Author: Simon Pavey

There are plenty of monetary benefits to owning an electric vehicle, but how does their depreciation compare with ICE (internal combustion engine) vehicles?

As EVs become more popular, it can be interesting to compare their performance and costs with ICE vehicles. When deciding whether you want to make the transition to an electric vehicle, depreciation is just as important to consider as performance, range and charging costs.

What is depreciation?

Depreciation refers to the loss of value of a vehicle as soon as it is sold. The decrease in value begins the moment you drive it.

High mileage, damage and lower demand are some of the top causes for this loss of value.

Also, when buying a new car from a dealership, you’re paying a lot of extra money on top. Even if you sold the car back to them the next day, you’d be at a huge loss.

According to the AA, the average new car could lose between 10% and 40% of its value in its first year on the road. Assuming you’re doing plenty of miles, the car will have depreciated by 60% after three years.

If you bought your car for £20,000, you’re looking at getting £8,000 for it after three years.

Can owners of electric vehicles expect to encounter the same dramatic price reduction?

Increased demand for EVs

Due to the lack of demand, EV depreciation has been pretty extreme in the past. There weren’t many people looking to buy used electric cars as the technology advances so quickly, making older cars obsolete quite quickly.

Now, however, the market for electric cars has increased massively.

This is probably due to the fact that car owners no longer see ICE vehicles as a sensible investment. The government plans to ban production and sale of new petrol and diesel cars in 2030. With this deadline approaching, many drivers are considering an electric vehicle as their next car.

Similar factors are also pushing more drivers towards EVs. Many cities are adopting low emission zones, including London, Birmingham, Oxford and Bristol. Drivers are keen to get their hands on an electric vehicle as they are exempt from the charges that come with these zones, making EVs a great option for cities.

On top of this, statistics show that many drivers could be saving a huge amount of money on fuel costs if they were driving an electric vehicle. Since charging with electricity has become cheaper than filling up a vehicle with fuel, it is possible to save hundreds of pounds every year depending on your mileage.

Electric vehicle depreciation

So what rate of depreciation should an electric vehicle owner expect? Is it any better than the 60% price reduction seen in ICE cars?

Of course, it depends on the vehicle. Brands such as Tesla, Mercedes and Porsche claim to be subject to the least depreciation. The Porsche Taycan for example is calculated to lose only 23% of its value over 3 years.

However, the Taycan is an extreme example. Statistics suggest that EV drivers can expect their vehicles to depreciate by around 50% over 3 years. The Volkswagen e-Golf will lose around 49%, whilst the BMW i3 will lose 52%.

That figure is an improvement on the 60% depreciation seen by ICE car drivers. It’s not a vast difference, but depending on the specific vehicle you buy, you could end up retaining thousands of pounds when you go to sell your car.

Along with the lower total cost ownership (TCO), the less extreme depreciation is another financial benefit to owning an electric vehicle.

What causes the depreciation of EVs?

There are other factors outside of your control. For example, your brand of vehicle could develop a negative reputation; people might believe it is not a reliable vehicle. In this case, you’re going to get less money for it regardless of how well maintained it is. If a newer model of your vehicle is made, your vehicle is likely to depreciate, as there will be more demand for the newer model.

It looks as though depreciation isn’t something that EV owners need to be worrying about for the time being. As the transportation industry adopts electric vehicles more and more every year, their demand is likely to increase.

If you are considering transitioning to electric vehicles for your fleet or business, get in touch with our expert team today and find out how you can keep costs to a minimum during this process.

If your business is still reliant on petrol and diesel vehicles for your day-to-day operations, there has never been a better time to make the transition to an electric fleet.

Recent trends in company vehicle preferences and changes in government tax rules and incentives should leave you in little doubt that the future of commercial transportation is electric. So it’s worth doing some research and finding out more about the financial and tax advantages of electric cars.

The shift towards electric fleets

A third of fleet managers across the UK expect more than half of their company cars to be electric in five years’ time. That’s according to a survey by Go Ultra Low, a joint government and industry campaign focused on promoting the adoption of electric vehicles (EVs).

Seven out of ten fleet managers and decision-makers said they were planning to buy an electric car within two years. Half predicted an increase in the adoption of EVs in commercial fleets as a result of changes to benefit in kind (BIK) taxes on electric cars, which we explore in more detail below.

According to Go Ultra Low, the fleet sector accounted for more than half (53.3 per cent) of the UK’s 2.3 million vehicle registrations in 2019 and is viewed as a “pivotal player in accelerating EV adoption”.

Poppy Welch, head of the campaign, said: “There are around 60 electric models now available and most are able to travel more than 200 miles on a single charge. The decisions fleet managers make about EVs today will be critical in driving mass adoption tomorrow.”

In November 2020, the government said the UK had taken “another historic step on the road to ending its contribution to climate change” by announcing the end of the sale of new petrol and diesel cars in the country by 2030.

These developments suggest that any business hoping to keep up with the accelerating move towards a zero-emissions future needs to plan the electrification of its fleet.

For many companies, this will be a major undertaking that requires a lot of thought and planning. On the positive side, there are many advantages of electric cars, including financial incentives that will help your firm’s bottom line.

Electric car tax advantages

Taxation is one of the key topics you’ll need to take into account when you’re considering the various financial benefits and costs associated with electric fleets.

As far as road tax on electric cars is concerned, the good news is that government measures recently brought into effect will keep rates to a minimum for the near future. Company car tax (CCT) on electric cars was reduced to zero in 2020-21 and will be set at one per cent in 2021-22 and two per cent in 2022-23.

There have also been changes in the rules covering vehicle tax for hybrid cars, with the government introducing five new CCT bands for plug-in hybrid vehicles that emit 1-50g of CO2/km. These bands are designed to provide the biggest tax incentives for EVs that have the greatest electric range, meaning they can drive longer distances with zero emissions.

Furthermore, it was also confirmed recently that fleet operators buying vans and trucks will benefit from a new ‘super deduction’ tax relief. The Treasury said this deduction will allow companies to reduce their tax bill by up to 25p for every £1 they invest in new plant and machinery, subject to certain criteria.

A spokesman for HM Revenue and Customs told Fleet News that heavy and light commercial vehicles can qualify for this benefit if they meet relevant conditions – being new and unused, for example.

Benefit in kind taxes and electric cars

BIK taxation is another key area you should be familiar with if the electrification of your fleet will be a priority for your business in the coming years.

Company car tax essentially has two components: what the business pays and what the employee pays. The amount the organisation pays is based on the value of the vehicle (known as its ‘P11D’ value) and its CO2 emissions. Your national insurance contributions also relate to your fleet’s emissions and the P11D value of your vehicles.

The employee’s tax liability is slightly more complicated and takes into account their company car’s P11D value and BIK band, as well as their individual income tax bracket.

For example, someone in the 20 per cent tax band, using an electric car worth £30,000 that falls in the one per cent BIK band, will pay £60 in BIK tax. Since the BIK bands are higher for cars that emit more CO2, users of these vehicles will be subject to higher tax rates.

According to Go Ultra Low, a company car driver using an electric Peugeot 208 would save the equivalent of £8,063 in BIK tax over a typical three-year agreement, compared to the petrol model.

The government has confirmed that BIK brackets will be kept low for electric cars over the coming years. The rate is due to increase to two per cent in 2022 and will stay at that level until the 2024-25 tax year.

Capital allowances

Companies are able to claim capital allowances on cars they buy and use to do business. This means you can deduct part of the value of the vehicles in your fleet from your profits, thereby reducing your tax bill.

Like BIK taxes and national insurance, the allowances you can claim for your fleet partly depend on your vehicles’ CO2 emissions. Between April 2015 and April 2018, it was possible to deduct the full value of new cars with emissions of 75g/km or less. In April 2018, this threshold dropped to 50g/km, and since April 2021 only zero-emission cars have qualified for a full deduction. This provides a strong incentive for businesses to shift to EVs if they want to make the most of capital allowances.

Salary sacrifice

Another concept to consider as you progress with the electrification of your fleet is salary sacrifice. This allows employees to exchange part of their salary for a non-cash benefit, such as a company car, and can be a good way to encourage adoption of EVs.

People who choose to take part will have a single monthly payment to cover costs such as leasing, maintenance and insurance taken from their pay every month, before income tax and national insurance. This can be mutually beneficial for employer and employee, since the business pays less in national insurance and supports the shift towards zero-emissions motoring, while the worker pays tax on a reduced portion of their salary.

As the transition towards EVs and fully electric fleets gathers pace in the coming years, it will become increasingly important for businesses to stay up to date on changes to taxation and financial regulations relating to electric cars.

Passing this information on to your employees and proactively promoting the use of EVs will help to ensure your business keeps up with the times.

Want to know more about how you can save money through switching to electric vehicles? Get in touch with our expert team today!

Petrol stations have been a part of the landscape for almost as long as there have been cars on the roads – the first one was opened in Berkshire by the AA way back in 1919.

However, with the increase in electric and hybrid cars in a bid to make the country greener, fewer people are likely to need petrol and diesel going forward. So, what will this mean for Britain’s infrastructure of refuelling stations? Let’s take a look.

The rapid expansion of EVs

Electric vehicles (EVs) are currently enjoying a boom in take-up rates. Analysts estimate there are more than 200,000 currently on Britain’s roads, with at least a million expected to be in use by the end of 2022.

Worldwide, the International Energy Agency suggests this could equate to 300 to 400 million EVs out of two billion total vehicles by 2040.

In the UK, this take-up is partly being driven by the government’s policy to end the sale of new petrol and diesel cars by 2030, even though there is not yet a timeline for the suspension of fuel sales.

However, for many people, a major stumbling block in changing from combustion engines to EVs has been range and the ability to top up mid-journey. No-one wants to be caught out without power on a longer trip, so some have opted to wait rather than taking the plunge.

This could be set to change, though, as a new network of refuelling stations evolves to offer customers not only recharging options, but also a lifestyle hub fit for the 21st century.

A new breed of refuelling station

Today, data from Zap-Map shows there are 8,471 charging locations for EVs across the UK. In contrast, the number of petrol stations has dwindled to 8,400, demonstrating the rapid roll-out of the necessary technology to top up greener vehicles.

Co-founder of Zap-Map Ben Lane said: “The public and private sectors are now investing heavily in the UK’s EV charging infrastructure to ensure that there are sufficient charging points to support the growing electric fleet.”

Indeed, the Automated and Electric Vehicles Bill introduced in 2017 made it mandatory for motorway services and large fuel forecourts to install EV charge points. This came after the European Parliament said there should be at least one charger for every ten cars on the road if EVs are to become a viable alternative to traditional cars.

Since a cluster of two or more charging points is essentially a refuelling station, many providers have been making the decision to provide dedicated facilities for EVs that could shape the future of our vehicle-based technology infrastructure.

After all, since most drivers are familiar with stopping at a petrol station and refilling, the act of stopping at an electric hub for a battery top-up isn’t too much of a stretch for the imagination. And with motorways offering the combination of longer journeys and the need to stop to stretch the legs, many of these EV hubs are likely to be alongside such major routes as an alternative to traditional service stations.

Major providers changing their offerings

A number of major brands in the transport industry have already been making headway in terms of offering EV charging fuel stations. For example, Shell aims to have 200 Shell Recharge points on its existing forecourts by the end of 2021.

However, in 2020 it said it has even loftier ambitions than this. The brand revealed it wants to see true energy hubs going forward, where drivers are directed into EV charging bays and offered airport-like facilities featuring coffee shops, parcel collection points and meeting rooms while they wait.

“We call it Project Evelyn – an energy hub where you can recharge yourself and recharge your car,” said Shell’s Bernie Williamson.

This vision of the future forecourt being far more than just somewhere to charge up is shared by BP Chargemaster, which also recently unveiled its plans to partner with Marks & Spencer to provide retail facilities alongside its charging points.

Meanwhile, Nissan has opened the first of its planned 100 EV-only service areas in Essex, offering users shops, cafes, meeting room pods and a wellbeing area to make the most of while they wait.

How will EV charging fuel stations work?

Electric car charging times are clearly longer than the time it takes to fill up a traditional car with petrol or diesel, but drivers will still need to recharge and go before too many hours have passed.

Refuelling stations will therefore typically offer power points to provide:

• Fast charging – three to four hours
• Rapid charging – 30 to 60 minutes
• Wireless charging – not available in the UK yet, but being pioneered in Europe for future use without cables

In terms of payment, it is likely that most dedicated hubs will eventually offer a ‘payment by subscription’ model similar to the way an ‘all in one’ fuel card works for fleet drivers today. Users may drive up to a power point and swipe a card to select a charging option and pay.

Although the cost to charge an electric car will undoubtedly be more at a hub than it would at home, drivers will undoubtedly be willing to pay for the convenience – a rapid charge is likely to cost more, yet get them back on the road again in less than an hour.

Going forward, the government has called for all new rapid chargers to incorporate contactless payment, so it’s likely that charging sessions will be managed via apps before too long.

Interestingly, after so many years using traditional forecourts, it may be that it’s the etiquette drivers need to adjust to, including:

• Moving vehicles as soon as batteries are full
• Not unplugging other vehicles
• Stowing cables safely after use to prevent trip hazards

What about rural forecourts?

It’s easy to see this being the end for old garages in rural locations, as they’re usually far from motorways and therefore not somewhere drivers would need to stop mid-journey.

However, spokesperson for the Irish Petrol Retailers Association David Blevings told the Irish Times this needn’t be the case. He pointed out that most petrol stations don’t rely solely on fuel income and could therefore be in a good position to provide the experience-led forecourt necessary going forward.

What’s more, rural refuelling hubs could be essential for customers who don’t have off-road driveways and to manage demand for the power grid.

The future?

EV technology is still developing and both governments and power providers will undoubtedly have kinks and issues to iron out before these forecourts of the future can truly come to fruition. However, as more people embrace the green revolution, it’s becoming increasingly likely that they will become science fact rather than science fiction in the not-too-distant future.

When you pull into the forecourt with your new electric vehicle for the very first time, you’ll want to be sure you’re getting the best deals possible. With the Shell Electric Vehicle Fuel Card, you’ll get 2p off each kWh.

Get in touch today, and we’ll help your fleet make the transition to EVs.