‘Social leasing’ EVs could lift low-income drivers out of transport poverty, says new report

• Proposal for £100-a-month ‘social leasing’ of EVs for low-income drivers
• Transition to EVs could help pull people out of poverty
• Scheme for 10,000 EVs would cost £175m annually
• ‘Electric avenue’ report produced by Social Market Foundation think tank

Social leasing could make EVs affordable for hundreds of thousands more UK
households, says the Social Market Foundation

The government should introduce a social leasing plan to pull lower income households out of fuel poverty and help them afford electric vehicles (EVs), says a new report by cross-party think tank the Social Market Foundation.

According to ‘Electric avenue: Increasing access to electric vehicles for low-income households’ about 5 million people in the UK are stuck in transport poverty and cannot afford the upfront cost of an EV.

The report suggests that social leasing would help lower-income households lease a car from a private company for a low monthly fee, with the government paying any difference between the fee and the market price.

Introducing social leasing for electric vehicles at £100 per month for low income consumers could make EVs affordable for hundreds of thousands of households.

According to the report’s executive summary: “High upfront costs for EVs mean they are disproportionately available to the richest households. Increasing accessibility to these vehicles for lower income deciles will be essential to meeting our climate targets and justifying them to the population. In doing so, policymakers can decarbonise our highest-emitting sector while pulling some of our most disadvantaged communities out of poverty.”

Gideon Salutin, Senior Researcher at Social Market Foundation, said: “Instead of waiting years for EVs to achieve price parity with regular vehicles, the government must be proactive.

“By reducing upfront costs through a social leasing scheme, we can remain on track for our net zero goals, and help hard-pressed families.”

These households would pay an additional £1,200 annually just to lease an EV, and pay as much for it over five years as it would cost to buy a used petrol car.

People would be considered based on eligibility criteria, including households with less than £8,000 in annual earnings per person, rising to £18,000 based on demand. 

Geographically, the scheme would focus on households with high driving needs such as those living over three miles from work. 

This could pull half a million people out of poverty and take between 900,000 – 1.5 million tonnes of carbon from the atmosphere annually, the report said.

Additionally, the report found that 982,000 people could be pulled out of poverty by the savings made on operational costs from EV transition, including 847,000 in England, 56,000 in Scotland, and 79,000 in Wales. 

The report claims that rural areas would benefit the most, with a 2.9% point reduction in poverty in rural areas compared to a 1.2% point reduction in urban ones. 

The report went on to state that EVs could help pull 940,000 people out of poverty in England and an additional 136,000 in the rest of the UK due to lower running costs. 

However, EVs have a higher upfront fee, saving drivers over £1,000 a year but costing £6,500 more than internal combustion engine (ICE) vehicles on average, meaning that low-income households would make a net loss for the first five years. 

The price of EVs and fossil-fuel powered cars are expected to level out by 2030, whether or not social leasing is considered, aligning with the government’s 2030 net-zero targets. 

Progress is already underway, with the price of a non-premium used EV costing £6,578 more than the average petrol car in February 2024, compared to £12,603 in October 2022.

Western EV manufacturers spent the last decade focusing on low volume, high cost models that catered to higher income earners to offset the high cost of batteries. The price of used premium EVs, including brands like Tesla, Lexus, and BMW, are now 45% below their peak in the Summer of 2022, yet still cost almost £20,000 more than petrol and diesel equivalents.

Additionally, UK subsidies have been inefficient with expenditure reaching over £15,000 for every EV and much of it going to drivers who could afford an EV without subsidy. 

According to the UK Zero Emissions Vehicles Mandate, car manufacturers must increase the proportion of sales made up by EVs, but reliance on EV demand and transport poverty has slowed the uptake.