Know your PCP from your HP: The confident guide to financing options for electric vehicles
March 2021 | Written by Karen Kennedy, Bank Of Ireland Finance
Protecting our environment for generations to come remains a prevalent concern for all consumers nowadays and we all know that one of the key enablers is to reduce our CO2 emission globally. If there is one thing that this awful Covid-19 pandemic and the numerous lockdowns have shown is that with less traffic on our road, the environment responded with improvements in the quality of air, cleaner rivers, less noise pollution, undisturbed and calm wildlife – an experiment you could say like no other.
We know that in a normal environment, passenger cars account for approximately 12% of total EU greenhouse gas (GHG) emissions. As part of the European Green Deal, the EU will implement strict CO2 emission targets over the next ten years that will force car manufacturers to produce more carbon-neutral cars which will in essence accelerate the move to Electric Vehicles (EVs). Furthermore, in October 2020, the Irish government has committed to Ireland being net-zero carbon emissions by 2050.
That’s all very well but what does that mean for me as a consumer looking to make a car purchase and protect the environment in 2021?
The good news is that there is certainly more choice now with all manufacturers and distributors having an EV option for customers. The technology still remains expensive to produce and it is expected that the requirement for government subsidies (SEAI grants) will continue into the future. Financing the purchase of EVs is also an option worth considering with lots of brands offering low interest rates even as low as zero.
So, once you have navigated the grant available and the electric car most suitable for your driving needs, what are the payment plans that are available to you and how do you go about figuring out what is the most suitable for you? The good news is that the same finance products* that would be available on a diesel, petrol, or hybrid car through your motor dealer are available with Bank of Ireland Finance. The two finance options below are the main products offered to customers by their motor dealer and both are available when purchasing an EV. Let’s look at them now in more detail to understand how they work.
Standard hire purchase: A hire purchase agreement splits the cost of the car into a deposit usually 20% of the cost of the EV (taking the current SEAI grant into account) and a number of monthly repayments over a set number of years (2-5 years) to suit your budget, with interest added. After the final payment is made at the end of the agreement, the car belongs to you. The repayments are fixed for the duration of the agreement which makes budgeting and planning easier.
Personal contract plan (PCP): A PCP is a specific type of hire purchase which is typically over a three-year term combining a low monthly repayment and flexible options at the of your agreement. After the initial deposit usually between 10% and 30% of the cost of the EV (taking the current SEAI grant into account), the monthly repayments on a PCP are usually relatively low, because a significant amount of the cost is held back until the end of the PCP period which is called the Guaranteed Minimum Future Value (GMFV). This GMFV means you don’t need to worry about the resale value of your EV at the end of the agreement or the depreciation associated with owning a car. This guarantee gives you good peace of mind on the valuation of your EV as we watch the technology continue to evolve over the coming years. At the end of your PCP, you can pay the GMFV to own the car outright, trade in the car at any dealership of your choice, and take out another PCP to fund a newer car or hand the car back to the dealer with nothing further to pay**.
Deciding which finance option is best for you is really important and you should take the time to do your research in terms of the products that are available to you. Ask yourself, how important is it for you to own the car, or do you like to change your car every three years and avoid costs such as NCT, etc.? Look at the interest rate, the term of the agreement, the deposit required, and if in doubt contact your motor dealer to discuss your options. They will be happy to talk you through the terms and conditions and explain how the particular finance options you are looking at works. There are some great offers in the market at the moment across the EV product range and the electric car market looks set to continue to grow year on year. Hopefully, it means we well on our way to reduce the overall EU greenhouse emissions for generations to come.
To see Electric cars for sale with Bank Of Ireland Finance available, click here.
*Finance is provided by way of a Consumer Hire Purchase agreement. The credit provider is Bank of Ireland trading as of Bank of Ireland Finance. Lending criteria and conditions apply (over 18s only). Ownership remains with Bank of Ireland until the final payment is made.
**subject to the Wear & Tear agreement and it is within the agreed kilometres.