What you need to know about buying an EV with finance

You may have noticed increased chatter online or in the office about buying an EV. As the founder of Australia’s leading EV database and comparison site, there are two burning  questions I’m often asked:

1. Do EVs depreciate faster?
2. What are the best ways to finance an EV?

If you’re considering an EV as your next vehicle, it’s important you have the answers to these questions. 

EV depreciation explained

While the data to date suggests EVs depreciate faster than petrol cars, what you should know is that it’s based on a very small sample size. EV sales have only taken off in the last few years, and still only comprise 1% of Australia’s total car fleet. 

EVs are also comparatively more expensive, therefore, all things equal, the loss in resale value will be greater. 

In my opinion, it is too early to say categorically whether they depreciate faster than petrol cars. While we wait for the EV market to normalise, there are still a few things you can do to maximise resale value of an electric car:

• Choose established brands with strong demand and brand awareness. For example, in the US, a study by Energy Sage found Tesla EVs held their value better than other brands. 
• Stick to basic colours which are in high demand such as white, silver, black.

Best ways to finance an EV purchase

EVs are financed using the same options as petrol cars. Some EV finance options however are eligible for government incentives that provide tax benefits or favourable interest rates that could save you thousands.  

Green Car Loans

One of the most common methods of financing a car is through traditional car loans. Many financial institutions and banks also offer specialised EV loan products often known as ‘green car loans’ with competitive interest rates and flexible repayment terms. 

These loans allow buyers to spread the cost of the EV over a set period, making it easier to manage the upfront expense while also offering favourable interest rates. 

To give you an example, in March 2024 a typical car loan had an interest rate of 6% to 8% per annum whereas a green car loan included an interest rate discount of between 0.5% to 1% per annum. This means rates on average are lower at 5% to 7% per annum.

Novated Leasing

Novated leasing is emerging as the most popular way to ‘purchase’ or finance an EV. Procuring an EV through a novated lease arrangement can potentially save you thousands  per year due to the favourable tax benefits. 

How do novated leases work?

A novated lease is a type of car leasing where your employer enters into an agreement with a leasing company to lease a vehicle for you. Under a salary sacrifice arrangement, the lease payments are taken from your pre-tax salary and are tax-deductible. 

Electric cars are eligible for the FBT exemption meaning you’ll benefit from the full deduction without needing to pay fringe benefits tax (FBT). 

At the end of the novated lease period you can either: 

• Make the residual payment to own the car (also known as a balloon payment).
• Refinance the remaining amount owing into a new term. 
• Trade the car in and potentially start a new lease with another vehicle. 

EVs are a great vehicle choice and it’s too soon to tell if they depreciate faster than petrol cars. 

My recommendation is to look at financing options that offer tax benefits and/or better interest rates. 

If saving hundreds, if not thousands of dollars is important to you, it’s definitely worth doing your homework to find the best finance option.

Have you considered buying an electric vehicle? Would you finance the purchase? Let us know in the comments section below.

Also read: Why EVs are causing more car sickness