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Electric vs. Petrol Cars: Which is the Better Investment in 2026

Petrol fuel pump and electric vehicle charging plug representing petrol and electric cars

Electric vs Petrol: Your Guide to Financing an Electric Car

Switching from a petrol car to an electric vehicle (EV) no longer feels like a far‑off dream.

New battery‑electric cars in the UK now cost less on average than petrol models, and according to the Guardian their running costs are significantly lower. As electric car finance becomes more flexible, the choice between petrol and electric depends on more than just up‑front price. This guide explains the differences in ownership costs, shows you how to finance an electric car in the UK and highlights some of the best EVs to buy on finance.

How to finance an electric car in the UK

Most buyers don’t pay cash up front for a new car, they spread the cost over time. Electric cars can be financed using the same products as petrol cars.

The two main options offered by Car Loans UK are Personal Contract Purchase (PCP) and Hire Purchase (HP) and you can visit our dedicated pages for each to find out more about each option and whether they are right for you.

Best electric cars to buy on finance

Thanks to increasing competition and government incentives, electric cars are becoming more affordable. In 2026 the average price of a new battery‑electric car in the UK fell below that of a petrol car. This shift, combined with lower running costs and tax benefits, makes financing an EV more attractive than ever.

Rather than naming a single “best” model, it’s helpful to consider a few guiding principles when picking an electric car on finance:

  • Residual values matter. PCP and lease deals are based on how much a car is expected to be worth at the end of the term. Models from well‑established brands and those with strong demand tend to hold their value better, which can lower your monthly payments. The Week notes that buyers only pay for the depreciation of the car under a PCP deal.
  • Look for incentives. Some manufacturers offer deposit contributions or zero‑per‑cent APR PCP deals on electric cars. The Renault Scenic E‑Tech, for example, is available with 0 % APR after the government grant is deducted. Keep an eye out for similar offers and government grants when choosing a model.
  • Think about range and charging. Smaller city‑focused EVs have lower purchase prices and may fit well within a tight budget, while larger family models offer more space and longer ranges. Consider how far you typically drive and whether you can charge at home or will need to rely on public infrastructure.
  • Compare monthly costs across finance types. A car with a higher list price may still be affordable on PCP if it has a strong guaranteed future value. Conversely, a cheaper model could work out more expensive if it depreciates quickly or if finance incentives are limited.
  • Financing a used EV. If you’re considering a second‑hand electric car, our used car finance guide explains how to spread the cost and what checks to make. 

Ultimately, the best electric car to finance is one that suits your lifestyle and budget. Use our car finance calculator to compare deals across different models and talk to multiple lenders to find the most competitive offer.

Electric car connected to an EV charging station

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Find out how much you could borrow

Car Loans UK is a credit broker, not a lender. Rates from 10.9% APR. Representative 21.6% APR (fixed).

Representative Example (Hire Purchase): Borrow £6,000 with £0 deposit over 60 months with a representative 21.6% APR (fixed). 60 monthly payments of £157.92. Final Option to Purchase Fee: £10. Total cost of credit: £3,485.20. Total amount payable: £9,485.20. Car Loans UK is a credit broker, not a lender. This is an example only; all finance is subject to status. Lender fees may apply.

Total cost of ownership: electric vs petrol

Up‑front price is only part of the story.

Fuel and maintenance costs can make electric cars cheaper over time. The UK government’s advisory fuel rates show that from March 2026 electric cars reimbursed for home charging are rated at 7 pence per mile, rising to 15 pence on public chargers. For petrol cars, the advisory rates range from 12p to 22p per mile depending on engine size. Charging an EV at home therefore costs less than half the per‑mile price of running a comparable petrol car.

Maintenance and servicing savings add to the advantage. A Guardian report on an academic study by the University of Leeds found that pure electric cars have much lower fuel and maintenance costs than petrol or diesel vehicles, because their motors are simpler and regenerative braking saves brake wear. In the UK, the researchers estimated that the four‑year total cost of ownership for an electric car was about 10 % lower than for a petrol or diesel car in 2015. The study’s authors predicted that as battery prices fall, EVs will become as cheap to own and run as petrol cars without subsidies by the early 2020s. Some councils charge less for residential parking permits for electric cars and that BMW’s service plans for EVs are £6–£9 per month cheaper than equivalent petrol plans.

Finally, the up‑front cost gap is narrowing. According to The Guardian, in 2026 the average price of a new electric car dropped below that of a petrol car, reflecting increasing competition and government incentives. When you combine lower purchase prices with cheaper energy and maintenance, the total cost of ownership often favours electric cars.

Petrol fuel pump and electric vehicle charging plug representing petrol and electric cars

Electric vs petrol: which is cheaper to finance?

Finance payments are driven by the car’s price, interest rate, deposit and how much it will be worth at the end of the term. Petrol cars can still be cheaper to buy outright, but electric‑car prices are falling: the average new EV now costs less than a comparable petrol model. Manufacturers use deposit contributions and low‑rate finance to boost EV sales. Lenders can tweak interest rates or provide upfront discounts (often called deposit contributions) to move more EVs, and certain electric models such as the Renault Scenic E‑Tech are offered with 0 % APR PCP deals after the government grant.

On a monthly basis, electric cars may still cost a bit more than equivalent petrol models, but the gap is narrowing. Top Gear reports that the electric ID.3 cost about £50 more per month than the petrol Golf GTI on a three‑year PCP. However, the EV’s running costs were vastly lower – around 2.7p per mile versus 21p per mile for petrol. When you factor in fuel savings and slightly cheaper servicing, many drivers find the total cost of financing and running an EV to be similar to or cheaper than a petrol car. Government incentives and future resale values will ultimately determine which option works best for you.

Person plugging an electric vehicle charging cable into a car
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Car Loans UK is a credit broker, not a lender. Rates from 10.9% APR. Representative 21.6% APR (fixed).

Representative Example (Hire Purchase): Borrow £6,000 with £0 deposit over 60 months with a representative 21.6% APR (fixed). 60 monthly payments of £157.92. Final Option to Purchase Fee: £10. Total cost of credit: £3,485.20. Total amount payable: £9,485.20. Car Loans UK is a credit broker, not a lender. This is an example only; all finance is subject to status. Lender fees may apply.

Electric Car Finance Questions Answered

If you are in search of a used electric car, you might find these FAQ’s helpful.

Often, yes. Financing an electric car may have slightly higher monthly payments, but electricity costs are far lower than petrol. Charging an EV at home costs about 2.7p per mile, whereas a comparable petrol car costs 21p per mile. A Guardian‑summarised academic study adds that lower maintenance costs and simpler electric motors make pure EVs around 10 % cheaper to own and run over four years. When you combine the fuel savings with reduced maintenance, the total cost of ownership often favours electric cars.

Yes, interest‑free finance deals do exist. Auto Express is a good resource to check availability on 0% APR PCP offers after the government grant is deducted. Manufacturers may also adjust interest rates or provide deposit contributions to help sell EVs. These deals are usually limited to specific models and may require a larger deposit, so compare offers and read the small print.

Under a Personal Contract Purchase you finance the car’s anticipated depreciation, not its full price. You pay a deposit and then monthly payments based on the difference between the car’s initial cost and its value at the end of the contract. At the end of the term you can either pay the balloon payment to own the car, put any equity towards a new deal or simply hand the car back. This process is the same for electric and petrol cars. Electric‑car residual values vary by model and market conditions; high‑demand EVs may hold their value better, while others may depreciate faster. Always check the guaranteed future value in your PCP quote.

Begin by deciding whether a PCP, HP, lease or personal loan suits you best. A PCP spreads the cost of depreciation and ends with a balloon option, while HP spreads the full cost of the car with fixed monthly payments until you own it. Leasing (PCH) is effectively a long‑term rental. Once you’ve chosen a product, compare deals from dealers, banks and finance brokers. You’ll typically need a deposit, proof of income and your driving licence. Use a car finance calculator to estimate payments and pay attention to interest rates, contract length and mileage limits.

Absolutely. To encourage EV adoption, manufacturers frequently provide deposit contributions, free charging packages and low‑rate finance deals. Always compare deals across models and check the terms to make sure you’re getting a genuine saving.

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