How to choose the right finance option for an electric vehicle in 2025
Electric cars are becoming increasingly more popular every year. And, with the phasing out of new petrol and diesel cars edging closer, more drivers are thinking about making the switch. With the up-front cost of an EV higher than their petrol or diesel counterparts, car finance is a great way to make an EV affordable.
But which is the best car finance for you? There are different ways to finance an electric car, but the right choice depends on your budget, driving habits, and long-term plans. Here’s everything you need to know about choosing the best finance option for your EV in 2025.
The electric car market in 2025: what you need to know
EVs have come a long way in the past decade. As of 2025, there are more new and used options than ever, whether you’re looking for a sleek city car or family vehicle to get around in.
This is only set to accelerate over the next decade, as the government has introduced a ban on new petrol and diesel cars from 2035.
Because of their growing popularity, charging is also set to become easier. Government incentives for new EVs have mostly faded. But, there is still a unique car charger grant for renters and flat owners. Plus, more public charging points will appear in the UK in the coming years to encourage the switch to electric vehicles.
If you are thinking of making the switch to an EV, let’s look at which EV car finance options would best suit your circumstances.
Electric car PCP
Personal Contract Purchase (PCP) is one of the most popular ways to finance an electric car. You’ll pay a deposit, and monthly payments plus interest. At the end of the agreement, you have three options. You can:
- Pay the balloon payment (a lump sum based on the car’s value) and own the car
- Trade it in for a new EV on another PCP deal
- Hand it back with nothing more to pay (as long as you’ve stuck to the mileage limit and kept it in good condition)
PCP is a good option if you like switching to a new car every few years. It also tends to have lower monthly payments compared to Hire Purchase. However, you won’t own the car unless you pay the final balloon payment, and there are mileage limits to watch out for.
Note: PCP agreements may require you to adhere to agreed mileage limits and vehicle condition terms. If you exceed these terms, additional charges may apply. Always ensure you understand the terms of your agreement before committing.
Electric car HP
If you know you want to keep your EV at the end of your finance deal, an electric car Hire Purchase (HP) agreement might be a better choice.
HP works differently from PCP because you don’t have the same choices at the end; you’re simply paying off the loan to own the car. There’s no big balloon payment at the end, and once you’ve made the final payment, the car is yours.
HP monthly payments are higher than PCP, because there’s no balloon payment required at the end. But, you won’t have mileage restrictions, and you’ll automatically own the car at the end. This makes it a great option if you plan to keep your EV long-term and don’t mind paying a bit more each month.
Electric car PCH
If you definitely don’t want to own a car, Personal Contract Hire – aka leasing – could be a good alternative. Because you’re just loaning the car, there’s no option to buy it at the end; you simply hand it back.
Leasing can be cheaper than PCP in terms of monthly payments, and some deals include maintenance and servicing, which can help keep costs down. But, you’ll have to stick to mileage limits, and like HP, you’ll never own the car.
Which EV finance option is best for you?
The right finance option depends on how you use your car and what matters most to you:
- PCP is great if you want lower monthly payments and the option to upgrade every few years. But, there is a big lump sum at the end if you want to own the car.
- HP is better if you want to own your car and don’t want to worry about mileage limits.
- PCH works well if you don’t want to own the car, and want a lower-cost way to drive an EV.
The takeaway
With the EV market growing and more ways to finance a car than ever, 2025 could be a great time to go electric. Whether you go for PCP, HP or leasing, car finance can help you drive the car you want in a way that suits your budget.
There are pros and cons to all car finance options, so it’s important to weigh them up before making a decision. Be sure to compare deals, do your research, and think carefully about what you can comfortably afford.
Remember, all finance agreements are subject to affordability checks, and your monthly payments should be within your budget. Make sure you’re aware of any additional charges that may apply to your chosen finance option.
Disclaimer: Car finance involves borrowing money, and you must repay the lender according to the agreed terms. Failure to make payments may affect your credit score and lead to additional charges.