Costing the Earth: Can Electric Cars Really Save You a Fortune?

Oct 25, 2013   //   by Keith McDonald   //   Money Saving Tips, Technology  //  Comments Off on Costing the Earth: Can Electric Cars Really Save You a Fortune?

Fuel economy, tax breaks, and a host of other money-saving measures make electric cars a surprisingly attractive proposition for resistant Brits. Joe Cox of Car Loan 4U investigates the opportunities.

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For millions in the UK, the cost of motoring comes second only to our rent or mortgage in terms of outgoing costs, and with inflation high and energy bills continuing to rise, it’s difficult to see where the so called ‘squeezed middle’ can find real savings. Certainly, prices at the pump aren’t set to drop anytime soon and paying car tax is inevitable, right?

Well, not necessarily. What if you could run a vehicle that didn’t cost you a penny in petrol and was exempt from car tax? Would that not save us a fortune? It’s an argument that the proponents of Ultra Low Emission Vehicles (ULEV) have been trying to put across for years, and it seems, with the Government’s latest tranche of measures designed to encourage their uptake, they may now have a point.

A Raft of Incentives

In September, the Parliamentary Under-Secretary of State for Transport announced £1billion worth of measures, which would form part of the Government’s strategy to remove petrol and diesel vehicles from our roads entirely by 2050. If you are considering buying a ULEV then this document is definitely worth scanning through.

Amongst the savings that have been offered to owners of plug-in cars was a guarantee to extend car tax exemption for the lowest polluters until 2020. Business car tax on these vehicles has also been extended until 2015 and there are some considerable savings for businesses to be made here.

There are a whole range of incentives that have already been introduced or are being introduced that one needs to take into consideration when calculating potential savings with a ULEV. These can be split between those offering direct financial savings to plug-in car drivers and those making it far more convenient to drive a ULEV as opposed to a standard petrol or diesel vehicle.

Benefits

  • Plug-in Car Grants are offering buyers of electric vehicles’ as much as much as 25% (up to £5,000) off the cost of an electric car and 20% (up to £8,000) off the cost of an electric van. These subsidies are intended to make ‘the total cost of ownership of a ULEV increasingly comparable with that of a conventional vehicle.’
  • Fuel Duty, is a tax levied on fuel costs by the government and the UK has one of the highest rates in the OECD. The savings made here are simply down to the fact that ULEVs require far less petrol or diesel, if any at all, and are therefore cheaper to run.
  • Vehicle Excise Duty for plug-in cars is to continue being waived until at least 2020, with Company Car Tax remaining at 0% until 2015, rising to no more than 3% below conventionally fuelled vehicles from then until 2020.
  • All vehicles emitting less than 75g/km of CO2 and company cars emitting less than 95g/km will be eligible for a 100% first year capital allowance to March 2015.
  • Exemption from the London Congestion Charge of £10 per day
  • Discounted parking through a range of schemes being organised by individual local authorities as well as exemptions for ULEVs in traffic restriction schemes designed to reduce congestion

With various other benefits being offered, the report reveals a £400 million spend from the Office for Low Emission Vehicles up until 2015, with a further £500 million budgeted for 2015-20.

Video presented by Car Loan 4U

Slow on the Uptake

Although many of these measures, like the 0% Vehicle Excise Duty and the Plug-In Car Grants, have been in place since 2011, uptake on ULEV’s is still fairly low.

So why aren’t people racing to the forecourts to get their hands on a Nissan Leaf or a Vauxhall Ampera? Well, there are two reasons for this.

The first is vehicle cost. ULEV’s aren’t cheap and it’s this initial outlay that will inevitably be putting a lot of people off, despite the long term savings they could make. The Plug-in Car Grants are attempting to tackle this problem but may be falling well short in adequately subsidising the electric car market at present.

The second is good old fashioned prejudice. People often fear the unknown and the idea of owning a vehicle powered, if only in part, by a battery, is enough to turn some people off the idea completely.

These biases towards conventional combustion engines are fuelled by a lack of information. So called ‘range anxiety’ is just one symptom of our unhealthy addiction to petrol; the fear of not being able to get from A to B in an EV before running out of ‘juice’. Part of this problem lies in endemic cultural and social norms (electric cars are still seen by many as uncool at best and an expensive indulgence of an eco-obsessed middle class at worst).

Investment in infrastructure may be one way of addressing the problem of range anxiety at least, and encourage more people to invest in a plug-in car.

Norway is a good example of how proper investment pays off. With many more charge points on its roads than the UK, nearly a quarter of all new car registrations are for plug-in EVs. The UK can’t even manage 1 percent. Nextgreencar.com’s Zap-map shows all of the UK’s current charge points.

Living the Electric Dream

Video courtesy of The Energy Savings Trust.

The benefits of owning a ULEV will always depend on how you use it (whether daily or periodically, for short runs or long commutes).

Savings made in fuel costs will almost certainly constitute the majority of financial savings made by owning a ULEV, with a typical plug-in car costing just £2 to £3 per 100 miles in charging costs, compared to £12 to £18 to drive 100 miles in a typical petrol or diesel car.

The Energy Savings Trust suggests that the higher retail prices of ULEVs are generally offset by the lower running costs, bringing the overall lifetime cost of a ULEV into line with that of a similar petrol or diesel vehicle. The benefits of ULEVs are more significant for London commuters and company cars, which will benefit from more tax breaks, making them cheaper overall.

Many manufacturers also rent out the car battery to the vehicle owner, allowing them to significantly reduce the vehicle purchase price.

Of course there are many simple ways of saving money on whatever kind car you have, such as driving at optimal speed on the motorway, turning off the air con, and making sure you have the right car tyres.

The long-term savings you’ll make from switching to an electric vehicle could be huge, but how huge will undoubtedly depend on future government policy. The need for continuing government investment in the subsidies and tax breaks already available need to go hand-in-hand with a real long-term investment in a nationwide charging network. Only then can plug-in vehicles really turn a corner and start challenging their petrol or diesel cousins for dominance on the roads.

Author Bio: Joe Cox is a writer for Car Loan 4U and has written extensively about motoring and environmental issues.

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