Is it worth investing in electric cars for car leasing?

The car market is changing. With scandal over diesel emissions, the introduction of Ultra-low emission zones in our cities and the price of fuel fluctuating, people are hoping for real alternatives. This is why we have seen a steady increase in demand for electric cars.

More and more electric cars are being seen on our streets and all the parties in the general election made promises towards investing and improving electric car technology and infrastructure in this country. So is it now the time to invest in an electric car?

Leasing companies like Hippo Leasing now have great selections of electric cars on offer for those of you wondering if you should take your company in a greener direction. Customers, especially millennials are taking more of an interest in how businesses deal with climate change and green policies. Having an all electric car fleet might be a positive step forward. But is it the right step forward for you?

The electric future

Let’s be honest, the promise of an electric car revolution has been around for years without coming to fruition. Until now. Morgan Stanley believes that the real change from fuel-powered cars to electric cars has begun because there has been a change in how we view climate change and the threat of it.

Related: 8 of the best electric cars for small business leasing

Morgan Stanley analyst, Harald Hendrikse, who covers the European auto sector said: “We think the key answer is that political and scientific concerns about the impact of CO2 and particle emissions on public health have risen sharply.”

With the issue of CO2 emissions, air pollution and climate change picking up traction quicker than before, there are real concerns about the future of motoring. Fuel-powered cars will remain more popular for decades still, but Morgan Stanley predicts by 2050, electric car sales will be the dominant 69%. You can get ahead of the curve now.

High price for electric cars

The main concern with electric cars for many businesses is that the price of them is too high. It is to be expected. They are still fairly new, with the technology still being developed. The cost of the batteries and the infrastructure is coming down, but at this moment in time, they are seen as being expensive. However, that shouldn’t put you off.

Purchasing a car outright, especially for businesses is no longer the first choice. In fact, it is barely the third option anymore. Instead, you have far more affordable options, the main one being car leasing.

Leasing is the cheapest option because of how it works. Whilst car finance allows you to pay off the value of the car over an agreed period, car leasing works differently. Instead of paying off the value of the car, you pay off the value of the depreciation lost on the car over the period of the agreement. This means your monthly payment will always be lower on a lease than on a finance.

Making electric cars affordable

Car leasing ensures that as a business you get the best affordable price on your electric car. If you want them brand new, Hippo Leasing offers great Contract Hire deals on them.

With these deals, you pay the low costs per month for the agreed period, usually between24 and 48 months and at the end, you hand the cars back. This means that as a business, you don’t need to worry about selling them on and therefore continued depreciation of the vehicle isn’t a concern.

This is a great opportunity for your business because it means that overall your lease agreement will be lower, thanks to the fact you aren’t paying for the full value.

Electric cars on BCP

Business Contract Purchase options offer you more choice in terms of what you as a business can do with your electric car fleet at the end. Whilst with Contract Hire, you must return the car at the end, with BCP it isn’t that restricting.

When your BCP agreement comes to an end, you can hand the car back or you can pay a balloon payment to take ownership of your electric fleet. This balloon payment is calculated at the start as the Guaranteed Minimum Future Value, which is the estimated value of the car when the agreement comes to an end.

This is a potential option for you as a business because electric cars depreciate quicker than fuel-powered cars, therefore your GMFV will be lower than it would be on a normal car. This means it will be more affordable to take ownership of the car if as a business you choose that is the right course.

The quick depreciation of electric cars is a beneficial reason to lease rather than to buy. It is estimated that a Nissan Leaf that cost £23,000 brand new, will be worth less than £3000 in five years. That means that if you own the car, you will make a loss when it comes to selling it on. However, if you lease it, you won’t have to be concerned by the quick depreciation and it can work in your favour in some cases.

See also: Is car leasing right for my business?

Jon Sumner

Vivianne Halvorson

Experienced director of digital media with a demonstrated history of working in the publishing industry. Strong media and communication professional skilled in media sales, digital strategy, web development,...

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