The cost of car insurance for electric vehicles (EVs) has typically risen by £313 year-on-year in November, according to new research from Compare the Market. Annual car insurance cover for an electric vehicle in November 2023 cost £929 on average compared to £616 in November 2022.
The significant rise in electric vehicle premiums may in part be due to insurers facing higher repair costs. The rapid rise in inflation in the last couple of years will have likely impacted many areas of the motor repair industry including the cost of spare parts, energy, and hiring specialist mechanics, which in turn could be driving up repair costs for electric vehicles. Replacing some parts of electric vehicles such as new batteries can be particularly expensive.
The cost-of-living crisis may be causing a drop in demand for electric vehicles as these cars are typically more expensive than petrol equivalents. Sales of new electric cars have declined by 17.1% year-on-year in November according to figures from the Society of Motor Manufacturers and Traders.
Upcoming tax increases may also make purchasing EVs less appealing to motorists. EV owners will need to start paying Vehicle Excise Duty from April 2025. This will cost EV owners £180 per year from the second year of car registration at the current rate of tax. Many EV owners will also pay the expensive car supplement. This is currently set at £390 per year for cars with a list price of £40,000 or more in their second to sixth years of registration. This means that some EV owners could soon need to pay £570 more in road tax each year.
However, the cost of driving a petrol-fuelled vehicle has also increased by £337 over the past 12 months. The typical premium for a petrol vehicle now costs £980 in November 2023.
The lower average cost of insurance for an electric vehicle is possibly due to the profile of people who are likely to drive these vehicles. Due to the higher cost of purchasing an EV, these motorists tend to be older and therefore more experienced drivers. EV owners may also be more likely to have off-street parking to charge their vehicles overnight.
Drivers of both electric and petrol vehicles could save money on their car insurance by shopping before their policy is renewed. Motorists could save up to £516 on their car insurance through Compare the Market.
Julie Daniels, Motor Insurance Expert at Compare the Market, comments: “EV owners will be concerned about the surging cost of car insurance. Drivers who’ve made the switch to an electric vehicle will be glad their choice of car is more environmentally friendly, and they are substantially cheaper to run than petrol-fuelled cars. However, the significant upfront cost of buying an electric car and installing a home charging point along with the upcoming tax increases will prevent many drivers from being able to afford this option.”
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