Should I Lease an Electric Car? An Honest UK Guide

Short answer: if you can charge at home overnight, or you can take a car through your employer, leasing an electric car is very likely the right move for you right now. The tax and running-cost gap is still wide. If you can't charge at home and would live off public rapid chargers, be honest with yourself - the savings mostly evaporate.

Should I lease an electric car right now?

Yes - for most drivers with off-street parking, and for virtually every company car driver, this is a good moment to go electric. The 4% BIK rate for 2026/27, cheap overnight charging and a mature model range make the case. The exception is drivers with no home charging who would depend on public rapid chargers.

That's the honest version. The tax advantage on an electric company car is still enormous, and it's confirmed in legislation rather than left hanging - which means you can sign a three or four-year contract and know roughly what your tax bill looks like for the whole term. On the personal side the picture is more nuanced, and it hinges almost entirely on where you plug in.

One more thing worth saying plainly: EVs are no longer an experiment. According to the BVRLA's Leasing Outlook report, battery electric vehicles now make up around 48% of the association's car lease fleet, and its members fund more than a third of all EVs on UK roads. The leasing industry moved first because the numbers worked first.

Who should go electric - and who shouldn't yet

Go electric if you have a driveway or garage, do most of your miles locally, or can access a company car or salary sacrifice scheme. Think twice if you park on-street with no realistic charging, regularly tow, or cover very high motorway mileage on public chargers. Everyone else sits somewhere in between.

Notice what isn't on that list: how green you feel about it. This guide is about money and practicality, because that's what people actually ask us about. If the environmental side matters to you too, treat it as a bonus rather than the reason.

Not sure whether a full battery car, a plug-in hybrid or a self-charging hybrid fits your week? Our guide to BEV vs PHEV vs hybrid walks through the differences without the jargon.

How much company car tax will I pay on an EV?

For the 2026/27 tax year, fully electric company cars are taxed at 4% of the car's P11D value - its list price including VAT, delivery and factory-fitted options. Petrol and diesel cars sit at roughly 15-37% depending on CO2 emissions. On a £40,000 car, that's the difference between about £53 and £400 a month for a higher-rate taxpayer.

According to HMRC's published company car tax rates, the zero-emission percentage is set through to the end of the decade:

What that looks like in pounds

Example (illustrative round numbers): a £40,000 P11D electric car in 2026/27 gives a taxable benefit of £40,000 × 4% = £1,600. A 40% taxpayer pays £640 a year - about £53 a month. A £40,000 petrol car in the 30% band gives a taxable benefit of £12,000, costing the same driver £4,800 a year, or £400 a month. That's a gap of £4,160 a year on the tax alone.

Two things follow from the table. First, even at the 9% cap in 2029/30 an EV is still far cheaper to run as a company car than anything with an exhaust. Second, if you're eyeing a plug-in hybrid on a four-year deal, check where you'll be in 2028/29 - the jump to a flat 18% catches a lot of drivers halfway through a contract.

You can model your own figures using the GOV.UK company car and fuel benefit calculator. And if your employer offers it, electric car salary sacrifice layers Income Tax and National Insurance relief on top of that low BIK rate - it's the single cheapest route into a new EV for most employees, which is why it's the fastest-growing part of the leasing market.

What does an electric car actually cost to run?

Between roughly 2p and 23p a mile, depending entirely on where you plug in. On an off-peak overnight EV tariff at around 7p per kWh you're at about 2p a mile. At the standard Ofgem price cap rate you're around 7p. On a public rapid charger you're around 23p - roughly what a 45mpg petrol car costs.

Figures assume a real-world 3.5 miles per kWh, which is a fair average across the current UK market. Efficient small EVs beat it comfortably; a big SUV in January will not. The Ofgem cap rate quoted is the 26.11p per kWh average unit rate for the July to September 2026 period, and public charging averages are drawn from UK charge-point price tracking published in mid-2026.

Two structural details explain most of that spread. Home electricity carries 5% VAT while public charging carries 20%. And rapid chargers price in grid connections and high-power hardware, not just electricity. That's why our honest advice to anyone without off-street parking is to work out their realistic charging mix before choosing a car - see what it costs to charge an EV and whether you need a home charger.

What about road tax, grants and the 2028 mileage charge?

Electric cars pay Vehicle Excise Duty (VED, or road tax) like everything else: £10 in the first year and £200 a year thereafter for 2026/27. The expensive car supplement of £440 a year applies to zero-emission cars with a list price of more than £50,000, against more than £40,000 for petrol, diesel and hybrid.

That threshold difference is a genuine EV advantage and it's worth understanding. Per DVLA and GOV.UK guidance on vehicle tax for electric and low emission vehicles, the supplement runs for five years from the second year of registration. An electric car at £48,000 avoids it; a petrol car at the same price doesn't. On a lease the funder holds the V5C and handles road tax for the contract term, so this shows up in your rental rather than as a bill through the door - but it still shapes which cars price well.

Does the Electric Car Grant help if I'm leasing?

Yes, indirectly. The Government's Electric Car Grant gives up to £3,750 (Band 1) or £1,500 (Band 2) off qualifying new electric cars with a recommended retail price at or under £37,000, applied by the dealer at the point of sale rather than claimed by you. Because it reduces what the funder pays for the car, it feeds through into lower rentals on eligible models. Eligibility is model and trim specific and the list is updated regularly, so always check the current position on the car you want.

What is the 3p per mile charge from 2028?

At Budget 2025 the Government announced electric Vehicle Excise Duty (eVED), a mileage-based charge payable alongside standard VED from April 2028 - 3p per mile for fully electric cars and 1.5p per mile for plug-in hybrids. Implementation detail is still being worked through, and the BVRLA has been publicly critical of both the timing and the design.

Should it change your decision? For most people, no. At 3p a mile, 10,000 miles would add around £300 a year - real money, but it doesn't close a gap that's currently thousands of pounds for a company car driver. It's a reason to read the fine print of a five-year contract, not a reason to stay in a diesel.

Why lease an EV rather than buy one?

Because on a lease you pay the gap between what the vehicle costs to acquire and its forecast value at the end of the term, plus interest charges - and the funder, not you, carries the risk that the forecast is wrong. On a class of car where used values have been volatile, that risk transfer is worth a lot.

Used EV prices have fallen hard since 2022 and the BVRLA has warned repeatedly about residual value pressure across the sector. If you buy an electric car outright, that pressure is yours. If you lease it, you hand the keys back at the end and walk away, whatever the market has done. That's the same deal a contract hire customer has always had, but it bites differently on a fast-moving technology.

The other half of the answer is buying power. Brokers commit to manufacturers in volume - hundreds of vehicles at a time - and secure terms an individual or a small business simply can't replicate. The residual value, though, is forecast against the vehicle itself, not against what the funder paid for it. So the volume discount comes off the acquisition side while the end value stays where it is, which narrows the gap you're funding. That's the mechanism, and it's why a broker rental can undercut what looks like a sharp private deal.

Be fair to the other side, though. If you keep cars for eight or ten years and drive them into the ground, buying can still win. Leasing suits people who want a new car every three or four years with a fixed, known monthly cost. Our leasing versus buying comparison lays out both cases, and if you're weighing up rentals from different providers, our lease comparison guide covers how to judge whether a deal is actually good value.

So is an EV lease really cheaper than a petrol one?

Not always on the rental itself - EV list prices are higher and rentals reflect that. Where the EV wins is total cost: BIK at 4% instead of 15-37%, fuel at 2-7p a mile instead of 13-14p, and less routine servicing. Compare the whole monthly picture, not the headline rental.

Will the range and charging actually work for me?

For most drivers, yes. UK drivers average well under 30 miles a day, and any current EV covers that on a fraction of a charge. Range only becomes a live issue on long motorway runs, in cold weather, and for people who can't plug in overnight. Those three factors, not the WLTP figure on the brochure, decide whether it works.

A quick reality check we give customers: forget the official range and assume around 70-80% of it in winter motorway conditions. If that number still covers the longest journey you make regularly without a stop you'd resent, you're fine. If it doesn't, either go for a bigger battery or accept a coffee break at a rapid charger. Both are legitimate answers.

Winter is the honest weak spot. Expect a meaningful drop in cold conditions - it's physics, not a fault - and plan accordingly if you commute long distances in January. Our guide on how cold weather affects EV range goes into the detail.

Your decision checklist before you sign

Work through these six points in order. If you answer yes to the first three, an electric lease is very likely right for you. If you answer no to the first one and no to the second, look seriously at a plug-in hybrid or hold off for now.

On that last point - a personal lease (Personal Contract Hire, or PCH) is quoted including VAT, while Business Contract Hire (BCH) is quoted excluding it. Put a BCH rental next to a PCH rental and the business deal will always look cheaper. It isn't; it's just priced differently.

Based on our team's experience arranging leases across every fuel type, the customers who regret going electric are almost always the ones who assumed the charging would sort itself out. The ones who love it worked out the charging first and chose the car second.

Frequently Asked Questions

Written by the FVL guides team. We've arranged personal and business vehicle leases for over 25 years, and we're authorised and regulated by the Financial Conduct Authority and a member of the BVRLA. This guide is reviewed and updated as tax rates, grants and charging costs change.