Should I buy an electric car?: the financials

The headline cost of an electric vehicle (EV) is invariably more than a internal combustion engine (ICE) vehicle.  Depending on the battery size, the difference is in the region of about £6,000 to £10,000.  There are Government plug in grants for qualifying vehicles, but the reality is these simply mitigate a part of the additional cost of providing a battery, they do not eliminate the cost altogether.

The principal cost saving in buying an electric car is obviously the difference between regularly filling up with fossil fuels (which for the purpose of this piece is assumed to be £1.40 per litre, in a car with a 40mpg fuel efficiency) and the very low cost of filling up with electricity, particularly at home.

This last variable is the most significant; I am on Economy 7  and (until this recent energy debacle) can fill my car up at home, overnight, at a cost of 8p per kilowatt hour. This compares with a common cost for most “fast” chargers at 20p to 30p per hour, and some of the very fast chargers (iOnity are a great example) can be up to 80p per kilowatt hour. This makes the cost per mile comparable to a petrol car will cost as, explained below.

For the purpose of this analysis I will consider someone charging at home at 10p per kilowatt hour (the cost of electricity at home  is creeping up) and also 30p per kilowatt hour (my “ceiling” for external charging) as I think it is realistic to assume that most people could have avoid a very high cost outlet with a bit of planning.

The car that runs 500 mile at 40p per gallon and fuel cost of £1.40 a litre has an effective cost of 16p per mile.  This is shown in the calculations below:

  • 40 miles per gallon is 8.8 miles per litre (a confused set of units!)
  • This means 8.8 miles costs £1.40
  • And 1 mile costs 16p

The electric car on a 70 kilowatt battery with a 250 mile range is costing £7.00 to fill up (70kw x 10p, as above). Expressed per mile this is 2.8p.  As I said in my previous piece, this might be 98% of journeys by journey count, but, from my usage, is something in the order of 95% of journeys by mileage.  Triple this cost of 30p per kilowatt hour which is realistically the most I have ever spent on electricity and the cost goes to 8.4p per mile, still around half the cost of a ICE vehicle.

Naturally if you are in a position where you live close to a free charger (e.g. Tesco), or are spending lots of time staying at hotels with free charging points it is theoretically possible to pay nothing for electricity for an electric car indefinitely.  There are also some manufacturers that offer free electricity as an incentive to purchase an electric vehicle which, subject to other incentives and costs, can be appealing.

The most difficult calculation is how long does the reduced electricity cost takes to breakeven with the additional cost of the battery. and you will see comparing scenario A with scenario B it could easily be in excess of 60,000 miles (the extra battery cost divided by the 8p/mile differential).

For somebody with modest use this could easily be a decade’s ‘payback’, and with many of my clients being retired this makes an electric vehicle unappealing for financial reasons. However, as I have said before, there are reasons why people will buy an electric car that are not financial.  For somebody that is driving like me, 12,000-15,000 miles per year (pre-CV lockdown) then an electric car might only take a few years to cover its costs.

This is before we think of any other incentives like company car. This is covered in the next piece.

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24 Nov 2021

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