Electric Vehicle (EV) Finance: 5 Options Compared

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Electric vehicles sales continue to grow at a staggering rate, comprising 8% of new car sales in the first half of 2023. Driving this growth is improved availability of supply, the introduction of lower priced models and a raft of government incentives.

The initial cost of purchasing an EV (or any car for that matter) can sometimes be a barrier for potential buyers. Fortunately, a wide range of EV finance options are available to help make EV ownership more affordable and accessible. In this article, we’ll delve into: the different options available to you, the pros and cons of each, and a case study comparing the financial impact of these options.

1. Car loans (including Green Car Loans)

One of the most common methods of financing an electric car is through traditional car loans. Many financial institutions and banks also offer specialised EV loan products (often known as ‘green car loans’) with competitive interest rates and flexible repayment terms. These loans allow buyers to spread the cost of the EV over a set period, making it easier to manage the upfront expense. At the time of writing, you can expect a typical car loan to have an interest rate of 5% to 7% per annum whereas a green car loan will include an interest rate discount of between 0.5% to 1% per annum, meaning rates on average are lower at ~6% to 8% per annum.

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2. Dealer Financing

Electric vehicle manufacturers (and dealers) often provide their own financing options to customers. These products can include low-interest loans, extended warranties, and other incentives to make EV ownership more attractive. Manufacturer financing may also offer additional benefits, such as access to exclusive maintenance services or charging network memberships. Several manufacturers in Australia offer this including Polestar, Hyundai and Tesla to name a few.

3. Leasing

Leasing an electric car is another popular finance option. EV leases typically require a smaller upfront payment (or none) compared to purchasing, as you're essentially paying for the car’s depreciation over the lease term. Leases also provide the flexibility to upgrade to newer EV models at the end of the lease period. Additionally, some leases include maintenance and repair services, further reducing the long-term costs of EV ownership.

4. Novated Leasing

Novated leasing is a type of car leasing which the main difference being your employer enters into an agreement with a leasing company to lease a vehicle for you. The lease payments are taken from your pre-tax salary and are also tax-deductible. For eligible electric cars, this option provides potential tax advantages due to the FBT exemption for electric vehicles.

It offers many of the advantages of a lease with the added tax benefits.

5. Subscriptions

A car subscription is like Netflix for cars. Instead of buying or leasing a single car, you pay a monthly fee to access a range of vehicles. Depending on the service, you can switch between cars as your needs or preferences change. The subscription often covers other costs like insurance, maintenance, and registration, so you don't have to worry about the usual hassles of car ownership. Think of it as a more flexible way to have a car without the long-term commitment.

The availability of diverse EV finance options and government incentives is empowering individuals to overcome the initial cost hurdle and embrace sustainable transportation.

When considering an electric vehicle, it's essential to thoroughly research and compare the different finance options available. Evaluate the terms and conditions, interest rates, and long-term costs associated with each option to make an informed decision that suits your financial situation.

About the author

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Danny Thai

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Danny is a consultant and entrepreneur working at the cutting edge of the electric vehicle and energy transition. He is passionate about educating and helping consumers make better decisions through data. He is the founder of zecar and is currently the EV Innovation Manager at Endeavour Energy.

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