Nationwide Vehicle Contracts outlines the factors to consider when calculating the total cost of ownership, with a focus on lease-related expenses.
When choosing a new vehicle, it's essential to fully consider the total cost of ownership to make an informed decision about the car.
Ownership encompasses not only the purchase or lease price but all the costs associated with owning a car, such as maintenance, servicing, and fuel costs.
In this blog, we'll explore the factors to consider when calculating the total cost of ownership for the four main car types.
Electric Cars
Electric cars are viewed by the majority as typically cheaper to run than combustion-engined vehicles, but how true is this?
Purchase Price
Electric cars typically have a higher upfront cost than regular cars due to them being more expensive to manufacture. They feature a range of complicated tech, such as the battery, electric motor, and battery management system, making them more expensive for the consumer.
Depreciation
Electric cars initially depreciate faster than regular cars but hold their value over a long period of time far better. This is because of the longevity of their components, which is only increased by regular maintenance and servicing.
It's also estimated that lithium-ion batteries used in electric vehicles can last for up to 20 years, and even though they decrease in efficiency over time, they often last far longer than the car itself.
Operating Costs
Electric cars offer lower fuel costs than regular cars due to electricity being much more affordable. According to The Electric Car Scheme, electric car drivers spend £740 a year on electricity, compared to over £1,000 for combustion-engined cars.
Charging at home is typically the cheapest; however, it does take much longer than a public charger. For home charging, you can use various comparison sites and switch providers to get the best rate, ensuring you keep your kWh price as low as possible. For more information, check out our Electric Car Charging Costs guide.
Maintenance costs for electric vehicles are also typically lower, as the drivetrain involves fewer moving parts, which means there's less chance of a particular component failing.
Charging Infrastructure
The last thing to consider is the EV charging infrastructure in your local area. If there aren't sufficient chargers, you'll need to get a home charger, which could prove costly. According to CheckATrade, it costs roughly £1,000 for the installation of a home charger (or £650 if eligible for a government grant).
Homeowners are no longer eligible for grants, but those who live in a flat or residential property may be eligible for the EV Chargepoint Grant.
If you're interested in an electric car, check out our Electric car lease deals.
Petrol Cars
Purchase Price
Petrol cars are often the cheapest cars to buy because of how affordable they are to manufacture. Their engines use established technology and can be mass-produced, meaning cheaper overheads for manufacturers.
The engines are also fairly basic and have less high-tech features like an EV.
Depreciation
Depreciation for petrol cars varies depending on a range of factors, such as the make, model, and maintenance. It's expected that petrol cars depreciate by 60% after their first three years on the road, so it's essential you do everything to ensure your car maintains value.
Check out our Depreciation guide for more information.
Operating Costs
Petrol is the cheapest fuel to buy, but prices can fluctuate, meaning you might have to pay more after buying your car, depending on the oil market. According to NimbleFins, the average petrol driver in the UK spends £1,255 a year on fuel.
The main factor you need to consider for operating costs for a petrol car is the engine itself. The bigger and more powerful the engine, the more fuel it will use and the more expensive it will be to maintain.
One advantage of living in the 21st century is that a lot of petrol engines now feature mild-hybrid technology that uses a small electric motor to help keep running costs down and improve the efficiency of the engine.
Hybrid Cars
Purchase Price
You'd never guess where hybrid cars come in terms of their purchase price… between petrol and electric cars! To put it simply, hybrid cars combine a traditional engine with an electric motor. They're not as expensive as electric cars because they don't feature anywhere near as much technology and cost much less to build.
Depreciation
Hybrids tend to depreciate at the same speed as combustion-engined cars. The great thing about hybrid cars is that you get the benefits of an EV with the practicality of a traditional car, so they can last for long periods of time. We'd recommend holding on to your hybrid.
Operating Costs
Hybrids offer excellent fuel economy, combining electric and petrol engines and therefore decreasing the amount of money you spend on fuel.
You'll also save on your maintenance costs compared to a combustion-engined car, as similar to electric cars, they feature fewer moving parts.
Diesel Cars
Purchase Price
Diesel cars are slightly more expensive than petrol cars when it comes to purchase price but are lower than hybrid and electric cars. Diesel engines require extra hardware compared to petrol vehicles, and as a result, their price slightly increases.
Depreciation
In the last five years, diesel cars have started to hold their value less than petrol cars. However, this is no bad thing when it comes to ownership at the end of your lease. Diesel cars are often good for long periods of time and offer great value for money, as they're extremely fuel efficient.
Operating Costs
Diesel fuel is more expensive to buy than petrol, and according to NimbleFins, the average diesel driver spends £1,572 a year on fuel. However, diesel fuel is much more fuel efficient. It contains more energy per gallon than petrol, which allows your car to achieve better fuel economy. Most diesel cars will come with a fuel economy that exceeds 40mpg.
Like petrol cars, the maintenance costs for diesels can vary depending on the make and model. However, they do feature fuel filters that aren't typically found in petrol cars, which can lead to additional maintenance costs.
For more information on leasing a diesel car, check out our Leasing a Diesel Vehicle guide.
Conclusion
As you can see, there are advantages and disadvantages in terms of ownership costs for all types of vehicles. Whatever you go for depends on your personal preference, but ensure you choose a car that is affordable to your budget.
Remember to consider the initial purchase price, depreciation in value, and operating costs when looking to own a car.
Looking for more car leasing advice? Nationwide Vehicle Contracts produces a range of blogs, such as Comparing Electric Car Models for Salary Sacrifice and Charging Strategies for Efficient Driving.
We are also one of the UK's largest car leasing brokers, offering a range of lease deals to suit your every need.
