Electric car finance: can you finance an EV and is it worth it?
Electric cars can be financed the same way as petrol or diesel cars, and with used EV prices falling steadily, the monthly payments are more manageable than many people expect. This guide covers how hire purchase works for electric vehicles, what to check before you commit to a specific car, and whether the switch makes financial sense given the running cost differences.
Yes. Hire purchase works for electric vehicles in exactly the same way as it does for petrol or diesel cars. You spread the cost over fixed monthly payments, the lender holds an interest in the car until the final payment is made, and ownership transfers to you at the end of the agreement with a small option to purchase fee. There are no EV-specific restrictions on the finance itself.
AutoMoney Trust offers hire purchase from £4,000 to £25,000 over 36 to 84 months with no deposit required. We work with a network of dealers across the UK, and the range of cars available through that network includes used electric vehicles. For a full explanation of how the product works, see our guide on how does hire purchase car finance work?.
Most electric cars financed through a specialist hire purchase lender will be used rather than brand new. This is not a drawback. Used EVs have come down significantly in price over the last few years as more models have entered the second-hand market, and a two or three year old electric car from a reliable manufacturer can represent strong value compared to a new one at full list price.
The things worth paying attention to with a used EV are slightly different to a used petrol car. Battery condition and remaining warranty are the most important factors, since the battery is the most expensive component to replace and its condition directly affects the car's range. A car with a documented service history and a manufacturer battery warranty still in effect is a much safer choice than one where neither can be confirmed.
For guidance on choosing a used car that holds its value and suits your budget, see our guide on the best second-hand cars to buy on finance.
The monthly payment on an electric car finance deal depends on the price of the car, your deposit (if any), the term, and the interest rate, exactly the same factors as any other car. A used EV at £12,000 will have similar monthly payments to a petrol car at £12,000.
Where EVs have historically been more expensive is the purchase price of newer models. As used EV prices have fallen, this gap has narrowed. Some used electric cars are now priced comparably to equivalent petrol or diesel models of similar age, which means the finance cost does not have to be higher just because the car is electric.
Use the car finance calculator to see what monthly payments would look like for a specific loan amount and term before you start looking at cars.
Yes, provided you meet the lender's affordability requirements, poor credit does not prevent you from financing an EV. Hire purchase lenders assess applications based on your income, outgoings, and overall affordability alongside your credit history, and the type of car you are financing does not change that assessment. An electric car and a petrol car are treated the same way from an application perspective.
For more on how lenders assess applications when credit history is not straightforward, see our guide on car finance with poor credit or a CCJ.
The battery is the most significant variable when buying a used electric car. Unlike a petrol engine, where age and mileage are reasonable proxies for condition, a battery's health depends on how it has been charged and used over its lifetime. A car with moderate mileage that has been regularly fast-charged to 100% and left fully charged for long periods may have degraded more than a higher-mileage car charged more carefully.
Before agreeing to a specific car, it is worth checking:
Your dealer should be able to provide or confirm this information before you commit. If they cannot, it is worth treating that as a signal to look elsewhere.
For most drivers, yes, though the saving depends heavily on how and where you charge. Charging at home overnight on an off-peak tariff is significantly cheaper per mile than petrol or diesel. Charging on the public network, particularly rapid chargers at motorway services, can cost considerably more and in some cases rivals petrol costs per mile.
Beyond fuel, EVs generally cost less to maintain because they have fewer moving parts. No oil changes, no clutch wear, regenerative braking reduces brake pad wear, and there is no exhaust system to maintain. The main running cost variable specific to EVs is tyre wear, which can be higher due to the additional weight of the battery.
To get a fuller picture of what a car costs to own beyond the finance payment, see our guide on MOT and service costs and what it really costs to run a car.
EV residual values have been more volatile than petrol equivalents over the last few years, partly because the used market is newer and pricing has been finding its level, and partly because rapid improvements in battery range have made older models depreciate faster than expected. This picture has stabilised as the market has matured.
For a hire purchase customer, depreciation matters most if you plan to sell the car before the end of the agreement. Since HP means you do not own the car until the final payment, selling early requires settling the finance first. If the car has depreciated more than expected, you may find you owe more than the car is worth at that point. Choosing a well-regarded model from a mainstream manufacturer with a strong dealer network gives you the best protection against this.
For drivers who do most of their mileage locally and can charge at home or at work, an electric car on finance makes strong financial sense. The monthly payment is predictable, the fuel savings are real, and the lower servicing costs mean the total cost of ownership over the agreement term can be competitive with a petrol equivalent even if the purchase price is similar.
Where it makes less sense is for drivers who do a high proportion of longer journeys without easy access to rapid charging, or who are relying entirely on public charging where costs are less predictable. In those situations, a hybrid may suit the pattern of use better, though the finance cost would be similar.
For a direct comparison of electric and hybrid options, see our guide on electric or hybrid: which should you buy on finance?. To check your eligibility for hire purchase on an electric car with a soft search that will not affect your credit file, visit our apply for car finance page.
Yes, your car is likely to lose value during the finance agreement. Most cars depreciate over time, meaning they gradually lose value as they age. For most used cars, depreciation continues throughout a Hire Purchase agreement, so the vehicle is typically worth less at the end of the finance term than when it was purchased.
Depreciation is important because the total amount payable on a car finance agreement includes the amount borrowed, interest, and any applicable fees. As a result, the total amount you repay over the agreement may be higher than the vehicle's market value by the time your finance ends.
Depreciation can also increase the risk of negative equity. If you decide to settle your car finance early or sell the vehicle before your agreement has ended, the car's current market value may be lower than the outstanding finance balance. In this situation, you may need to pay the difference before the agreement can be settled.
The rate at which a car depreciates depends on several factors, including its age, mileage, condition, service history, brand, model, and market demand. Keeping your vehicle well maintained and within reasonable mileage can help preserve its value over time, although depreciation cannot be avoided completely.
Some drivers also choose to take out GAP insurance, which may help cover the difference between an insurer's payout if the vehicle is written off and the remaining balance on the car finance agreement. This can provide additional financial protection particularly during the earlier years of a hire purchase agreement, when the outstanding finance may be higher than the vehicle's market value.
Yes, if you finance your car with AutoMoney Trust, you'll need to maintain fully comprehensive insurance for the entire duration of your hire purchase agreement. This is because the vehicle remains the property of AutoMoney Trust until you've made your final repayment and ownership transfers to you.
Comprehensive car insurance provides protection against a range of situations, including accidental damage, theft, fire and third-party claims. Keeping the vehicle insured for the full duration of your agreement helps protect both you and the lender by ensuring the car remains covered throughout the finance term.
When budgeting for a financed car, it is important to consider insurance as part of your overall running costs. Fully comprehensive cover is often more expensive than third party or third party fire and theft insurance, so make sure you include this alongside your monthly finance payments, fuel, servicing, and other vehicle expenses.
Some drivers choose to consider GAP insurance, which can help cover the difference between your insurer's settlement value if the vehicle is written off and the remaining balance on your car finance agreement when the outstanding balance may be higher than the vehicle's market value.
The length of your car finance agreement can have a significant impact on both your monthly payments and the total cost of borrowing. Choosing a longer finance term, such as 60 or 84 months, spreads the cost of the vehicle over a greater number of payments. This can make your monthly payments more affordable, but it may mean you pay more interest overall throughout the agreement.
A shorter car finance term, such as 36 months, usually results in higher monthly payments because the balance is repaid over a shorter period. However, paying the agreement off sooner can reduce the overall amount of interest paid, making it a potentially lower-cost option over the full term.
When choosing the right finance term, it is important to consider your budget, monthly affordability, and how long you plan to keep the vehicle. The best option is one that allows you to comfortably manage your payments without putting unnecessary pressure on your finances.
AutoMoney Trust offers car finance terms from 36 to 84 months, giving you flexibility to choose an agreement that suits your circumstances. Use our car finance calculator to compare different term lengths and understand how your monthly payments and overall costs could change before applying.
The main difference between fixed and variable car finance rates is whether the interest rate can change during your agreement. A fixed interest rate means your rate and monthly car finance payments stay the same throughout the finance term, giving you certainty over what you'll pay and making it easier to budget. In comparison, a variable interest rate can rise or fall over time, meaning your monthly payments may change.
AutoMoney Trust offers fixed-rate hire purchase car finance only, so you know exactly what your monthly repayments will be for the full term of your agreement. While fixed rates may sometimes be higher than an introductory variable rate, they provide protection against future interest rate rises and make it easier to plan your finances with confidence.
When comparing car finance options, it's important to consider not only the interest rate but also the APR, total amount payable, and the overall cost of borrowing. For more information read our guide on What Is Car Finance APR?.
