New Compare the Market research says electric cars now ‘£525 cheaper to run than petrol’

The typical annual running cost for an electric vehicle is now £525 cheaper than a petrol car on average, according to new research from Compare the Market. The research looked at middle-aged drivers aged between 45 and 54 years old as an example to showcase the difference in electric vehicle premiums compared to petrol-fuelled cars.

The research, which analysed the price of insurance, fuel and road taxes, showed that the average annual cost of running an electric vehicle is £1,195. In comparison, a petrol car typically costs £1,720 to run for 12 months. The difference in running costs between the different types of vehicles has increased since 2023, when an electric vehicle was £357 cheaper to run on average.

The cost of car insurance has significantly increased year-on-year for both electric and petrol vehicles, the researchers said. The average premium for a middle-aged person driving an electric vehicle has risen by £139 in the past 12 months, while the average premium for a petrol car has jumped by £157. However, the average premium for an electric vehicle is still £195 more than for petrol vehicle if the driver is aged between 45 and 54 years old.

Compare the Market: average premiums (March 2024)

However, falling energy prices mean that the cost of electricity to run an electric vehicle for a year has declined by an average of £155. Electricity to power an electric vehicle for 12 months costs £400 on average compared to £555 last year. In contrast, the average cost of petrol to fuel a car for a year has decreased by £15 to £930.

Despite lower running costs, demand for electric vehicles has slowed in recent months as Society of Motor Manufacturers and Traders’ data show sales of battery electric vehicles have only increased by 3.8% year-on-year in March 2024. Electric vehicle owners will also face significantly higher running next year as they need to start paying Vehicle Excise Duty from April 2025. Many electric vehicle owners will also have to pay the expensive car supplement from 2025.

Julie Daniels, motor insurance expert at Compare the Market, said: “Motorists who’ve switched to an electric vehicle will be glad to see they can be substantially cheaper to run than petrol cars. As well as helping the environment, electric vehicle owners currently benefit from fuel and tax savings. However, the significant upfront cost of buying an electric car and installing a home charging point will prevent many drivers from being able to afford this option.

“The rising cost of car insurance for electric vehicles and higher road taxes from 2025 may also make switching less attractive to some motorists. One of the best ways to try and save money on your car insurance is by comparing prices ahead of renewal.”

Methodology

Insurance data was sourced from Compare the Market. 51% of Compare the Market customers aged between 45 and 54 were quoted less than the prices stated in this release for their car insurance for March 2024 and March 2023. These are for petrol and electric vehicle enquiries for comprehensive cover. Hybrid vehicles are included in the petrol-fuelled insurance figures.

Fuel cost

• Annual fuel costs based on drivers travelling 6,000 miles per year (ONS NTS0901 – Petrol car mileage: all cars 2022)

• Petrol priced at £1.47 per litre in March 2023 and £1.45 March 2024 (Source: BEIS Monthly: Typical/average annual retail prices of petroleum products and a crude oil price index (tab 4.1.1 quarterly).

• Fuel efficiency is 5.40 litres per 100km (Source: Department for Transport ENV0103)

• Electricity priced at 34 p per kWh in 2023 and 25p per kWh in 2024 (Source: Energy Price Guarantee 2023 and Ofgem 2024). Fuel efficiency is 16.9 kWh per 100km (Source: average efficiency for the ten most electric vehicle popular models on Compare the Market)

MOT cost

Vehicle tax rate

• Petrol car registered on or after April 1, 2017. Rates for second tax payment onwards. Single 12-month payment – £190, according to gov.uk