Driving Electric Part 6 – Whole life costs and electric cars

02nd Mar 2021

Looking at Whole Life Costs allows a business to compare the costs of vehicles over the life of their contract. Here we are looking at why whole life costs can help identify electric cars as a clear choice for fleet vehicles and employee schemes.

With the government’s road to zero, changes to company car tax and rising fuel prices over the last few years, many fleet operators, employers and employees are being encouraged to choose low-CO2/high-mpg vehicles. We are seeing an increase in companies starting to implement CO2 caps on their choice lists and looking at electrified vehicles as alternatives to their petrol and diesel equivalents.

When considering electrified vehicles, the seemingly high purchase price can often be a barrier for any consideration to be taken any further. However, by looking at the Whole Life Cost (WLC) of a vehicle over its life, electric and hybrid vehicles can often come out on top.

 

What are Whole Life Costs (WLC)?

When considering the costs of fleet vehicles, Whole Life Costs is the term given to the overall cost of vehicles over the term of leasing or ownership. The Whole Life Costs take into account all the related factors over the holding period: the acquisition price, level of depreciation, servicing and maintenance costs, company car tax plus running costs – including likely fuel expenditure. They’re an accurate way of calculating the true cost of running a vehicle.

Our Whole Life Cost calculation is based on the full term of the lease and considers:

  • The total Contract Hire (finance) costs for the hire period 
  • Servicing and maintenance costs
  • Recoverable VAT on finance and maintenance costs (including any restrictions that may apply)
  • National Insurance payable on the Benefit-in-Kind, as applicable
  • Cost of fuel for business mileage (taking into consideration the fuel type and fuel efficiency of the vehicle)
  • Insurance costs 

Looking at the WLC’s of vehicles with a higher purchase price (like that of an electric or hybrid vehicles) can actually identify that the cost of such a vehicle over its lifetime is significantly less than a cheaper or alternative fuel model. For example; two vehicles could appear to cost the same, but in reality one could end up costing significantly less over its life cycle as it may have lower maintenance costs, a better residual value, better fuel consumption and lower CO2 emissions.

So, as well as identifying potential savings WLC can help clients afford to obtain better quality vehicles for fleets or employees.

WLC’s can help with:

  • Budgeting
  • Comparing funding methods
  • Determining driver grades/allowances
  • Comparing manufacturers and actual vehicles
  • Defining cash allowance levels
  • Predicting future costs
 

Electric Vehicles and WLC

There’s no escaping the higher cost of electric cars. The huge, advanced battery packs required for each vehicle can add thousands of pounds to the contract price. Even with the full government grant of £3,000 towards the new price of an electric car, they still tend to be more expensive than a petrol or diesel equivalent. However whilst electric vehicles are often more expensive than their petrol / diesel counterparts there are more and more being introduced into the market today and are significantly cheaper compared to 2 or 3 years ago. The Tesla Model 3 and Kia e-Niro as a couple of recent examples.

Looking at the WLC’s of hybrid, PHEV and battery electric vehicles and moving away from diesel/petrol, can see clients make savings and gain advantages such as lower fuel costs, lower national insurance and no tax. Making electric vehicles a much more competitive option.

The following examples* are based on a 3-year hire period and 10,000 miles per annum, . 

Please note: These are examples based on current quotes. Actual pricing may differ depending on customer requirements.

Get in touch

If you are looking switch you fleet to electric or want to have a chat about looking at WLC’s our team would be happy to help.