Many people want to drive an electric car, but EVs are still more expensive to buy than petrol or diesel cars, and we now have the added pressure of the cost of living crisis, so what’s the best way to drive an EV? Choices include buying an EV, leasing an EV, or having an EV on subscription.
Buying a car with any powertrain has been challenging over recent years. The shortage of computer chips for cars resulting from factory shutdowns in the Far East due to COVID has meant that there’s been more demand for cars than supply, resulting in many new cars taking around 18 months for delivery – or even longer in some cases.
This problem with the supply of cars still persists today, although it is gradually improving. So car buyers are interested in ways to drive a new car without having to wait for months.
There’s also a challenge with the latest technology. If you buy an EV outright, you’re stuck with the car and its battery. Battery technology is improving at a rapid pace, and it’s virtually guaranteed that a new car will be on the market in a few months with better battery technology than the car on your drive.
And then there’s the challenging economic outlook for the UK. Against this backdrop, many people don’t want the long-term financial commitment of a car that’s leased or that has some other form of finance.
Changing consumer behaviours now include a desire for increased flexibility, including not being committed to a particular car and its associated monthly payments over a long time period.
Factors such as those above have resulted in the growth of a new service for consumers: EV subscriptions. An EV subscription offers a way to drive an electric car for a monthly payment, without the long-term commitment, or the upfront ‘deposit’, of a lease. The monthly payment typically includes all outgoings for the vehicle, including for the vehicle itself, insurance and maintenance. An EV subscription can be more affordable than a lease for some EVs.
You can drive the car for however long you want, you can stop the subscription whenever you want (after a short initial period, typically one month), or you can swap to another make and model of car.
The future of EV ownership is likely to be that most people won’t own an EV; they will instead drive an EV through some form of service such as a subscription.
Consumer research from Loopit, a dedicated turnkey software solution, revealed almost a quarter (24%) of people today no longer own a car, and 81% would consider a car subscription for their next car over purchasing a vehicle outright.
Loopit’s study also demonstrates a strong link between electric vehicle adoption and car subscription, with 87% of respondents who currently drive an electric vehicle saying they would consider car subscription over other forms of car ownership.
Against the current backdrop of economic uncertainty, the long-term commitment and contractual obligations from loans, leases and PCP schemes present a financial burden, making the flexible car subscription option a more affordable and appealing alternative.
elmo is an example of a company that offers electric vehicles on subscription. By subscribing to an electric car with elmo (rather than leasing or buying), you enjoy all the benefits of using your own personal car without the risk and hassle of actually owning it. There’s no high upfront cost to pay – such as when you buy a car or put down a deposit on a lease – and all the insurance, maintenance and breakdown costs are covered in the price. You can choose your contract term from elmo’s flexible monthly subscription, with just a 60-day minimum term, or go for elmo’s 12-month option for a reduced rate.
elmo also has a solution for charging an electric car on subscription. An elmoCharge card offers elmo subscribers access to chargepoints from 20 leading network providers, covering more than 20,000 charging points across mainland Britain – and just one single way to pay for all charging through their elmo account.
Olly Jones, co-founder & Managing Director of elmo, comments: “The EV market is growing at pace and so are new ‘ownership’ models like subscriptions. At the end of 2020, there were only about 5,000 cars in total under subscription in the UK. That number is forecasted to be about 600,000 by 2025 – a significant increase in car terms.
“This reflects a general shift in consumer preferences away from outright ownership, towards greater flexibility but also the role that it can play in making electric cars more accessible by reducing some of the key adoption barriers, like the upfront cost.
“The elmo service, for example, is designed to help people overcome these barriers by removing the cost and complexity of switching to an electric car. An elmo subscription means that if a customer doesn’t like a car, they are not committed for a long contract term (they just give 30 days’ notice to change or end after their minimum term) and they haven’t had to pay a big deposit.
“Plus, we don’t believe in charging customers a premium for flexibility, so we aim for our subscriptions to be price competitive with longer term leases. That’s how we claim to be re-imagining the traditional lease and using that as a mechanism to empower people to make the switch.”
elmo also offers a salary sacrifice scheme based on a subscription model. This scheme allows employees to ‘sacrifice’ some of their gross salary in return for an electric car. Instead of taking out an EV subscription personally and paying for the car from post-tax pay, the monthly subscription cost is taken from pre-tax pay which reduces the employee’s tax liability and allows them to save 30-60% of the cost, depending on their salary and tax bracket.
Because elmo’s salary sacrifice scheme is based on a subscription model, unlike a scheme based on a leasing model, there’s no deposit and no early termination fees, and you can change your car at any point.
The scheme on offer from elmo is a UK-first, with no one else currently offering a fully managed, electric car subscription salary sacrifice scheme.
Aside from EV subscriptions, there are different forms of car finance available, including leasing (where there’s no option to own the vehicle) and hire purchase (HP) and personal contract purchase (PCP) where you can choose to own the vehicle at the end of the contract.
Leasing an EV means that you don’t need many thousands of pounds of cash to buy the car outright. Payments can instead be made monthly, although there’s usually also an upfront payment to be made, which could be several thousand pounds. There’s normally a minimum time commitment of perhaps two, three or four years for an EV lease.
If you have a large lump sum of cash burning a hole in your bank account then it may appear that the best option is to use this to buy an EV. It may be possible to negotiate a good deal on a petrol or diesel car with cash, however over recent years this hasn’t been likely with an EV due to lots of demand and limited supply. It’s also still the case that most EVs have a waiting list of many months, unless you’re lucky to find an EV that’s in stock, which is a rare occurrence, so even if you’re buying with cash, you may have to wait for your EV.
If you don’t have the cash, another option is getting a loan to buy an EV. The issue with this route is that the interest on a loan makes a car more expensive. And you’re still likely to have to wait for the EV.
The world is changing at an ever-increasing rate, and car buying is not immune to global trends. Loopit estimates that subscription-based mobility services will account for around 30% of new car sales by 2030, representing an $80 billion opportunity by the end of the decade. Even if this estimate is slightly over-optimistic, there’s no denying that the car subscription market is growing rapidly, and EVs, which are constantly being updated with ever-improving battery technology, are an ideal segment of the car market for a subscription model.