2022 has been a boom year for electric cars. Although supply hasn’t been straightforward, the rocketing demand has been beyond dispute. In fact, sales of EVs now exceed 15% of all new car sales.
This sudden increase in demand should come as no surprise. After all, here in the UK, the production of conventional Internal Combustion Engine (ICE) vehicles will come to a halt through the force of law in 2030.
Furthermore, almost every vehicle brand has now developed an EV-focused strategy. Only one question remains. Right now, as 2022 draws to a close – is this the right time to switch to an Electric Vehicle?
In this article, we’ll look at the pros and cons of Electric Vehicle ownership and, critically – when is the best time to take the EV plunge.
Are Electric Vehicles expensive to buy?
Electric cars are still relatively expensive to buy compared to their ICE equivalents. This is due to:
the cost/scarcity of materials, such as Lithium for the batteries
the construction process
the manufacturers’ considerable R&D and investment costs rapidly having to pivot from fossil fuels to battery tech.
The UK is currently the tenth most expensive country to buy an EV. The cost has been further inflated by the UK government’s decision to remove the Plug In Car Grant. (In October this year, this removal decision was postponed until April 2023, but only for cars already ordered from the manufacturer).
How expensive are Electric Vehicles to run?
The cost of EVs doesn’t just lie with the purchase price. The running costs will also be a major factor. Running costs of EVs are typically much cheaper than for petrol or diesel cars. But, will this always be the case?
Recent world events, such as the invasion of Ukraine and the cost of living crisis, have shown how vulnerable and unstable energy prices can be. It’s likely that the costs of running EVs will always be cheaper than ICE vehicles, but by how much? Only time will tell.
On the plus side, due to the very nature of Electric Vehicle construction, with far fewer moving parts, servicing and maintenance costs will be dramatically lower than with petrol and diesel vehicles.
Buying an EV – will I be helping to save the planet?
Evidently, EVs provide considerable environmental benefits. There’s the obvious 100% reduction in exhaust emissions. But the overall impact might not be quite as great as some would have you believe. For example, the production, wear and tear of tyres will always be a pollutant. You also have the cost to the environment of mining and refining Lithium for EV batteries. However, in spite of one or two caveats, the overall consequence of switching to EV driving is a massively cleaner planet.
Should I go for a new or used Electric Vehicle?
We’ve already ascertained that Electric Vehicles are expensive to buy new. There are considerable savings to make if you go for a used model. However, batteries of older EVs have a relatively short life and are expensive to replace. On the other hand, with newer EV models, you can easily expect a battery life of eight years or more. You’ll need to keep all these factors in mind as you shop around for a second-hand model.
What are the tax benefits of buying an Electric Vehicle?
The Government has announced in the Autumn Statement that, in order to further encourage uptake, the benefit-in-kind (BIK) tax for electric vehicles (EVs) will continue to be kept low.
The Chancellor said he had listened to the fleet industry and would increase company car tax for EVs by one percentage point year-on-year for three years from 2025.
Currently, BIK for a pure EV is 2% (2022/23) and remains at that rate up to April 2025.
The Chancellor’s announcement means that it will increase to 3% in 2025/26, to 4% in 2026/27, and 5% in 2027/28.
Will Electric Vehicles be exempt from Vehicle Excise Duty?
Until the Chancellor’s 2022 Autumn Statement, the answer was ‘no’. However, it’s now ‘all change’. From 2025, the Government will be introducing VED on Electric Vehicles.
New zero-emission cars registered on or after April 1, 2025, will be liable to pay the lowest first-year rate of VED (which applies to vehicles with CO2 emissions 1 to 50g/km), currently £10 a year.
From the second year of registration onwards, they will move to the standard rate, currently £165 a year. Zero-emission cars first registered between April 1, 2017, and March 31, 2025, will also pay the standard rate.
An end to the Expensive Car Supplement Exemption
The Chancellor has also announced an end to the Expensive Car Supplement exemption for zero-emission vehicles. This will take place in 2025.
The Expensive Car Supplement currently applies to cars with a list price exceeding £40,000 for five years. Zero and low-emission cars first registered between March 1, 2001, and March 30, 2017, currently in band A will move to the band B rate, currently £20 a year.
Should I buy an Electric Vehicle now or wait for 2023 and beyond?
If an EV is in your price bracket, and, based on your typical journeys, the range isn’t going to be an issue, then buying an electric car is an excellent proposition. Not only will it be cheaper to run, but it will be eco-friendly and easy to drive. In short Electric Vehicles look set to be the best way to futureproof your transport solution for years to come.
However, you might be well-advised to wait before diving in too soon. Electric Vehicles aren’t cheap. The range you can drive your vehicle between charges is growing all the time. In the end, Electric Vehicles are like almost every new technology throughout history. As manufacturing processes improve and volumes go up, prices are almost certainly destined to go one way. Down.
True, the tax benefits of EV ownership are likely to reduce in the coming years, but taking all factors into account, you might well find that the longer you can wait before making your first EV purchase, the better off you’ll be.
Haines Watts – here to help
We’re tax specialists and have years of experience advising clients with a broad range of tax-related matters – including in the field of vehicle tax.
Do you think you’re ready to buy your first Electric Vehicle? The pros and cons are not as straightforward as you might think. We’d be delighted to chat through the implications with you.
Do get in touch. After all, we’re here to help.
Tel: 01296 394 648