EV Finance: Battery Warranty & Residuals

Why battery warranty and residual value drive EV finance decisions

When EV owners get a new car through finance, two things are very important. One is the battery warranty. The other is the value of the vehicle at the end of the lease term. This is also called the guaranteed minimum future value in PCP deals. As EV adoption grows, lenders now change how they set loan terms and think about risk. They pay more attention to electric vehicle technology, battery life, and what the car could be worth in three or four years. All of this helps them make better lease and PCP deals for you when you get an EV. This also lets you plan better for the end of the lease term.

Your final decision about PCP, HP, leasing, auto loans, or salary sacrifice depends on a few things. You need to think about how you feel about your car going down in value. You also have to know how long you want to keep the car. Make sure to check if the warranty still covers you when you sell it, give it back, or make the final payment.

Battery warranty basics in plain English

Most UK EVs have a special traction battery warranty. This is not like the full cover that comes with the whole car. The battery warranty in the UK usually lasts 8 years or around 100,000 miles. A few brands could give you a higher mileage limit. There are two things that matter most about this:

1. There is a limit on how long you can use it or how many miles you can drive.
2. There is a promise about the battery capacity. For example, the warranty might help if the battery drops below about 70–75% during this time.

What the warranty usually covers

• Problems in the high-voltage pack can be due to how it is made or the materials used in it.
• A drop in battery power happens when it goes lower than a set level in the given time.
• Some plans include connected parts such as the battery management system, contactors, and the cooling system.

What it may not cover

• Normal wear and tear that does not pass the set limit.
• Damage that happens when people use it the wrong way or change it without asking for permission.
• Not doing the needed work or updates to the software.

Older models and transferability

Some older models may have had shorter time limits or other rules for what they cover. You need to check if you can move the cover to someone else. If you can, it may help when you want to sell it. This makes the older models have a higher value when you go to sell them. It can help you get more out of your older models and be good for both you and the next person.

Battery life, battery performance and what influences them

Real-world battery performance is the result of several things. The type of battery, how the pack is made, the software inside, how you use it, and the weather all make a difference. All these help decide how good the battery is over time. Still, there are some clear ways to make battery performance better.

• Charging habits: Using DC rapid charging can be handy when you need to go on long trips. But when you are at home, it is better to charge slowly with AC power. Try to keep the battery between half and full as much as you can to help with battery life.
• Temperature: Hot and cold weather can change how far you can go. The car tries to protect the battery, so it does not get hurt in the long run. Still, you should think about this when planning long distances.
• Regenerative braking: A good regenerative braking system gives you some energy back and makes your brakes last longer. It does not help battery life much as the years go by, but it does let you go further every day.
• Software & servicing: The company sends updates to the software often, which can help with things like battery life and heat or cooling systems. Always save your records for service and updates, because the warranty will need you to have them.

The main thing to know for finance is easy to see. Cars that have better packs and can go for more miles on the road often keep their value for longer. This can help them have strong residuals too.

Residual value 101 (and why it’s different for EVs)

Residuals are what your car might be worth after the lease or PCP ends. This number helps pick how much you pay every month for leasing or PCP deals. For electric cars, people look at what it could be worth later so they can set the price now.

• You need to check how good the brand is and see if the battery pack will last a long time.
• Look at how long the battery warranty will be, and what you get if you choose to sell your car later.
• It helps to know if people want used cars, where to charge them, and the amount you pay for energy.
• The world of electric vehicle technology changes fast. There are better batteries now and you can charge them quicker.
• There are different types of electric vehicles. Some are BEVs that run only on electricity, and some are PHEVs you can plug in, but they also use regular fuel.

As things improve for EVs and there is more data out now, the prices for used EVs have mostly stayed the same. EV models with batteries you can trust and longer support from the maker often have better resale value. Older models that only have short warranties do not hold their value as well.

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EV finance products compared (with key differences)

Personal Contract Purchase (PCP)

• You start with an initial deposit and then pay a set amount each month to cover the drop in the car’s value.
• At the end of the lease, you have a choice. If you want to keep the car, you make a final payment, sometimes called a balloon payment. If you do not want to keep it, you give the car back.
• Cars that have good resale value and long warranties can help make your monthly payments lower.

Hire Purchase (HP)

• There be an easier way to own the car. You just make a deposit and then pay equal amounts over time. After the last payment, you get to keep the car.
• This be good if you want to have the car for a long time after the finance ends while the battery warranty still be good for some years.

Leasing (Contract Hire)

• The monthly payments are usually the lowest you will find, and the lease often does not need a significant upfront payment.
• You do not own the car during the lease term. At the end of the lease, you give the car back, so you do not have to sell it or look for a buyer.
• There are rules about how many miles you can drive and about the car’s condition. The warranty, and how long it lasts, also helps decide what the car will be worth by the end of the lease term.

Green auto loans (personal loans)

• A fixed-sum credit is a normal loan. You get to own the car at the start.
• Some lenders offer green rates when you go for EVs. The credit score you have and the length of your loan will change the cost.

Salary sacrifice (employee benefit)

• You give up part of your main pay to get a leased EV. Tax savings and National Insurance savings help pay for the lease, because Benefit-in-Kind is low on an EV.
• This is good for people who want an easy and steady way to use a car. If you leave your job, you need to check what will happen with your lease.

Key differences to ICE finance

With cars that have an internal combustion engine or use a combustion engine hybrid, you spend most of your money on fuel and keeping the car in good shape. In electric vehicles, it costs less for the electricity you use when you drive each mile. It is also easier to take care of these cars. Because of this, the total cost of electric vehicles can be different, even if the price of the new vehicle seems higher at first. Lenders think about these costs as well, and use them to see if you can pay for the car.

Worked finance examples (illustrative)

Example A: 3-year PCP on a family EV

• The price of the new vehicle on the road will be £38,000.
• You will have to pay an initial deposit of £3,800. This is 10% of the total price of the new vehicle.
• The term is set for 36 months.
• The APR is 6.9%.
• The GMFV is £18,500. A good warranty can help keep the value strong.

Paying for the car’s price drop from £34,200 to £18,500, including interest, means your monthly payments are hard to match. If the car had a weaker warranty, the GMFV might be about £16,500. This would push your monthly payments higher, even if the APR and term do not change.

Example B: 4-year HP on a compact EV

• Price: £28,000
• Deposit: £2,800
• Term: 48 months
• APR: 7.5%
• When you finish your payments, there is still battery cover time to use. If the warranty is for 8 years, then you will have 4 years left after paying for 4 years. This is good if you think about selling it later.

Example C: 3-year Lease

• The EV is from the same family. It comes with a limit of 10k miles each year.
• Significant upfront payment: You need to pay six months’ rent before you start. PCP needs just a deposit.
• Rent prices are set by funders based on what they feel the car will be worth later. A long battery warranty means less risk for them. This can help lower your monthly cost when you compare it to an ICE car that is similar.

These examples are here just to give you the basic idea. The residuals and warranties both change how much you pay every month. These things also change what your choices are when you want to finish your contract.

Leasing versus buying an EV: pros and cons

Pros of leasing

• With a lease, you pay less money at the start. The initial deposit or the significant upfront payment is smaller with a lease than with PCP.
• At the end of the lease, you do not have to care about what the car is worth. You do not have to think about if resale prices go up or down.
• When electric vehicle technology gets better, it will be easy for you to upgrade and change to a newer car.

Cons of leasing

• There is no equity. The car’s mileage and its condition be important.
• Ending the lease early can cost a lot.

Pros of PCP/HP (buying on finance)

• If the car is worth more than you thought, you may get more money back.
• In HP, you do not need to think about the miles you drive. In PCP, you can pick how you pay your final payment.
• It’s good to have the car in your name if you like to go on long distances or keep your car for a long time.

Cons of PCP/HP

• You need to handle the risk if the car goes down in value as time goes by. The monthly cost is often higher with this than with a lease for the same car.

If you do not know what to choose, compare car finance options like PCP, HP, lease, and auto loans. Be sure to use the same details for each one. This means looking at the same term, yearly miles, and deposit. This way, you can see the key differences in what you pay and the risks you might face with each choice.

Extended warranties for Tesla and other brands: what to check

When you get extra protection from the manufacturer or another company, read everything. You need to know what is included and what is not in the plan. Look for things that are not covered. There can also be special rules that you should read. This helps you make a good choice. Take your time to read and understand all the small details before you decide.

• Do the high-voltage parts like the inverter, DC-DC converter, onboard charger, and BMS come with this?
• When the term is up, is there a battery performance limit for how much power it can still hold, or do they only help if the battery will not work at all?
• Are software checks or fixes included? A lot of new EVs need this.
• Are there rules about labour or how many times you can claim repairs? Can I only get repairs at the dealer?
• Can someone else have it if I sell the car? This could help the value of my car.

Extended cover that matches the first traction-battery terms is rare. If you get it, it can be good when you sell your car. This helps more if you plan to pay off the car over a long period of time.

Battery leasing models and the impact on finance

Some brands used to make their cars different by offering a battery lease. This means you pay less when you buy the car. It can also help keep the car’s resale value about the same. This is because the battery, which can cost a lot, is leased from the car company. But you will have to pay an extra fee every month.

If you do about the same mileage every month and want to keep your costs steady, a battery lease might be a good option.

However, this type of lease is not seen as much now when you get a new vehicle.

Driving patterns, range confidence, and resale

Used buyers want to be sure about what they are getting. Cars with a steady range, that work well in winter, and have a clean service record, often sell for better prices.

If you go on long trips, it is good to look at cars with bigger batteries and faster charging.

If you only need to drive a short way in the city, a small battery car will still work well. A small battery can also cost less every month.

For PHEVs, you can use just electric power for daily trips. This can help you save on fuel and might also keep the car’s value high. But, if PHEVs have a short electric range, they may lose value like regular gas cars. This is more likely if people think the car is too complex and feel it does not give enough EV savings.

The role of credit score and deposit strategy

Your credit score can change your APR. It grows over three to five years. There are two things you can do:

• Initial deposit: A bigger initial deposit can help you pay less interest as time goes by. It can also make it easier to get approved for the lease, especially if you are close to meeting the rules.
• Term discipline: Try to keep your lease term or how long you finance the car in line with the battery warranty. This way, you do not end up with a car that is out of warranty when you want to sell it.

If you do not have much cash, it is good to check how much you will need to pay for the whole contract. Do not just look at what you pay each month. This is key if there is a final payment at the end.

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Total cost framework (beyond the headline monthly)

A quick and easy total cost checklist so you can compare things in a fair way.

• Upfront: You will need to make an initial deposit or a significant upfront payment. There may also be some extra fees to pay at this time.
• Ongoing: Each month, you will have to make instalments. The costs can also include insurance, tyres, servicing, and you may need both home and fast charging.
• Taxes/charges: You may have to pay VED class tax or local road charges, like the ones for clean-air zones.
• Exit: At the end of the term or if the PCP ends, you might have to make a final payment. There can be delivery or collection fees, extra charges if you go over your mileage, or costs to fix any damage.
• Residual: The value of your car at the end of the term depends on how much demand there is for your trim and spec in the market.

Use the same idea to look at an internal combustion engine car. The price of the new vehicle for an EV can be higher when you buy it. But the running costs are less for the EV. After three to four years, this will help you make up for the bigger starting price. You may even spend less with an EV than with a combustion engine car.

How UK EV Finance Compares to the EU

When you look at the finance terms for electric vehicles in the UK, you find that they are much like the ones in the EU. But there are some things that EV owners should know. In many EU countries, new EVs often come with battery warranties that match UK rules. These warranties usually last for 8 years or up to 100,000 miles. Some companies in Germany and the Netherlands add more to the battery life and give better performance in their EV finance deals. This can be good for people who get their EV in these countries, and not just in the UK.

Residual values in the EU can change based on how many people drive EV cars. Some countries or areas have better charging stations and more help from the government. When this happens, the value of the vehicle at the end of the lease term can be higher. UK drivers should look at trends like EV adoption and government incentives. That can help you get what you need when making your final decision about PCP, HP, or lease term for your EV.

The UK and EU use almost the same electric vehicle technology. Even so, different things change the total cost and value, like government incentives and how much people want to buy an EV later. Know that these points can affect your initial deposit, loan terms, and the way you will pay your final payment at the end of the lease or PCP agreements. So, it is good for us to compare these before deciding what best suits you or your needs.

Government incentives and employer schemes (overview)

National grants for buying EVs have changed as time has gone on. But people who choose to get EVs still have some good things to enjoy. There is low Benefit-in-Kind tax for company cars. You may get local help with the cost to set up a home charge point. In some areas, road charges are also lower for EVs. If you use a low-BiK salary sacrifice plan and pick a car that has a long battery warranty, you can have a good total cost for your daily drive. This way is good for people who use their car to get to work.

Where “compare car finance” really helps with EVs

Different lenders see the leftover value of a car in their own way. So, if you get two PCP quotes for the same EV, they can be very different. This is because they each use their own steps to set the GMFV and APR. If you want to compare PCP car finance plans for an EV, the GMFV and APR are the main things you should look at.

• You see who has the long traction-battery warranty. The company lets you know who gives you credit for this.
• You find which loan terms go with your mileage and the way you will use the car.
• You can check PCP, lease, and HP at the same time. It is simple to spot the key differences on one screen.

Do this again before you reach the end of the lease or the finance term. At this time, you need to decide if you will refinance the balloon payment. You can also choose to change to a new vehicle or pick a new brand.

Practical pre-purchase checklist for EV finance

1. Make sure you know how long the traction-battery warranty lasts. You also need to know what the lowest battery capacity is for the warranty to stay valid.
2. Check if you can switch the warranty to another owner. This will help if you want to sell your electric vehicle later.
3. Match any new deal time with the amount of warranty you still have left if you plan to leave before the end.
4. Look up the expected GMFV or final values from at least three lenders. This is good to get.
5. Figure out your real mileage so you don’t end up paying extra money.
6. Go for a drive and check where you will charge, like at your home or at public stations. Also think if you will need to drive over long distances.
7. Think about all the types of electric vehicles like BEVs and PHEVs. Pick the one that best suits your needs.
8. Think about if you feel okay even if the future values go up or down by 10%.
9. Keep the electric vehicle software and services up to date. This will help battery performance and keep your car worth more.
10. Save all the results from your checks. Look back at them each year because things in the market can change.

FAQs about EV Finance: Battery Warranty & Residuals

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