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How social leasing of electric vehicles can drive the UK towards net-zero

(Credit: Adobe Stock)

Social Market Foundation (SMF)

3 min read

With many of the political parties supporting the transition to electric vehicles (EVs), Researchers Niamh O Regan and Gideon Salutin, at the Social Market Foundation (SMF) believe that for a cash strapped government, social leasing is great way to increase the uptake of EVs

Transport has the highest carbon emissions of any sector of the economy. Decreasing the number of combustion engines on our roads and increasing the number of EVs is certain to be part of the solution.

There are encouraging signs that we are moving in the right direction – EVs account for 18 per cent of new car sales and are expected to rise to 22 per cent next year. EVs also have the commercial advantage of being cheaper to run, with fuel and servicing costs around 40 per cent lower than petrol or diesel engines.

That said, the sticker price of an EV remains high. The average mass-market EV costs £20,311, compared to £14,773 for petrol vehicles. In general, this means they are not a viable option for low-income households, even though they would stand to feel the greatest benefit from the potential savings.

Different strategies have been mooted to increase the uptake of EVs. The Conservatives have suggested reinstating the Plug-In Car Grant (PICG), which offered up to £5,000 off EV purchases. Unfortunately, subsidies like these are often poorly targeted, with most beneficiaries being households who likely would have bought an EV even without the grant. That makes such schemes expensive for the state. 

The PICG, for instance, cost the exchequer £1.36bn but added just 90,000 electric cars to the road. In a forthcoming SMF report, we show that rather than supporting lower-income households to buy an EV, government should instead encourage social leasing, following France’s lead. There, low-income households can lease an EV for an average of €100 a month for three years – well below the cost of a petrol lease. After three years, they have the opportunity to buy their car at a price discounted by the money already paid towards it.

“The average mass-market EV costs £20,311, compared to £14,773 for petrol vehicles”

A similar scheme in the United Kingdom, offering EV leases for £100 a month, would make leasing an EV both more affordable and more attractive. On average, it would cost the state £1,740 per vehicle per year. Eligibility criteria could heavily prioritise households in poverty, focusing initially on the lowest incomes and those in regions with poor transport links. The full cost to the state would depend on how many EVs they plan on subsidising, but working off existing prices, social leasing for 100,000 EVs would cost £174m a year, and that is before the expected fall in the prices of EVs is taken into account.

By subsidising rentals rather than purchases, and prioritising low-income households, the exchequer would save millions. The policy would put as many EVs on the road in a year as the PICG did in 10, and would do it for a fraction of the cost, all while pulling carbon out of the atmosphere and households out of poverty. At a time when lower-income households are worried about the cost of living, giving them the opportunity to run a car at lower cost and be part of the drive towards net-zero in an affordable way is simply good politics, too.

For an incoming government that will certainly be looking to keep a tight grip on the purse strings, social leasing presents an opportunity both to alleviate transport poverty and reduce transport emissions, without breaking the bank.

This article was originally published in The Path To Net Zero supplement circulated alongside The House magazine. To find out more visit The Path To Net Zero hub.

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