Some studies suggest EV drivers may be involved in fewer accidents, potentially due to the typical demographic or the nature of the technology.
• Competition: As more EVs come to market, insurance providers are becoming more competitive.

It’s essential to get quotes for both EV and petrol cars you are considering. The difference might be negligible or significant depending on your insurer, location, and driving history.

5. Taxes, Road Tax, and Other Fees

This is another area where EVs often have an advantage, especially in countries with environmental policies.

• Road Tax/Vehicle Excise Duty (VED): In the UK, most new EVs registered after April 2017 pay £0 in VED in the first year and are exempt from the £190 annual “expensive car” supplement for cars over £40,000 until 2025. Petrol cars, depending on their CO2 emissions, can incur significant annual VED charges.
• Congestion Charges/Low Emission Zones: Many cities offer discounts or exemptions for EVs in congestion charge zones or low-emission zones, saving drivers daily fees.
• Company Car Tax (Benefit-in-Kind): For company car drivers, EVs typically have much lower BIK tax rates than petrol cars, representing substantial savings.

Always check the latest regulations in your specific country or region, as these policies can change.

6. Resale Value: The Evolving Picture

Historically, concerns about battery degradation and the rapid pace of EV technology development led to worries about poor resale values. However, this has changed considerably.

Current Trends:

• Strong Demand: The growing popularity of EVs means demand for used models is high.
• Battery Health: Battery technology has improved, and manufacturers offer long warranties (often 8 years or 100,000 miles) on batteries, providing peace of mind.
• Technological Advancements: While new models are always coming out, the core technology in most modern EVs is proving durable.

Many studies now show that EVs hold their value as well as, or even better than, comparable petrol cars. This means the depreciation cost, which is a significant part of overall ownership cost, can be favourable for EVs.

It’s wise to compare the projected resale values of specific models you’re considering.

Putting It All Together: A Total Cost of Ownership (TCO) Comparison

To truly answer “is an EV cheaper than petrol?”, we need to look at the Total Cost of Ownership (TCO) over a period, say 5 years or 100,000 miles.

Let’s create a hypothetical comparison:

This is a simplified example. Actual figures will vary greatly based on your specific car choices, driving habits, and local costs. The key takeaway is that the lower running costs of the EV can easily offset a higher initial purchase price.

Who Benefits Most from an EV?

An EV is likely to be cheaper for you if:

• You drive a significant number of miles each year.
• You can charge at home, especially overnight on a cheaper tariff.
• You can take advantage of government grants and tax incentives.
• You plan to keep the car for several years, allowing the savings to accumulate.
• You are eligible for lower company car tax rates if it’s a company vehicle.

If you only drive very short distances infrequently and never have access to cheap home charging, the economic advantage of an EV might be less pronounced.

Frequently Asked Questions (FAQs)