Funding method: private purchase (PCP/HP), personal contract hire (PCH) or salary sacrifice

How you pay for an electric car can change the real cost more than which car you choose. The same vehicle can look expensive on one funding method and unusually cheap on another, mostly because of how tax and residual values are handled.

Private purchase: PCP and HP

Hire purchase spreads the full price over the term and leaves you owning the car at the end. Personal contract purchase defers a large chunk of the value to a final balloon payment, which lowers the monthly figure but means you own nothing unless you pay it.

• HP: higher monthly cost, you own the car outright at the end
• PCP: lower monthly cost, optional final payment, mileage limits apply
• You carry the depreciation risk on HP; on PCP the guaranteed future value shifts some of it to the lender

Personal contract hire (leasing)

PCH is a long-term rental. You pay an initial payment and fixed monthlies, hand the car back at the end, and never own it. It is often the cheapest way into a brand-new EV because the funder prices the deal on its own residual value assumptions.

• No ownership and no balloon payment decision at the end
• Mileage limits and end-of-contract damage charges matter
• Maintenance can usually be bundled for a fixed monthly amount

Salary sacrifice

If your employer offers it, salary sacrifice is usually the cheapest route to a new EV for a higher-rate taxpayer. You give up gross salary in exchange for the car, so you avoid income tax and National Insurance on that amount, and pay only benefit-in-kind tax, which stays low for fully electric cars.

• Savings scale with your marginal tax rate
• Benefit-in-kind on EVs is far lower than on petrol or diesel
• Tied to your employment — leaving the job usually ends the arrangement

Which suits whom

As a rough rule: salary sacrifice first if it is available to you, PCH if you want a new car with predictable costs, PCP if you want flexibility with an option to buy, and HP or cash if you keep cars for a long time.

As a worked example, a £45,000 EV on salary sacrifice for a 40% taxpayer typically nets out far cheaper than the same car on PCH, because the gross deduction removes income tax and National Insurance and the benefit-in-kind charge on a fully electric car remains a small percentage of list price.