If you’re considering making the switch to electric, you’ve probably noticed that whilst EV running costs are low, the upfront prices can feel steep.
How you pay for an electric car makes a massive difference to what you’ll actually spend each month.
Your Main Options for Getting an EV
- Buying outright: Pay the full price upfront (£25,000-£50,000+ for most EVs).
- Personal Contract Purchase (PCP): Monthly payments with a large final balloon payment to own the car.
- Personal leasing (PCH): Fixed monthly payments, return the car at the end, no ownership.
- Salary sacrifice: Pay from gross salary before tax, save 20-50% on monthly costs.
Buying Outright: The Highest Initial Cost
Purchasing an EV outright means you own it from day one, but it requires serious capital.
The average new electric car in the UK costs between £48,000 and £50,873, though more affordable options like the Dacia Spring (from £14,995) and MG4 (from around £27,000) are available.
Pros:
- You own the asset
- No monthly payments once purchased
- Freedom to modify or sell whenever you want
Cons:
- Requires £15,000-£50,000+ upfront
- You absorb all depreciation (typically 40-50% over three years)
- Separate costs for insurance, servicing, breakdown cover, tyres
- No tax benefits
Personal Leasing (PCH): Predictable but Expensive
Personal leasing offers fixed monthly payments without the large upfront cost of buying, but you’re paying from your after-tax salary.
Pros:
- Lower initial cost than buying
- Predictable monthly payments
- Drive a new car every few years
- No depreciation risk
Cons:
- Paying from post-tax income (no tax benefits)
- Insurance and maintenance are extra costs
- Mileage restrictions (excess charges apply)
- No ownership at the end
Salary Sacrifice: The Tax-Efficient Winner
Salary sacrifice changes the game completely. By paying for your EV from your gross salary before tax, you unlock substantial savings that other methods simply can’t match.
How it works
Instead of receiving part of your salary as cash, you exchange it for an all-inclusive EV package. Because the deduction happens before income tax and National Insurance are calculated, you save on both.
Comparing All Methods
Let’s compare a £35,000 electric car over 36 months across all methods:
| Method | Total Cost (36 months) | Monthly Cost | Ownership | What’s Included |
| Buying outright | £51,510 | £1,431 equivalent | Yes | Car only |
| PCP finance | £18,000-£22,000* | £450-£550 + extras | Only if balloon paid | Car only |
| Personal leasing | £18,000-£21,000 | £470-£570 | No | Car only |
| Salary sacrifice (higher-rate) | £12,132 | £337 | No | Everything |
| Salary sacrifice (basic-rate) | £14,400 | £400 | No | Everything |
*Excluding final balloon payment
The numbers speak for themselves. Salary sacrifice delivers the lowest total cost of ownership by a considerable margin.
Why Salary Sacrifice Saves So Much
The affordability advantage comes from three key factors:
1. Tax savings: You save 28-47% on income tax and National Insurance on the sacrificed amount
2. Low BiK tax: Electric cars are taxed at just 4% in 2026/27 (compared to 25-37% for petrol/diesel company cars)
3. All-inclusive pricing: No unexpected bills for insurance, servicing, or repairs
Even as BiK rates gradually increase (5% in 2027/28, rising to 9% by 2029/30), electric vehicles will remain dramatically cheaper to tax than any petrol or diesel equivalent.
What About Used EVs?
If you want to reduce costs even further, some salary sacrifice providers (including EZOO) offer used electric cars.
Used EVs through salary sacrifice typically cost 20-30% less than new models whilst still including all the benefits: insurance, maintenance, servicing, breakdown cover, and those crucial tax savings.
A nearly-new EV with low mileage can be an excellent way to access electric driving at the lowest possible monthly cost.
The Requirements for Salary Sacrifice
To benefit from salary sacrifice, you need:
- An employer who offers the scheme (or who’s willing to set one up)
- A salary that remains above £12.71/hour after the sacrifice (from 1st April 2026)
- Typically, permanent employment (though some part-time employees qualify)
The Verdict? Salary Sacrifice Wins on Affordability
When it comes to pure affordability, salary sacrifice is unbeatable. You’re typically saving:
- £150-£250+ per month compared to personal leasing
- £1,800-£3,000+ annually in total costs
- 20-50% on the overall cost of driving an electric car
The combination of tax efficiency, all-inclusive pricing, and low electric car BiK rates creates genuine value that traditional financing simply cannot match.
For employees who have access to a salary sacrifice scheme, it remains the single most affordable way to drive a new electric vehicle in the UK. You get a brand-new car, zero hassle, predictable costs, and substantial savings – month after month, year after year.
The question isn’t whether salary sacrifice is more affordable. It’s whether you have access to it – and if not, whether it’s worth asking your employer to introduce it.
You might like this guide: Business Car Leasing or Buying: Which Is Better?