The five main ways to finance an electric car in the UK
- Personal Contract Hire (PCH) — leasing; you never own the car. Lowest monthly cost.
- Personal Contract Purchase (PCP) — monthly payments cover depreciation, with an option to own at the end via a balloon payment.
- Hire Purchase (HP) — full purchase price spread over monthly instalments; you own the car when the last payment clears.
- Personal loan — borrow a lump sum and buy outright; no mileage limits or end-of-contract decisions.
- Salary sacrifice — available through your employer; the most tax-efficient route for employees due to the low BiK rate on EVs.
Personal Contract Hire (PCH) — electric car leasing
PCH is the most popular route for new EV drivers. You pay a fixed monthly rental for an agreed period, typically two to four years, return the car at the end, and never own it. There is no balloon payment and no residual value risk.
Personal EV leases start from around £124 per month (verify current deals). The Electric Car Grant (up to £3,750 off qualifying EVs under £37,000 — verify current threshold at GOV.UK) reduces the list price before monthly payments are calculated, so you benefit automatically on eligible models.
PCH suits drivers who want predictable costs, no depreciation risk, and the ability to move to a newer model every two to four years. It is particularly compelling in 2026 given the pace of EV technology development and volatility in used EV values.
Ready to compare deals? Explore electric car leasing options on our leasing hub, where we compare personal and business deals side by side.
Personal Contract Purchase (PCP)
PCP monthly payments are lower than HP because you are only financing the car's depreciation, not its full value. At the end of the contract, you choose: pay the Guaranteed Minimum Future Value (GMFV) balloon payment to own the car, hand it back with nothing further to pay, or use any equity as a deposit on your next vehicle.
For EVs, the GMFV is harder to predict than for petrol equivalents, as used EV values have been volatile. If the car is worth less at the end than the GMFV, the finance company absorbs the difference. If it is worth more, you have equity. Some manufacturers offer deposit contributions on PCP deals on certain models, which can further reduce monthly payments.
Under the Consumer Credit Act 1974, if you have paid at least 50% of the total amount payable, you can exercise voluntary termination rights and return the car with no further obligation, provided it is in acceptable condition.
Hire Purchase (HP)
HP is the most straightforward path to ownership. You pay a deposit, then spread the full purchase price over monthly instalments. When the last payment is made, the car is yours. There are no mileage restrictions, no balloon payment decision, and no end-of-contract complexity.
Monthly HP payments are higher than PCP because you are paying off the entire purchase price. HP suits buyers who plan to keep the car for five years or more and want to build equity from day one. High-mileage drivers particularly benefit, as there are no mileage penalties to worry about.
Personal loan
A personal (unsecured) loan from a bank or lender lets you buy the car outright. You own it from day one, there are no mileage restrictions, and you are not locked into any finance product's end-of-contract rules. The Electric Car Grant (up to £3,750 on qualifying EVs) still applies at point of purchase.
The main consideration is APR. Personal loan rates vary considerably depending on your credit profile. Compare the total amount repayable, not just the monthly figure, and be aware that an unsecured loan means the car itself is not security for the debt.
Salary sacrifice — the EV-specific finance route
Salary sacrifice is only available through employers who have set up a scheme. It is not available to sole traders or the self-employed. But for employees, it is by far the most tax-efficient way to drive an electric car.
Here is how it works: your employer leases the car and deducts the monthly cost from your gross salary before income tax and National Insurance are calculated. You effectively pay for the car from pre-tax income. Because the Benefit-in-Kind (BiK) rate for zero-emission cars is just 4% for the 2026/27 tax year (rising to 5% in 2027/28), the tax cost is minimal compared to a typical petrol company car at 25–37% BiK.
The result: salary sacrifice typically saves employees 20–50% compared to a personal lease, depending on their income tax band. Employers also save on employer National Insurance (currently 13.8%) on the sacrificed salary amount. Salary sacrifice volumes grew 125% to 226,663 cars in 2025 according to the BVRLA, reflecting how compelling the numbers are.
Finance options compared
| Finance type | Own at end | Mileage limit | Monthly cost | Best for |
|---|---|---|---|---|
| PCH (lease) | No | Yes | Lowest | Drivers who want low cost and regular upgrades |
| PCP | Optional via balloon | Yes | Low to medium | Flexibility to own or hand back |
| HP | Yes, automatically | No | Higher | Long-term keepers; high-mileage drivers |
| Personal loan | Yes, from day one | No | Varies | Buyers who want full ownership immediately |
| Salary sacrifice | No | Yes | Lowest effective cost | Employees — biggest tax saving available |
How the Electric Car Grant affects your finance decision
The Electric Car Grant (up to £3,750 off qualifying new EVs priced under £37,000 — verify the current threshold at GOV.UK) is applied automatically by the manufacturer at the point of sale. There is no application required from the buyer.
For PCH and PCP, the grant reduces the list price the finance is based on, which directly lowers monthly payments. For HP and personal loan purchases, it reduces the amount you finance or borrow. For salary sacrifice, the grant is typically built into the employer scheme pricing. Always confirm with the dealer or broker that the grant has been applied before comparing deals.
What to check before signing any electric car finance agreement
- Confirm the broker is FCA authorised. Check the FCA Register before proceeding with any finance application.
- Understand the total amount payable, not just the monthly figure. This is the only true comparison between different products and terms.
- Check the mileage allowance against your actual annual driving. Excess mileage charges are typically 6–12 pence per mile on mainstream cars; up to 25 pence per mile on premium models.
- Confirm the excess mileage rate in writing before you sign.
- Ask about early repayment and voluntary termination rights — particularly important given EV value volatility.
- Confirm the Electric Car Grant has been applied before comparing headline monthly figures across dealers.
Key takeaways
- There are five main ways to finance an electric car: PCH, PCP, HP, personal loan, and salary sacrifice.
- Salary sacrifice offers the largest saving for employees, typically 20–50% vs a personal lease.
- The Electric Car Grant (up to £3,750) applies to qualifying new EVs under £37,000 across most finance types.
- PCP offers low monthly payments with the option to own; HP is simpler but costs more monthly.
- Always compare the total amount payable, not just the monthly headline figure.
Frequently asked questions
What is the best way to finance an electric car in the UK?
For most employed drivers, salary sacrifice offers the best value due to pre-tax payment and the 4% BiK rate. For personal buyers not on a scheme, PCH (leasing) typically provides the lowest monthly cost. PCP suits those who want the option to buy at the end.
Can I get a 0% finance deal on an electric car?
Some manufacturers do offer 0% or low-APR deals on specific models, often to hit ZEV mandate targets. These are time-limited and model-specific. Compare the total amount payable, not just the APR, as deposit contributions and grant savings affect the true cost.
Does the Electric Car Grant apply to finance?
Yes. The grant is applied by the manufacturer before finance is calculated. It reduces the list price used for lease payments, PCP, and HP calculations. You do not need to apply separately — confirm with the dealer that it has been applied.
Is electric car finance more expensive than petrol car finance?
Monthly payments can be comparable or lower for EVs, particularly when the Electric Car Grant is applied. Running costs (fuel, tax, servicing) are typically lower for EVs, which improves the overall cost picture. The higher list price of many EVs can increase the total cost of credit on HP.
Can I finance a used electric car?
Yes. HP, PCP, and personal loans are all available for used EVs. PCH on used vehicles is less common but growing — used EV leasing rose 166% year on year in 2025 according to the BVRLA, driven largely by salary sacrifice and business contract hire on returned vehicles.