Electric vs Hybrid Cars: Which One Should You Choose?
Electric and hybrid cars both offer lower running costs than a petrol or diesel equivalent, but they suit different situations and the gap in running costs feeds directly into whether the higher purchase price makes sense on finance. This guide looks at how the two compare for someone financing a used car, what to think about with charging and range, and how it affects the overall cost of ownership over a typical agreement.
A fully electric car runs entirely on a battery and electric motor, with no petrol engine at all. It needs to be charged from an external source and has no exhaust emissions.
A hybrid combines a petrol or diesel engine with an electric motor and a smaller battery. There are a few types: a standard hybrid charges its battery through braking and the engine, and cannot be plugged in. A plug-in hybrid (PHEV) has a larger battery that can be charged from an external source and typically offers a short electric-only range, often 20 to 40 miles, before the petrol engine takes over.
The right choice depends largely on how you drive day to day and whether you have somewhere to charge.
AutoMoney Trust finances used cars, including electric and hybrid models, from £4,000 to £25,000 over 36 to 84 months with no deposit required. The loan range and terms are the same regardless of whether the car is petrol, diesel, hybrid, or electric. What matters is the price of the vehicle falling within that range and the agreement being affordable based on your income and outgoings.
We consider applications from people with poor credit. The initial check is a soft search that will not affect your credit file. For a full breakdown of how the application process works, see our guide on how to apply for car finance.
| Factor | Electric (EV) | Hybrid / PHEV |
| Running costs | Lowest, electricity costs less per mile than fuel | Lower than petrol but higher than full EV |
| Charging needed? | Yes, regularly | PHEV yes for full benefit, standard hybrid no |
| Range anxiety | A consideration on longer trips | Petrol engine removes this concern |
| Purchase price (used) | Often higher for similar age and spec | Generally lower than equivalent EV |
| Depreciation | Can be steeper on early models | Tends to be more stable |
| Servicing costs | Often lower, fewer moving parts | Similar to petrol, plus battery checks |
| Best suited to | Regular short to medium journeys with home charging | Mixed driving, longer trips, no home charging |
This is often the deciding factor more than anything else. If you can charge at home, ideally with off-street parking and a home charger, an electric car becomes much more practical and the running cost savings are significant, since home electricity is generally cheaper than public charging.
If you rely on public charging, the cost advantage of an EV narrows considerably, and the time spent charging becomes a bigger practical consideration. In this situation, a hybrid or plug-in hybrid that can run on petrol when needed often suits better, removing the dependency on charging infrastructure for longer journeys.
When you finance a car, the monthly payment is based on the amount borrowed, the interest rate, and the term. A higher purchase price means a higher loan amount and therefore higher monthly payments, all else being equal. Electric cars, particularly newer used models, often command a higher purchase price than an equivalent hybrid or petrol car of the same age.
Lower running costs from an EV can offset some of that higher monthly payment over time, but it is worth doing the maths properly rather than assuming the savings automatically balance out. Add up the difference in monthly finance payment between an EV and a comparable hybrid, then compare that to the realistic difference in fuel or electricity costs for your typical mileage.
Use our car finance calculator to compare monthly payments at different loan amounts and terms, so you can weigh the finance cost against the running cost difference for your situation.
Depreciation is one of the most important factors when financing any car, because it affects what the car is worth relative to what you still owe at any point during the agreement. Some early electric models have depreciated faster than expected, partly due to rapid improvements in battery technology and range making older models less desirable more quickly than a comparable petrol or hybrid car.
Hybrids, having been on the market longer with a more established second-hand market, tend to have more predictable depreciation. This does not mean an EV is automatically a worse choice, but it is a factor worth considering, particularly if you might want to part-exchange or sell before the agreement ends.
For more on how depreciation interacts with finance agreements, see the FAQ: The car could lose value. If you are thinking about changing the car partway through an agreement, our guide on how to part exchange a car on finance covers how equity and negative equity work in that situation.
Insurance groups for electric cars have historically been higher than for equivalent petrol models, partly due to the cost of repairing battery packs and the specialist parts and labour involved. This gap has been narrowing as EVs become more common, but it is still worth getting an insurance quote before committing, as it affects your overall monthly cost alongside the finance payment.
Servicing costs for electric cars are often lower, since there is no engine oil, fewer fluids, and fewer moving parts to wear out. Hybrids have both a petrol engine and electric components, so servicing can be similar to or slightly more than a petrol car, depending on the model.
Comprehensive insurance is required under any hire purchase agreement. See: You'll need comprehensive insurance for more on what is required.
There is no single right answer, but a few questions help narrow it down:
Once you have an idea of the type of car that suits you, check your eligibility on our apply for car finance page to see what monthly payment you would be working with before you start looking at specific vehicles.
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?.
