Are Electric Cars Cheaper to Run?

Are EVs really cheaper to run compared to their petrol and diesel counterparts? In order to work that out we have explored and compared the actual fuel costs of electric cars versus traditional cars based on the current UK fuel & electricity prices.

We’ll also delve into maintenance, lifespan expenses, and other costs to offer a view of the running costs of each type of car.

white vauxhall EV on charge

Are Electric Cars Cheaper to Run?

Electric cars are still much cheaper to run than both petrol and diesel cars in the UK, providing you have access to the leading EV energy tariffs on offer. Our calculations show that when using the overnight Octopus Energy’s rate of 7.5p per kWh, electric cars cost approximately £1.312 to travel 100 miles. In comparison, petrol cars cost around £17.09, and diesel cars about £14.45 for the same distance.

Not all EV owners can access the 7.5p Octopus rate, however, even if you charge using a standard 27p per kWh rate, the cost to travel 100 miles is £4.72. If you use a public charger at a rate of 59p per kWh the cost is £10.32, both options are still significantly cheaper to run than the £17.09p cost of the same journey in a petrol vehicle.

Here’s how we worked out the running costs: To work out if electric cars are still cheaper to run, we need to compare the current cost of fuel or electricity that is needed to drive a certain distance, we took a 100-mile journey as an example.

First, let’s work out the average efficiency for each type of car:

  • Electric Car Fuel Efficiency
    A typical electric car consumes around 15-20 kWh to travel 100 miles, but for this calculation, let’s take a median of 17.5 kWh per 100 miles.
  • Petrol Car Fuel Efficiency
    An average petrol car might run at 40 miles per gallon (mpg).
  • Diesel Car Fuel Efficiency
    Diesel cars are typically more fuel-efficient than petrol cars, and an average diesel car might achieve 50 miles per gallon (mpg).

Now, let’s calculate the costs to work out if electric cars are really cheaper to run:

Electric Cars Running Costs for 100 miles
Using the current cheapest EV tariff on the market (7.5p per kWh overnight charging with Octopus Energy), the cost to travel 100 miles would be:

17.5 kWh × £0.075 / kWh = £1.312

Not all EV owners have access to the best current charging tariff of 7.5p. If you are on a standard UK electricity tariff you will likely pay 27p per kWh for your electricity.

Those who charge their EVs using a standard electricity tariff, priced at an average of 27p per kWh, face a different cost structure. The calculation for travelling 100 miles would be:

17.5 kWh × £0.27 / kWh = £4.72

This is three times more expensive than the Octopus tariff, but still much cheaper than a petrol or diesel equivalent.

EV owners who rely on public charging such as dedicated EV charging forecourts or supermarket chargers, will face even higher costs. The average cost of public charging is around 59p per kWh, so the cost to travel 100 miles is calculated as follows:

17.5 kWh × £0.59 / kWh = £10.32

Petrol Cars Running Costs for 100 miles
The current price of petrol in the UK is £1.554 per litre  and to travel 100 miles, you’d need 11 litres (given the 40 mpg efficiency):

11 litres × £1.554 = £17.09

Diesel Cars Running Costs for 100 miles
The current price of diesel in the UK is £1.554 per litre and to travel 100 miles (given the 50 mpg efficiency) you would need 9 litres:

9 litres × £1.606= £14.45

With these costs, we can answer the question of which type of car is cheaper to run, petrol or electrical:

Are electric cars cheaper to run than petrol cars?

While EV tariffs offer the most cost-effective option, standard electricity tariffs and supermarket charging still present cheaper alternatives compared to traditional petrol and diesel vehicles. Electric cars cost £1.312 to travel 100 miles using the overnight charging rate with Octopus Energy, £4.72 with a standard electricity tariff and an average of £10.32 if charged using a public charger. Petrol cars cost £17.09 for the same distance. Therefore, with this electricity rate, electric cars are indeed cheaper to run than petrol cars in the UK.

Are electric cars cheaper to run than diesel cars?

Electric cars cost £1.3125 to travel 100 miles using the overnight charging rate with Octopus Energy, while diesel cars cost £14.45 for the same distance. Therefore, with this electricity rate, electric cars are also cheaper to run than diesel cars in the UK.

These figures only work if electric car owners are consistently charging their vehicles overnight with Octopus Energy or a similar discounted rate. Even when using other charging stations, EVs are still cheaper to run than petrol or diesel cars.

Instavolt public chargers in Norwich
Public charging is still cheaper than Petrol or Diesel

Do EVs cost more than petrol cars?

Electric cars still cost more than petrol cars in the UK. The upfront cost of many EVs has been higher than petrol cars mainly due to the expense of the battery systems.

However, with technological advancements, economies of scale in production, and increased competition, the prices of EVs have been steadily decreasing in recent years.

The UK government have offered incentives and grants to reduce the overall cost of buying an EV. While the initial purchase price of EVs in the UK might be higher the gap is closing.

Do electric cars retain resale value?

Initially, it’s fair to say there were concerns about the resale value of EVs compared to traditional UK cars. The primary concerns centred around:

  • Battery Life
    Early EV models had limited range and there were worries about battery degradation over time. The potential high cost of battery replacement affected perceptions about the long-term value of an electric car.
  • Technological Advancement
    Rapid advancements in EV technology meant newer models often had significantly improved range and features, making older models seem obsolete more quickly than traditional cars.
  • Lack of Consumer Familiarity
    As EVs were relatively new to the market, many potential second-hand buyers were unfamiliar with or hesitant about EV ownership.

Over recent years, this is starting to shift – thanks mainly to improvements in battery tech.

Today’s electric vehicles are equipped with batteries that are not only more reliable but also have a significantly extended lifespan, plus many electric car manufacturers are now offering extended warranties on their EV batteries.

The growth in charging infrastructure in the UK has led to less ‘range anxiety’ and the appeal of EVs, including used ones, is only set to grow.

Taking a closer look at the current market data, we can see that some electric car models have been holding their value exceptionally well. For example, the Tesla Model 3 according to a 2020 study, experienced one of the lowest depreciation rates among all car categories. The Nissan Leaf has also been holding its value surprisingly well in resale statistics.

EV servicing and maintenance running costs

When considering the running costs of EV maintenance, there are a few technical reasons why they are considered cheaper to MOT and maintain than petrol or diesel cars:

Simple EV Motor
The electric motor doesn’t have as many moving parts as a conventional petrol or diesel engine. So there’s less wear and tear and parts to replace.

No Oil Changes
Traditional cars need routine oil changes, EVs do not need oil changes. As there is no engine to lubricate electric cars do not use oil.

Brake System Longevity
Many electric cars come equipped with regenerative braking. This system captures the energy usually lost when slowing down and feeds it back into the battery. As a result, the physical brake components experience less wear.

How much Tax do you pay with an EV?

In the UK, we have a number of tax benefits that reduce the overall running cost of an EV:

  • Benefit-in-Kind (BIK) Rate
    One of the most significant tax incentives for EVs is the advantageous BIK rate. The BIK is a tax for company car drivers based on the car’s value and its CO2 emissions.

    For fully electric vehicles, the current UK BIK rate is just 2%. This is a substantial reduction compared to petrol or diesel vehicles, which can have BIK rates as high as 37%. The 2% BIK rate means that employees can enjoy the perks of a company car with a much-reduced tax liability.

  • Exemption from Road Tax
    Another tax benefit for electric vehicle owners is the exemption from road tax, formally known as Vehicle Excise Duty (VED). Since this tax is calculated based on CO2 emissions EVs are exempt from road tax.

  • Salary Sacrifice for Electric Company Cars
    The salary sacrifice scheme allows employees to give up a portion of their salary in return for benefits, such as an electric company car. This not only allows employees to obtain a new EV without any upfront costs but also means that the salary is effectively reduced before tax, leading to income tax and National Insurance savings.

    Given the low BIK rate and VED exemption, providing you choose carefully and pick one of the best EV salary sacrifice schemes, this approach can be incredibly tax-efficient. It’s a win-win, with both employers and employees benefiting from National Insurance contribution savings.
mini EV on charge

What about insurance costs for EVs?

When considering the overall running costs of electric cars, insurance does cost more than petrol cars. We look at this in detail in our review of EV insurance costs. The average insurance cost for EVs is currently £113 higher than that for petrol cars.

EV insurance costs more because of the higher value of the car, the higher insurance group that EVs tend to be in and repair costs. However, it’s important to balance this with the other savings that you can get from EVs in other areas, such as fuel efficiency and lower maintenance costs.

The final word on electric car running costs

It’s clear from the various types of running costs involved in vehicle upkeep – that EVs are cheaper to run. How much cheaper EVs cost to run than petrol cars depends on 

Various factors – not just the direct expenses of fueling or charging but also other factors such as maintenance, servicing, avoiding clean air zone charges, and tax. 

Firstly, in terms of fueling costs, electricity – if you are being smart about your charging and using the best off-peak rate, is a much cheaper fuel when compared to petrol or diesel. Given the ever-rising prices of fossil fuels and the potential for more affordable electricity tariffs, this cost gap should widen even further in the future.

Maintenance and servicing costs also favour EVs. With fewer moving parts, no need for oil changes, and longer-lasting brake systems due to regenerative braking the servicing costs associated with EVs are typically lower.

From a tax perspective, the UK is distinctly pro-EV. The ultra-low 2% BIK rate, combined with road tax exemptions and the possibility of acquiring an EV through a salary sacrifice scheme, offers good financial benefits to both employees and employers.

Despite the UK government announcing in 2023 that they plan to delay the ban on ICE cars in the UK to 2035, there’s still potential for further incentives and benefits to be introduced to encourage EV purchases. So while the initial purchase price of an EV might sometimes be higher than a petrol car, when you view the overall cost of running the vehicle, it’s clear that electric cars are still much cheaper to run.

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