If you’re thinking of taking out an electric car loan, you’re one of many who are hopping on the EV bandwagon! The electric vehicle (EV) market in Australia is booming. According to the latest statement from the Electric Vehicle Council’s ‘State of EVs’ report, more electric vehicles were sold in the first half of 2023 than during the entire preceding year. Forecasts predict that electric vehicle sales will make up 8.4% of all new car sales in Australia by the end of the year.
This substantial increase is thanks to a growing environmental awareness coupled with government incentives and improved infrastructure (public charging facilities increased by 57% during the past year alone). But while more people are interested in buying an EV, many are still unsure how to go about financing an electric vehicle.
Muscle Money has put together the following EV Financing Guide to answer some common questions about how to finance an EV. We’ll break down the types of electric vehicle loan options available and include some important factors to consider when including an electric car in your financial plans.
Why Apply for an Electric Car Loan?
Applying for an electric car loan and buying an EV comes with a range of fantastic benefits, such as:
- Environmental advantages: There’s no denying that electric vehicles are better for the planet than traditional internal combustion engine (ICE) cars. With an electric vehicle, you’ll have reduced greenhouse gas emissions, a lower carbon footprint and improved energy efficiency (not to mention better air quality and reduced noise pollution).
- Long-term cost savings: Electric vehicle owners can benefit from substantial long-term savings. With an EV, you’ll have reduced running costs (with electricity generally being cheaper than petrol or diesel, per km) and lower maintenance costs (fewer moving components in an EV engine equals fewer parts to wear out or break). Electric vehicles also hold a high resale value and will typically have a longer lifespan than a traditional vehicle (thanks to the simplicity of the drivetrain).
Incentives and rebates available: Electric vehicle drivers may be eligible for a number of federal and state/territory-specific incentives and rebates. These include a higher threshold on the Luxury Car Tax, lower customs duties on EV imports and potential exemption from the Fringe Benefits Tax.
Electric Vehicle Loan Options
There are a number of different electric car loan options available to Australian buyers, so take the time to do a bit of research before committing to a specific form of financing. Researching available electric car financial plans will help you get the right finance option to suit your needs. EV finance options include:
- Traditional auto loans: These may be secured (where the vehicle is collateral for the loan) or unsecured car loans that are available from a range of lenders.
- Green loans: Specifically designed for environmentally friendly purchases, green loans often come with reduced fees and lower interest rates.
- Leasing arrangements: This could include an operating lease (where you return the EV at the end of the lease), a finance lease (where you have the option to purchase the vehicle once the lease term ends) or a novated lease (where payments are deducted from an employee’s pre-tax salary).
- Dealer financing: Most car dealerships will offer some form of finance, usually in partnership with a specific lender (although these may come with higher interest rates or fees).
Factors to Consider When Thinking of an Electric Car Loan
Because there are so many options available when it comes to financing an electric vehicle, it’s important to compare the following details before making a final decision:
- Interest rates: Even minor variations in interest rates could add up to significant costs…or savings, over the life of the loan.
- Loan term length: Adjusting the length of the electric car loan will affect the amount of interest you end up paying, but it could also make monthly repayments more manageable.
- Deposit: Some lenders may offer a reduced interest rate or other savings if a buyer can provide a deposit at the time of purchase.
- Total cost of ownership: Make sure you take the time to compare the total cost of ownership when comparing loan options. This would include overall purchase cost, total interest paid and any associated loan fees.
Understanding Rebates and Incentives
There are so many different rebates and incentives currently available to electric vehicle buyers, but eligibility criteria will vary depending on where you plan to purchase and register your EV.
- Federal and state incentives: All Australian states and territories currently offer some form of purchasing incentive for electric vehicle owners. However, these incentives are often for a limited time only or available to a restricted number of buyers, so check government sources for up-to-date information.
Manufacturer rebates: Certain dealerships may offer cash rebates on specific electric vehicle purchases, so it pays to shop around.
Tips for a Smooth EV Financing Experience
Applying for a loan can be stressful – but it doesn’t have to be. With the right advice, financing your electric vehicle purchase can be straightforward and simple. The specialist team at Muscle Money recommend the following three tips for a smooth EV financing experience:
- Don’t underestimate the importance of a good credit score: A good credit score could be the difference between your application getting approved or denied. That’s why the team at Muscle Money are passionate about protecting our client’s credit scores.
- Researching and comparing loan options can save you a lot of money: The first finance offer you see is rarely going to be the best one. Don’t have the time to research and compare? That’s OK – we’ll happily do it for you.
- Read the fine print and make sure you understand the loan terms: This is so important but is often skipped over. Our brokers can explain any fine print you’re unsure about to make sure you’re 100% satisfied with the terms of your loan.
Benefits of Financing Through Muscle Money
It can be very difficult for the average person to accurately compare electrical vehicle financial plans. When you choose to finance through Muscle Money, you’ll gain access to:
- Technology-driven solutions
- Competitive rates
- Tailored loan options
- Expert guidance and support
- Stream-lined application process
The future of transportation in Australia is electric, and with the right financing, it’s now within reach for many. The Muscle Money online platform and experienced team can help you explore lender options for electric vehicles that are tailored to you. So, if you’re interested in learning more about how to finance an EV, then contact Muscle Money today.
Caleb Waye-Harris, Senior Manager of Asset Finance at Muscle Money, has almost 15 years of relevant experience in the finance industry. His extensive background includes project management, consumer and commercial lending and asset-based lending.
