Can you lease an electric car?

How does electric car leasing work and is it a good option for you?

If you’re not sure if taking the plunge to buy an electric car is right for you just yet, you could think about leasing to get a feel for driving electric and the different models on offer.

So how do you decide whether to lease or buy an electric car? We take a closer look.

Yes, you can lease an electric car in the same way you would any other car. You have an agreement with a finance provider to pay a set monthly fee to drive a new electric car on a long-term basis and at the end of the lease term, which is typically between two and four years, you hand the car back.

You’ll need to pay an amount upfront to get started, decide how long you want to lease the car for, and how many miles you’re likely to cover in that time. Sometimes lease agreements will also include servicing packages.

At the end of the lease period, if you’ve kept to your mileage limit and the car is in good condition, you just walk away with nothing to pay. You’re free then to buy or lease another car.

Should I lease or buy an electric car?

Electric cars can be expensive to buy, so if you don’t feel ready to invest in the new technology just yet, leasing could be a way to test if electric is the right choice for you right now.

Pros of electric car leasing

Lower initial costs

With a lease you pay an initial amount of one or more months’ lease in the first month. This acts as a deposit, and then you pay a set monthly amount for the remainder of the lease. No-deposit options are also available.

Lower overall costs

Leasing a car usually means you pay less than you would when buying, as you’re paying to use the car for a set amount of time rather than its total value.

Higher-spec cars are more affordable

For the same monthly amount as buying a new car outright, you might find you can add extra trim or have a better model as leasing costs are lower.

Service and maintenance included

Some leasing providers will let you add a service and maintenance package to your lease, which spreads the costs of upkeep across the length of your contract.

Try before you buy

See if driving an electric car suits you and your lifestyle before you fully commit to purchasing one outright.

Keep up with new technology

You could be driving the latest model each time you start a new lease, usually every two to four years.

No depreciation

New cars lose most of their value in the first year after you buy them. Leasing avoids this drop in value as you don’t own the car so don’t face these costs.

Cons of electric car leasing

You don’t own the car

At the end of the lease period, you give the car back and so don’t keep any equity to use against a new car purchase.

Keep up with the payments

If you don’t keep up with the regular payments, your car will be taken away.

Restrictive leases

You need to keep within the mileage limits of your lease agreement and keep to any conditions of wear and tear, or you might have to pay extra.

How much does it cost to lease an electric car?

The cost depends on a few different factors:

The car make and model
Length of lease agreement
Estimated mileage
The service and maintenance arrangement

It’s worth looking at different lease providers and making sure the lease terms meet your needs, as well as comparing what it might cost to buy the model rather than leasing it.

How does leasing an electric car battery work?

Battery rental for electric cars involves a buyer paying outright for a car and then paying an extra monthly amount on top to lease the car battery. It’s no longer a popular approach, and unlike in the early days, batteries are now included in the price of almost all new electric cars.

Some manufacturers such as Renault were very keen on this type of scheme, as it lowered the initial costs of an electric car. But you were tied to a monthly lease for the battery, even if you paid outright for the rest of the car, and this proved to be a confusing idea for most buyers.

Renting the battery was also designed to allay fears about long-term battery use. Now that technology has moved on and electric car batteries are proving their value over time, only a couple of manufacturers have a battery leasing option.

How does electric car lease salary sacrifice work?

A salary sacrifice scheme is an agreement between you and your employer where you exchange part of your monthly pay for non-cash benefits. As a result, you see a reduction in Income Tax and National Insurance contributions, and both you and your employer should see the benefits. Common salary sacrifice schemes cover childcare vouchers and gym membership, and also car hire and lease schemes.

With an electric car lease, the lease is paid for using your pre-tax income, but because this is a benefit-in-kind (BIK) you will need to pay some tax on it.

You’ll need to agree your estimated mileage in advance and keep the car for 2 to 3 years. At the end of the agreement, the car goes back to the leasing company and a lease on a new car can be started. It’s just one way that electric cars can help reduce the amount of tax you pay.

Can you insure a leased electric car?

Just like all other cars on UK roads, a lease car needs to be insured to be driven legally. When you lease an electric car you are taking out an agreement to pay a monthly set fee to use a new car for between 2 and 4 years. Insurance is not usually included as part of the deal, so it will be your responsibility to make sure the car is properly insured before you take delivery.

The leasing company will want to protect the car that they still own while you are driving it and so they will expect you to take out a fully comprehensive insurance policy, which will give you and them the most protection against loss or damage.

Getting a quote for your new lease car is only slightly different than if you own the car outright. When you’re looking for a quote you will need to:

Tell the insurance provider you aren’t the registered keeper – this is the leasing company
Put yourself as the main policy holder for the insurance
Have the registration number of the car and your own details ready to get your quote

Lower monthly payments and greater flexibility might make leasing an electric car the best option for you, it’s worth shopping around to find the deal you can’t resist to get driving electric right now.

Who are Saga's car insurance policies underwritten by?

Saga’s car insurance policies, exclusively for people over 50, are unique products designed by us specifically for our customers. They are underwritten by a number of carefully selected insurers that provide high standards of quality and service.