Motor finance that doesn’t cost the earth

Earth Day, on 22 April, offered executives in the automotive finance sectors an opportunity to consider their role in the Green Revolution. Chris Farnell reports.

This Earth Day is a pivotal one. We have less than eight years left until the government’s deadline banning the sale of new petrol and diesel cars in the UK by 2030. A £2.8 billion windfall has been granted to support the nationwide switch to electrification, including £582 million for vehicle grants, £1.3 billion for grid capacity and charging infrastructure and £1 billion for industrial and supply chain transition. At the same time, there has been cause for cautious optimism, as a week before Earth Day scientists announced it may be possible to keep global warming beneath 2 degrees Celsius, if all countries adhere to their climate pledges.

Keeping to those pledges will be an effort in itself, but looking at the way the market is trending, the energy transition of the automotive sector is looking promising, and the finance market has an important role to play in that.

Right incentives

First and foremost, for the changeover to be truly embraced by consumers, EVs must be and be seen to be, more economical than their fossil fuel-powered counterparts.

Fortunately, Volkswagen Financial Services UK (VWFS) has carried out research that suggests that the monthly cost of ownership for many electric vehicles is already considerably cheaper than comparable petrol or diesel cars. Its figures suggest that drivers could save as much as £80 per month on selected EVs versus comparable petrol and diesel counterparts.

The research demonstrates the important role motor finance companies play in the switchover, as VWFS UK’s use of Volkswagen’s Cost of Ownership tool has allowed it to calculate the estimated cost of ownership of each vehicle by combining the retail price of a car with its average yearly running costs based on a selected mileage, taking into account length of ownership and tax, although excluding the costs of finance.

VWFS also offers the EV&Me app, created alongside Audi to show customers how an electric or plug-in hybrid vehicle could fit into their lifestyle, and by analysing driving behaviour the app gives insight into how many journeys can be driven without stopping to charge – as well as the cost savings that come from the switch to electric.

Manufacturers and retailers have a greater duty than ever before to help more drivers make the switch to electric vehicles.

Mike Todd, CEO at Volkswagen Financial Services UK

As Mike Todd, CEO at Volkswagen Financial Services UK, says, “Manufacturers and retailers have a greater duty than ever before to help more drivers make the switch to electric vehicles. This will be achieved by showing that the overall cost of an EV is not as big a barrier as once perceived, and in fact can be cheaper than most comparable petrol or diesel models. Naturally, the challenge is to show customers the financial benefit that switching can have and useful tools like 'cost of ownership calculators' and the EV&me app are great ways of showcasing the savings that can be made by embracing greener and sustainable travel.”

We are already seeking results, as further research by VWFS has shown that even luxury brands such as Porsche and Bentley are seeing a major spike in EV supercar interest following the pandemic. VWFS is reporting steady increases in finance case activations across Battery Electric Vehicle (BEV) and Plug-in Hybrid (PHE) supercar models in recent years. The finance provider’s data shows annual finance cases for the all-electric Porsche Taycan surged 36% from 2020 to 2021, making it Porsche’s best-selling model in 2021.

“The UK’s electric car market is in overdrive at the moment and the rapid acceleration of demand for electromobility has led to a phenomenal growth in this sector, and this is no different when it comes to luxury car brands,” Todd says. “Our data shows there is huge demand from customers for electric luxury supercars and brands such as Porsche and Bentley are making the migration to EVs a really smooth journey. People are more environmentally conscious than ever before but that doesn’t mean having to compromise on the thrills associated with driving a sports car. Electromobility is the future of green transport and sales of eco-friendly Porsches and Bentleys show no sign of slowing down.”

Porsche’s goal is for one-third of its sales to be electric vehicles by 2025, including new battery-fuelled versions of its 718 Boxster and Cayman sports cars and its Macan SUV.

Small changes add up

While the drive to persuade, nudge and encourage individual consumers to make the change to electric is an important and ongoing effort, it is equally important to see fleet managers make those changes on a company-wide scale.

Melanie Creedy, the new EV Business Development Manager at Northgate Vehicle Hire points out, “For a lot of fleets, the Drive to Zero can seem challenging, but Northgate have taken steps to simplify the process as much as possible at all levels. There are five key steps within our electrification programme which include fleet analysis, vehicle choice, driver training, charging infrastructure provision and of course, a robust implementation plan. We know that with the right framework in place for a transition to EVs within a business, it can be a remarkably simple process.”

Creedy was appointed to the role of EV Business Development Manager last month to reinforce Northgate’s ongoing commitment to the electrification of its customers’ fleets. In her new position, Creedy will set up robust strategies to help businesses manage the transition to electrified fleets on a national level, with turnkey solutions and EV infrastructure.

We know that with the right framework in place for a transition to EVs within a business, it can be a remarkably simple process.

Melanie Creedy, Northgate Vehicle Hire EV Business Development Manager

Melanie adds “I am excited to be working for such an established brand within the industry, and one with such an extensive national reach. I am delighted to simplify that process as much as possible at all levels.”

Tusker, a carbon-neutral company providing company car and salary sacrifice car schemes to organisations in both the public and private sector, has seen the transfer take place from several perspectives. The company CEO, Paul Gilshan, emphasises that while the challenge is big, the solutions will be small, but many.

“While big changes are already being made at national levels to reach net-zero, it is the small changes which we can all make, which will have a big impact overall,” he explains. “While Tusker has been carbon neutral as a business for more than a decade and has recently become a net-positive carbon contributor to the environment, we also now enjoy carbon-neutral offices, send zero waste to landfill, we encourage our employees to leave their cars at home, where possible we hold business meetings online to cut down on business mileage and we are very proud that our core product is driving more lower-salaried employees into electric vehicles for the first time. All small things but together all these incremental changes represent real change.”