Electric Cars vs Petrol Cars: The Ultimate Debate
The age-old question in the automotive industry for the past decade has been: what's best - electric cars or petrol/diesel cars? Electric cars are undoubtedly the future. In the UK, the sale of new petrol and diesel cars will cease by 2035. This adjustment aligns the UK with the EU and other global markets, mandating that all new cars and vans must be electric by 2035. This directive forms a crucial part of the broader initiative aimed at combating climate change within the UK and on a global scale. There has been a surge in demand for electric cars recently, with a 78.4% increase in October 2023, outpacing petrol (up 2%) and diesel (down 1.1%).
They are also unquestionably greener, but are they cheaper to run? What are the positives and negatives of both types of cars? This post aims to outline the comparison between electric cars and ICE cars (internal combustion engines) and resolve the debate over which is superior. It serves as a guide for transitioning to an electric car, particularly aimed at individuals who identify as petrol enthusiasts.
Cost of running an Electric Car vs a Petrol Car
When you're considering purchasing or leasing a new vehicle, it's crucial to factor in the average running costs based on your driving habits.
One significant advantage of driving an electric car is its substantially lower running costs compared to petrol or diesel alternatives. Electricity costs between 3 and 5 times less per mile than petrol, potentially saving drivers between £1,000 and £1,500 annually for a 10,000-mile journey. However, these savings depend on where you charge, with home charging typically cheaper than motorway charging, as well as your energy tariff.
In the UK, petrol and diesel prices have fluctuated in recent years. For instance, the estimated annual fuel cost for a Ford Focus is £1,230, while charging a Volkswagen ID.3 costs around £630 annually. This equates to approximately £600 in potential savings on fuel costs per year. The table below breaks down this information, showing the powertrain, approximate cost per mile, and estimated annual fuel cost for comparison.
| Make & Model | Powertrain | Approximate Cost per Mile | Approximate Annual Fuel Cost |
|---|---|---|---|
| Volkswagen ID.3 | Electric | 6.2p | £630 |
| Ford Focus | Diesel | 12.1p | £1,230 |
For further insight into the running costs of electric cars, you can read our blog: ‘How Much Does It Cost to Run an Electric Car’, which provides detailed information on the cost of charging at various types of charge points. We've also created a handy calculator that lets you compare the costs of driving a petrol car with the costs of leasing an electric car through a salary sacrifice scheme. You can find it here.
Differences in Repairs and Maintenance
Although electric cars typically come with a higher initial price tag compared to their petrol or diesel counterparts, they boast lower maintenance requirements and reduced servicing costs. With fewer moving engine parts, electric cars incur approximately half the servicing, repair, and maintenance expenses of petrol vehicles, potentially saving drivers between £500 to £1,000 annually. On average, servicing an electric car costs £143, while a petrol car requires around £174, representing an 18% higher servicing cost for petrol vehicles.
Concerns about battery degradation often deter potential electric car buyers, particularly due to the perceived high cost of battery replacement. However, in reality, replacing specific sub-optimal cells is more common than replacing the entire battery. In the unlikely event that a complete battery replacement is necessary, the average cost is £7,235. You can learn more about how manufacturers are addressing this issue by visiting our blog.
Regarding other maintenance aspects, electric cars follow the same maintenance procedures as petrol cars. Regular maintenance, such as ensuring recommended tyre pressure, is crucial, as electric cars tend to be heavier due to the battery weight, which can accelerate tyre wear.
What About Tax?
Road tax, known as VED or car tax, is an annual payment imposed on vehicles that are used or parked on public roads in the UK. It is calculated based on emission levels and those with higher emission levels will pay more because they contribute to more pollution and therefore cause harm to the environment.
Currently, drivers of electric cars are exempt from paying road tax because these vehicles do not produce harmful emissions. This can save over £500 per year compared with cars with high carbon emissions. However, from the 1st April 2025, EV drivers will have to pay VED (or road tax) for the first time in the UK. They will be liable to pay the lowest first-year rate of VED which is currently £10 per year. From the second year of registration they will then have to pay the standard rate of £190 per year. You can read more about the changes by visiting the Government website.
Benefit-in-Kind: Petrol vs Electric
The Company Car Tax is also known as the Benefit-in-Kind (BiK) tax for cars and is calculated based on the following three factors.
First, calculate the level of CO2 emissions produced by a car; an electric car will have none because it doesn’t produce any emissions. Second, consider the P11D value of the car, which represents its on-road price. Third, take into account your personal tax bracket.
What Is the BiK Tax for Petrol and Diesel Cars?
The BiK tax levied on highly polluting internal combustion engine cars (i.e., petrol and diesel cars) can go as high as 37%.
The low BiK rate has opened up the potential for drivers to make significant savings when buying an electric car, whereas petrol and diesel cars are becoming less affordable to run due to their higher BiK rate and running costs. Interestingly, hybrid cars do not enjoy a BiK rate as low as electric cars, some plug-in hybrid cars pay a BiK rate as high as 12%.
What Is the BiK Rate for Electric Vehicles?
Jeremy Hunt, The Chancellor of the Exchequer, shared in the 2024 Spring Budget announcement that he's keeping company car tax rates lower for electric vehicles. He's also made a promise to limit tax rate increases to just 1% per year for three years, starting in 2025. This means BiK tax will reach 5% by 2028.
The graphic below shows the monthly cost breakdown for the Nissan Ariya if you were to salary sacrifice it via The Electric Car Scheme. You can see that the average Benefit-in-Kind tax across the three-year lease with 10,000 miles per annum and a 40% tax bracket will cost approximately £49 per month. This would be significantly higher for an electric car of a similar size.
You can learn more about BiK tax by visiting our dedicated blog: Electric Car Benefit-in-Kind (BiK) Salary Sacrifice Guide.
Electric Car Tax Bands & BiK Rates
The table below shows how future BiK tax bands will work based on your vehicle’s CO2 emissions. At The Electric Car Scheem, we are working towards an assumption that the BiK rate in 2028/9 will increase by one percentage point year-on-year to 6% and the same will happen in 2029/30 (increasing to 7%).
| CO2 (g/km) | Electric Range | 2023 - 2024 (%) | 2024 - 2025 (%) | 2025 - 2026 (%) | 2026 - 2027 (%) | 2027 - 2028 (%) |
|---|---|---|---|---|---|---|
| 0 | NA | 2 | 2 | 3 | 4 | 5 |
| 1 - 50 | > 130 | 2 | 2 | 3 | 4 | 5 |
| 1 - 50 | 70 - 129 | 5 | 5 | 6 | 7 | 8 |
| 1 - 50 | 40 - 69 | 8 | 8 | 9 | 10 | 11 |
| 1 - 50 | 30 - 39 | 12 | 12 | 13 | 14 | 15 |
| 1 - 50 | < 39 | 14 | 14 | 15 | 16 | 17 |
You can view the rest of the table, where CO2 increases to 170+ g/km here.
The Upfront Cost of the Car: Electric vs Petrol
Purchasing an electric car outright can be very expensive; they are typically between 20% and 40% more expensive than new petrol cars. The average price of an electric car currently sits at £49,818, with the cheapest EV available being the tiny two-seater Citroën Ami, which has a range of 46 miles and is priced at £7,695. In contrast, the average medium-sized petrol car costs £21,964, almost £28,000 less than purchasing a brand new EV.
There is a growing market for second-hand electric cars as they become more popular and the market begins to stabilise. Average used car sales were declining in Q4 of 2023; the average value of a used car at three years and 60,000 miles fell by 4.2% in October. Stay tuned for used cars available through salary sacrifice at The Electric Car Scheme, which we expect to launch in the next couple of months.
It is important to note that although the initial cost of buying an electric car is higher than a petrol alternative, government grants and tax savings initiatives like The Electric Car Scheme make electric cars more affordable than petrol cars. Employees who make use of their electric car salary sacrifice benefit can save between 30% and 60% on any brand new electric car. You can also include service, maintenance and breakdown cover package with your electric car which will save you even more money in the long run.
Is There a Difference in Car Insurance Prices?
Typically, car insurance for electric cars is more expensive than for petrol cars. This is due to the higher value of electric cars, making them more expensive to replace in the event of a write-off - claims for EVs are 25.5% more expensive and their repair times can be up to 14% longer. According to NimbleFins, the average cost of EV car insurance is £654 for the most popular models in the UK, with quotes ranging from £400 to £1,000 per year. Insurance quotes are influenced by various factors such as age, gender, location, mileage, and more.
In the last year, insurance costs for all types of cars have gone up. This increase is attributed to several factors, such as higher prices for used cars and spare parts, a shortage of labour, longer vehicle loan durations, a surge in personal injury claims, and a decline in insurers' investment returns. You can learn more about EV insurance rising in our blog: Why Is Electric Car Insurance So Expensive?
With The Electric Car Scheme and through salary sacrifice, you can access car insurance which allows you to save 30-60% on that too!
Congestion Charges & Parking: Electric vs Petrol Cars
There are smaller, everyday positives to driving an electric car like savings on congestion charges and parking chargers that cannot be applied to petrol alternatives.
Congestion Charges
The Ultra Low Emission Zone, otherwise known as ULEZ, extended its reach to all London Boroughs (excluding the M25). There a number of ULEZ zones around the UK with some outlined in the table below.
| Cities | Daily Charge | Active |
|---|---|---|
| Bath | £9 for small vehicles, £100 for large vehicles | 24/7 |
| Bristol | £9 for small vehicles, £100 for large vehicles | 24/7 |
| Edinburgh | £60 | 24/7 |
| Glasgow | £60 | 24/7 |
| Oxford | £2 for ULEZ vehicles, £4 for low emission vehicles, £10 for non-compliant vehicles | 7am - 7pm daily |
| Newcastle & Gateshead | £12.50 for small vehicles, £50 for large vehicles | 24/7 |
Within this designated area, drivers of older vehicles face a daily charge, a measure implemented to curb the high air pollution stemming from older cars in densely populated areas. If your vehicle doesn’t meet ULEZ emission standards and isn’t exempt, you will have to pay a £12.50 daily charge to drive within the zone. This is something that those driving ICE cars will have to pay but EV drivers are exempt under the Cleaner Vehicle Discount until 25th December 2025.
Parking Charges
In London, there are some boroughs that offer free annual residential parking permits for electric car drivers. These include:
Barking and Dagenham,
Hammersmith and Fulham,
Newham,
Westminster,
Hounslow,
Redbridge,
Richmond upon Thames,
Kensington and Chelsea.
Some parking companies do also offer subsidised parking for electric cars in London like RingGo, who offers a 50% discount for fully electric vehicles in the London Borough of Hammersmith and Fulham, making parking 50% cheaper for electric vehicle drivers when compared to petrol/diesel owners.
Lease an electric car through The Electric Car Scheme
The Electric Car Scheme is an electric car salary sacrifice scheme that makes it easy for employees to access government tax incentives and save money on electric cars. Companies offer The Electric Car Scheme as an employee benefit to attract and retain talent whilst also boosting their environmental, social and governance goals.
In short, salary sacrifice is a financial agreement where an employee agrees to sacrifice part of their pre-tax salary in exchange for a non-cash benefit (in this case, an electric vehicle).
You can actually compare how much you could save by leasing an electric car through salary sacrifice schemes like The Electric Car Scheme compared to how much you would pay leasing a petrol car by visiting our Salary Sacrifice Calculator!
How does salary sacrifice work?
An employee selects an electric vehicle with a set budget, and the employer then leases the car on their behalf. The lease cost is then deducted from the employee’s gross salary, lowering their taxable income. This arrangement can lead to significant savings for the employee and employer because it reduces the amount of Income Tax and National Insurance that needs to be paid.
This is appealing because of the low Benefit-in-Kind tax rates for electric vehicles. This ultimately means employees can enjoy driving a new EV at a reduced overall cost to traditional car leases or purchases - it’s a win-win. You can learn more about Benefit-in-Kind (BiK) by reading our blog dedicated to the subject.
What are the benefits of electric car salary sacrifice?
As mentioned previously, an EV salary sacrifice scheme is advantageous for employees and employers. Here are some of the benefits of an electric car salary sacrifice scheme:
Save 30-60% on a brand-new electric car,
Include servicing, maintenance and insurance,
Reduce your carbon footprint,
Improve employee benefit offering,
Boost ESG efforts as a company!
Leasing an electric car through The Electric Car Scheme is a win-win for both employee and employer. You can see how it works and some of the cars available to lease in the video below!
Last updated: 18/04/24
Next update due: 18/10/24
