This is exactly when you should invest in an electric car

Electric cars may soon be affordable for most families, as the average price of used vehicles has dipped below £30,000 for the first time in two years.

While the ban on petrol and diesel cars has been pushed back from 2030 to 2035, the era of the EV seems to be on its way – but there are still questions over whether you’ll ever need to buy one.

A large number of British drivers remain wary of the move towards battery-powered vehicles. Two in five had wanted to see the original 2030 target scrapped, according to a Forbes magazine survey, while two-thirds said Britain would not be ready for a ban. 

The majority of respondents said the high cost of electric cars (EVs) was the main reason why they had not yet made the switch from petrol and diesel to greener vehicles.

Used car prices soared during the pandemic as supply chain issues pushed up demand. But as the thousands of cars sold on finance were released into the second-hand market, supply has rebounded, leading to a drop in prices.

It is no secret EVs are often more expensive to buy than their petrol counterparts, and the infrastructure to support an emissions-free future still needs work. 

So when exactly will electric cars become affordable for the average driver? And what needs to happen in order to make them cheaper? The Telegraph asked the experts.

State of the second-hand EV market

Most British drivers do not buy their cars new. 

In fact, according to the Energy and Climate Intelligence Unit (ECIU), a government advisory body, 84pc of car sales in Britain are secondhand. 

But therein lies the problem – used EVs are still more costly than their petrol equivalent. But there is some evidence that this may soon not be the case.

In April last year, the average price for a used electric car was £33,727, according to the car marketplace Auto Trader, while the price of a petrol equivalent was roughly half that, at £17,654.

Experts claimed this was a supply issue – and that the price of used EVs would fall as more of them filter through to the second-hand market.

This is the logic behind the ­Government’s mandate on manufacturers to sell an increasing number of EVs in the run-up to the 2035 deadline when 100pc of all new car sales must be zero-emission vehicles (ZEVs).

Proponents argue that if manufacturers flood the market with supply, by selling EVs to businesses to lease through company hire schemes, for example, more used EVs will become available and prices will naturally fall.

Figures published by AA Cars in December bear this logic out: the average price of Britain’s most popular petrol cars fell by 3.3pc in the final months of 2023 compared to the same period in 2022. For used EVs and hybrids, prices fell even further – by 5.9pc.

The average price for some popular models had fallen by as much as 17pc year-on-year. The price of a Toyota Corolla, for example, fell from £24,500 to £20,900.

In December, EVs sold six days faster than their petrol counterparts, and 13 days (or 30pc) faster than they did the previous year, according to figures published by Auto Trader.

Some electric cars are now reaching similar price points to their petrol counterparts: a three-year-old Renault Zoe would have been £7,000 more expensive than a Renault Cleo in 2022, but as of November they cost roughly the same, Auto Trader said. 

Similarly, the price difference between a three-year-old Tesla Model 3 and a second-hand BMW 3 series has fallen from £20,000 to just £1,000.

Erin Baker, of Auto Trader, said: “Although used electric car values continue to contract, it’s important to put this into the right context. 

“The electric market is still an immature one, and what we’re seeing is a natural and expected correction in the wake of the influx of stock this year as the circa 750,000 electric cars sold on finance and leasing contracts over the last three years, return to the market. 

“It may be some time before the market reaches a complete equilibrium, but with supply volumes easing and current demand at record levels, we are seeing signs of prices stabilising and some very attractive savings for electric buyers, with many models now at parity with their fossil-fuelled counterparts in certain pockets of the pre-loved electric market.”

Interest from drivers is also rising, with three million more people expressing interest in EVs for sale in 2023, compared to 2022.

Stuart Masson, of the Car Expert, an adviser, said drivers could see affordable models become available this year.

“Even 12 months ago, a Tesla Model 3 was hard to find in the used car market and prices were ridiculous,” he said. “But now there are plenty and prices are starting to fall at the sort of rate you’d expect to see from a petrol car.”

However, EVs generally remain more expensive than internal combustion engine (ICE) vehicles: of the 10 most popular models of electric car, none had an average second-hand price of less than £10,000. A used Vauxhall Corsa, meanwhile, sold for £9,800 on average last year, according to AA Cars.

This year 22pc of all new car sales must be of EVs, and manufacturers will be fined £15,000 for every car they fail to sell beneath the target. A similar target is in effect for heat pumps, prompting boiler manufacturers to impose a levy on gas boilers to meet the cost of fines.

Car manufacturers are unlikely to pull a similar trick, however, as competition in the sector is stronger. Mr Masson said manufacturers would be more inclined simply to remove petrol cars from sale: “If you bump up the price of a car by three or four grand to anticipate a £15,000 fine, you’re simply going to sell fewer cars.

“Car manufacturers don’t make enough money on cars to absorb losses, so it would make more sense for them to stop selling petrol cars.”

Others with more leeway may attempt to shift more EVs by offering cut-price deals, said Mr Masson. “If you’re a manufacturer you have two ways of discounting – either by offering two or three grand off the sticker price, or through finance deals,” he said.

Research by the Finance and Leasing Association found the value of consumer car finance new business in 2024 is expected to grow by 2pc to £40.1 billion in 2024. Mr Masson said that as interest rates fall, some lenders will begin to offer 0pc financing deals.

“Because supply was tight last year, there was no need for car dealers to offer deals, but as prices come down we may see a form of discounted finance where rather than give you £3,000 off the car, you’ll get £3,000 off the deposit.”

Tariffs that could save you hundreds

The oft-touted reason for electric car ownership – other than their reduced carbon footprint – is the savings drivers can enjoy on fuel. 

Households with access to off-street parking can charge their EVs overnight and benefit from cheap energy rates at low usage times. 

Experts argue that over time these savings will be more cost-effective than running a petrol car.

Colin Walker, of ECIU, says: “Even with record-high electricity costs driven up by the gas crisis, EVs are still around three times cheaper to run than their petrol equivalents.”

EVs synergise with other net zero initiatives, such as solar panels and heat pumps. 

Surplus energy from an EV battery can be used to meet a home’s electricity needs (a process known as V2H, or Vehicle to Home), or sold back to the grid to slash money off monthly bills (V2G, or Vehicle to Grid).

The ECIU says the savings offered by cheaper running costs and V2G was out of reach of millions of drivers who cannot afford the upfront cost of an EV.

Mr Walker says a stronger government mandate that increased supply could result in two million extra EVs on the road, driving down costs and saving drivers £11.5bn by 2035.

However, drivers hoping to take advantage of EV-specific tariffs have limited options today. 

Currently, only ­Octopus Energy, Ovo, and British Gas offer such tariffs. Octopus Go, the most popular of these tariffs, provides clean electricity for 12p a kilowatt hour (kWh) between 12.30am and 4.30am every night for new customers (normal electricity rates are about 33p/kWh).

Its other tariff, Intelligent Octopus, allows customers to set the time they want their vehicle ready and what the level of charge should be, while the provider works in the background to minimise strain on the grid by timing charges. 

The provider estimates a typical driver would save £970 a year on such a tariff.

Martin Young, at Investec bank, expects to see more “innovative tariffs” launch and suggested tariffs that offer lower rates for electric vehicle drivers would become mainstream.

Public electric car charging sites

For homes with no access to off-street parking, and those who need to make long journeys that cannot be covered by a single charge, a robust charging network will be a necessity.

By the end of December 2023, there were 53,906 charge points across 31,056 locations in Britain, according to Zap Map, a location service for charge stations. 

By 2030, the Department for Transport hopes there will be 300,000 installed in Britain. Industry experts predict there will need to be 40,000 installed every year to meet that goal.

Public charge points are typically more expensive than charging at home and some can only be used by drivers with specific apps or subscriptions, although the Government is working to legislate against this. 

They are also far less common in rural areas.

Surging electricity rates also make exclusively using public charge points less economical than using petrol, according to the AA.

So-called “range anxiety” and concerns over the availability of public charge points remain a barrier. Indeed, one of the intentions beyond the EV mandate is to encourage electric charge point providers to accelerate the installation of charging stations in Britain. 

The rollout of charge points is not going as well as expected. On Tuesday, analysis by the RAC showed the Government had fallen well short of a target to install at least six rapid or ultra-rapid charge points at every motorway service area by the end of 2023. 

RAC figures showed just 39pc of the 119 motorway service stations had hit the target. Ms Baker said: “We’re up to around 50,000 public charging points, but we are still way short of where we need to be in 2035.

“The thing holding back the growth of the network is not the engagement of charging providers, it’s the interminable layers of bureaucracy or landowners refusing to allow cables across their land and grid connections.”

Though there remain “blind spots” in some rural areas, home-charging on cheaper rates remains a more economic option for most drivers, said Mr Masson.

He added: “The average household does about 100-120 miles a week, and 99pc of all journeys in England are less than 100 miles (according to government data). 

“Most new EVs will do comfortably more than 200 miles on a charge, so if you can charge your car once a week then it’s certainly a doable prospect.”

Ginny Buckley, of comparison site Electrifying.com, called on manufacturers to prioritise making smaller, more affordable, cars to entice cash-strapped drivers to buy one.

She says: “Petrol super-minis are increasing in popularity, while at the same time, there’s a significant lack of smaller electric cars on the market.”

Looming tax and insurance costs

The above figures may suggest that those who invested in an electric car early, saying steep prices for new models or inflated prices on used vehicles, have lost out. But those investing in the near future will be hit by additional costs not faced by the early adopters.

From April 2025, drivers of EVs will pay Vehicle Exise Duty (VED) – also known as road tax – for the first time in Britain. This is an annual tax calculated on emissions levels, and those with higher levels pay more each year.

During last year’s Autumn Statement, Chancellor Jeremy Hunt said the plans to tax EV drivers would “make our motoring tax system fairer”. 

New EVs registered after April 2025 will pay an inconsequential £10 a year in the first year they are registered, but after that, they will move onto the standard rate of £180 a year. EVs registered between 2017 and March 2025 will also pay the standard rate.

The Expensive Car Supplement exemption for EVs will also expire in 2025. This applies to any car with a list price exceeding £40,000. 

RAC head of policy Nicholas Lyes said: “After many years of paying no car tax at all, it’s probably fair the Government gets owners of electric vehicles to start contributing to the upkeep of major roads from 2025.

Electric cars are also typically more expensive to insure than their petrol counterparts, owing to expensive-to-repair components like batteries.

The average cost to insure an electric car rose by £313 year on year in November, growing from £616 to £929 in the space of 12 months, according to price comparison site Compare the Market.

This article was first published on April 15 2023, and has since been updated.