Why leasing suits electric cars
The main financial risk with an electric car is not the battery, it is the resale value. Prices of new electric cars have moved sharply, battery technology improves quickly and used values have been more volatile than for petrol and diesel cars. If you buy, you carry that risk. If you lease, the funder does.
A contract hire agreement sets a fixed monthly rental based on the funder's forecast of the car's value at the end of the term. If the car is worth less than forecast, that is the funder's problem, not yours. You hand the car back, subject to mileage and fair wear and tear, and walk away.
Leasing also suits the pace of change. A three-year-old electric car may have noticeably less range and slower charging than a new one. A lease lets you move to a newer model when the term ends without having to sell the old one. The how car leasing works page explains the basic structure if you are new to it.
Battery warranty and degradation
Most manufacturers warrant the high-voltage battery for a long period, commonly eight years or 100,000 miles, and often guarantee a minimum capacity over that time. The capacity figure varies by manufacturer, so the warranty booklet is the document to read. Many leases last three or four years, so the car is normally well inside warranty during your contract.
Battery degradation is gradual. Typically a modern battery loses a small amount of capacity in the first few years, then declines slowly. Frequent rapid charging, very high temperatures and always charging to 100 per cent can accelerate it. Your lease is not usually affected by normal degradation, but you should know what is expected.
At handback the inspector will check the car's condition against the fair wear and tear standard, not the battery health, but a warning light on the dash or a charging fault can lead to a charge. If a battery fault occurs during the lease, report it to the manufacturer's dealer and tell the funder.
Home charging costs and the Ofgem price cap
Most electric car drivers charge at home. The Ofgem energy price cap for 1 October to 31 December 2026 sets electricity at 26.32 pence per kilowatt hour (kWh) for the unit rate, on a standard variable tariff for a typical Direct Debit customer in England, Scotland and Wales. Fixed or special EV tariffs can be lower, especially overnight.
Efficiency varies, but a typical electric car covers around 3 to 4 miles per kWh. At 3.5 miles per kWh, one mile costs about 7.5 pence at the cap. At 3 miles per kWh it is about 8.8 pence, and at 4 miles per kWh about 6.6 pence. For 10,000 miles a year at 3.5 miles per kWh, you would use about 2,857 kWh, which costs roughly £752 at the cap.
The unit rate is only part of your bill. The standing charge applies whether or not you own an electric car, so it is not an extra cost of charging. A home wallbox may cost a few hundred pounds to install, though the cost is often lower with a government or supplier scheme, and the funder may not allow installation on a rented property without permission.
To see what your own mileage and efficiency produce, use the fuel and charging cost calculator. You can also compare against petrol and diesel on the UK fuel prices page.
Public charging and range
Public charging costs more than home charging, and prices vary a great deal between networks. Rapid and ultra-rapid chargers are often more than double the home rate per kWh. As an illustration, at 75 pence per kWh and 3.5 miles per kWh a mile costs about 21 pence, and 10,000 miles entirely on public rapid chargers would cost around £2,143. That is an assumption for comparison, not an official price.
HMRC publishes advisory fuel rates for electric company cars, based on its own working: 7 pence a mile for home charging and 15 pence a mile for public charging from 1 September 2026. These are used for reimbursing business mileage and are lower than the rapid figure above because they use an average mix of public tariffs.
Range is the other practical issue. The official WLTP range is measured in controlled conditions. In winter, at motorway speeds or with a full load, real-world range can be markedly lower, often 20 to 30 per cent less. Choose a car whose real-world range comfortably covers your longest regular journey with room to spare, and check the charger network on your usual routes.
| Charging source | Illustrative cost per kWh | Cost per mile at 3.5 miles per kWh | Cost for 10,000 miles |
|---|---|---|---|
| Home, Ofgem cap (Oct to Dec 2026) | 26.32p | About 7.5p | About £752 |
| Home, HMRC advisory rate | Not applicable | 7p | £700 |
| Public, HMRC advisory rate | Not applicable | 15p | £1,500 |
| Public rapid, assumed 75p per kWh | 75p | About 21.4p | About £2,143 |
Company car tax and salary sacrifice
Electric cars have the lowest benefit-in-kind (BIK) rate in the company car tax system. HMRC's appropriate percentage for zero-emission cars is 4 per cent in 2026/27, then 5 per cent in 2027/28, 7 per cent in 2028/29 and 9 per cent in 2029/30. The taxable benefit is the car's P11D value multiplied by that percentage, and you pay tax on it at your marginal rate.
For a basic rate taxpayer, a car with a P11D value of £40,000 at 4 per cent gives a taxable benefit of £1,600, and income tax of £320 a year at 20 per cent. A higher rate taxpayer would pay £640 at 40 per cent. These are illustrative figures. The company car tax calculator works out the figures for your own car and tax band.
Salary sacrifice schemes use these low BIK rates and tax-efficient rentals. The employee gives up part of gross salary for the lease, so they save on income tax and National Insurance. Optional remuneration arrangement rules affect the tax benefit for cars above 75 g/km, but zero-emission cars are not subject to the same reduction. Check your employer's scheme terms, since leaving employment normally ends the car agreement.
Vehicle tax (VED) for electric cars
Electric cars used to be exempt from vehicle tax. That changed for cars registered on or after 1 April 2025. According to the gov.uk vehicle tax rate tables, the first-year rate for a zero-emission car in 2026/27 is £10, and from the second year the standard rate applies, which is £200 a year in 2026/27.
The expensive car supplement also applies. For electric cars registered from 1 April 2025, the supplement of £440 a year applies where the list price is over £50,000. It is charged in addition to the standard rate in years 2 to 6, meaning five payments. For petrol and diesel the threshold is £40,000. The supplement is based on the list price, not the price you pay or the lease rental.
On a lease, vehicle tax is normally included in the rental for the first year or for the whole term, but check your agreement. The car tax (VED) calculator shows the figures for different registration dates and prices. If you are unsure of a rate, gov.uk is the definitive source.
Insurance and other running costs
Electric cars are often more expensive to insure than petrol equivalents. Repair costs can be higher, parts and specialist labour are less widespread and the cars tend to have more powerful acceleration and higher list prices. Check the insurance group and get quotes for specific models before you decide, since the difference between two similar cars can be large.
Most funders require fully comprehensive insurance on a lease car, and many require specific cover for charging cables and home equipment. It is worth asking whether your policy covers the cable and wallbox, and what happens if the battery is damaged in an accident. Details are covered on the leasing with insurance page.
Servicing costs are normally lower because electric cars have fewer moving parts, though tyres can wear faster owing to weight and instant torque. Breakdown cover should include recovery for a flat battery. Finally, remember to return all charging cables and adaptors at handback, as missing ones are a common source of charges.
A checklist before you sign
Before you commit to an electric lease, work through the practical points below. They are the ones that most often decide whether the car suits your life.
- Can you charge at home or work, and does your landlord or employer allow it?
- What is the real-world range in winter, and is it enough for your longest regular journey?
- What are the battery warranty terms, and does the funder cover battery faults?
- Does the rental include vehicle tax, and does the list price trigger the expensive car supplement?
- What are the excess mileage rate and fair wear and tear terms for the model?
- Does your insurer cover the cable and home charger?
- If you are a company car driver, what is the P11D value and what BIK will you pay?