How to Finance an Electric Vehicle: A Comprehensive Guide

Driven by the growing concerns about climate change, technological advancements, and government incentives, the electric vehicle (EV) market is experiencing rapid growth, with India being no exception. To highlight the fact, India's EV market is expected to grow at a CAGR of 22.92% to reach $120 billion by 2030, as per the report by Mordor Intelligence.

In fact, ever since electric vehicles gained popularity, there has been a surge in interest in financing options for purchasing these eco-friendly vehicles. In 2023, according to data released by Autotech company CAR24, it was remarked that owing to ease and accessibility, three out of every five Indians prefer getting their cars financed.

So, are you ready to drive green? If yes, then this comprehensive guide will walk you through the many financing options for your electric vehicle purchase, including regular auto loans and specialty EV financing schemes. We will also provide advice on how to optimize government subsidies and rebates to make owning an EV more affordable while embracing a greener lifestyle.

Financing Options for Electric Vehicles

When it comes to asset finance options for electric vehicles, there is no 'one-size-fits-all solution. The best solution always depends on the individual's needs and situations.

Personal Loan

If we talk about a personal loan, it is an unsecured loan that can be used to purchase an electric vehicle. The interest rates for personal loans are generally higher than other financing options, ranging from 9.60% to 36% per annum.

Personal loans are ideal for those who want flexibility but not secured against the vehicle. A borrower can therefore:

• Borrow more than the value of the vehicle if required.
• Sell the vehicle without being obliged to settle the agreement.
• Spread the load over a longer term than Personal Contract Purchase (PCP) or Higher Purchase (HP).
• Not limited by any mileage agreement.

EV Loans

Today, among various options, the one that has significant traction in today's era is an EV loan. It is a specialized loan designed specifically for electric vehicle purchases. These loans offer competitive interest rates that vary from bank to bank. For instance, SBI's green car loan interest rate starts at 8.50% per annum. On the other hand, HDFC Bank's EV loan interest rate starts at 9.20% and depends on the loan amount, tenure, and CIBIL score. While PNB's green car (E-Vehicle) loan interest rate is 8.75% per year for a floating-rate auto loan and 9.75% for a fixed ROI.

Thus, EV loans are ideal for those who want to purchase an electric vehicle without using their savings. The basic documents for applying

for an EV loan includes:

• PAN card and Aadhar card for identity proof
• Utility bill, passport, rent agreement, sales deed for address proof
• Bank statement of last 6 months reflecting salary credit
• Shop and registration certificate, GST registration, property documents, maintenance bill, electricity bill for business existence proof

Hire Purchases

Hire Purchases is a popular financing option for electric vehicles. In fact, this option is suitable for businesses and individuals who use the vehicle for commercial purposes. In this option:

• The lender owns the vehicle, and the borrower hires it for an agreed term of up to 5 years.
• The funds are paid directly to the car dealer, not you.
• The amount borrowed cannot exceed the value of the vehicle.
• The loan is attached to the vehicle. The vehicle will be in your name, but title ownership only passes to you after the final payment.
• The vehicle cannot be sold unless the agreement is settled at the same time.

Personal Contract Purchase (PCP)

Personal contract purchases are the next option on the list. Individuals can purchase an electric vehicle by making an initial deposit and then paying monthly installments. The borrower has the option of returning the car after the agreement or purchasing it for a specified sum. Therefore, PCP is suitable for individuals who desire to drive a new car every few years.

Personal Leasing

Last but not least is personal leasing. This financing option allows individuals to use an electric vehicle for a set of periods in exchange for a fixed monthly payment for an agreed term of up to 5 years. And if at the end of the contract, the vehicle is within the agreed mileage and undamaged, it is handed back and a new vehicle is selected.

Hence, leasing is suitable for businesses and individuals who want to use the vehicle for a short period or want to avoid the hassle of vehicle maintenance. Leasing features also include:

• Your monthly payment includes the road tax
• There is an option to add a maintenance contract
• The only additional costs are fuel and insurance
• There is no option to purchase at the end of the agreement

Though different institutions provide different types of financing, keeping a few tips on how to optimize government subsidies and rebates is essential to make an EV more affordable:

Research: In order to make an informed decision, you must familiarise yourself with the various government subsidies and rebates, including FAME 2, Section 80EEB and Electric Mobility Promotion Scheme 2024 offered for EV purchases. These incentives include tax credits, incentives, and exemptions from certain fees. For example, the Indian government offers tax incentives for EV owners, including a tax exemption of ₹1.5 lakhs of interest paid on their loan amount. under Section 80EEB.

Combine Incentives with Manufacturer Offers: You must look for manufacturers that offer additional discounts or incentives for EV purchases. Some manufacturers offer discounts, free charging equipment, or other perks that can be combined with government subsidies to reduce the purchase price.

Consider State and Local Incentives: In addition to federal incentives, many states and local governments offer their own subsidies and rebates for EV purchases. For example, some states offer rebates for EV purchases, exemptions from sales tax, or access to HOV lanes. Be sure to research these incentives and factor them into your purchase decision.

By optimizing government subsidies and rebates, you can make owning an EV more affordable while embracing a greener lifestyle.

Now is the time to go green!

In today's ever-changing world, financing an electric vehicle is becoming more accessible. With a variety of alternatives available, including personal loans, EV loans, hire purchases, personal contract purchases, and leasing, you may find the perfect fit for your financial needs. Furthermore, by maximizing government incentives and rebates, you can make buying an EV more economical. So, why wait? Drive green to help create a more sustainable future!