How to find the best electric vehicle loan for you

Gone are the days when spotting an electric vehicle (EV) parked on the street or driving down the highway was an unusual sight.

There are now more than 180,000 EVs in Australia according to the Electric Vehicle Council, and with the number of new purchases increasing every year they're only likely to become a more prominent fixture on our roads.

Like any car purchase, plenty of budding electric vehicle owners will either want or need to take out a loan to fund their new vehicles.

In fact, new data released by the Commonwealth Bank shows that one in five new vehicle loans taken out with the bank over the past 12 months were for electric and hybrid vehicles.

So for anyone considering going electric, is there anything worth looking for in an electric vehicle loan and what are the key points worth knowing about them?

What's the difference between an EV loan and a regular car loan?

As electric vehicle uptake has increased, so too has the number of loans available from banks and lenders, and the good news for prospective EV buyers is that there are a few different options available.

"You can use a standard car loan in many cases to purchase an electric vehicle, but there are also dedicated electric vehicle or green car loans which are specifically for the purchase of electric cars and hybrid cars," explains Richard Whitten, a money expert at comparison website Finder.

In terms of structure, each type of car loan still has the fundamental components you would expect, such as an interest rate, application and ongoing fees, a range of loan amounts and a time frame over which the loan will need to be paid back over.

What is different, in some cases, between traditional car loans and dedicated electric vehicle loans is what they can be used to help finance beyond the actual car.

"One thing that's a little bit unusual with some of the specialised electric vehicle loans is that they'll let people borrow a little bit extra to cover setup costs as well, like installing a charging port, for example," says Whitten.

Can an electric vehicle loan be used to purchase a hybrid?

Battery electric vehicles are by far the most popular option among Australians according to the Electric Vehicle Council, but there were still thousands of plug-in hybrid purchases in 2023.

So how do lenders view hybrids when it comes to electric vehicle loans? Whitten says that it really differs from lender to lender.

"If you're applying for an electric vehicle loan it's always worth checking the kind of the vehicles each lender accepts, because often with these kind of loans where the lender is using the car as security they have specific criteria.

"So obviously for an electric vehicle loan, it will need to be fully electric, though some will say that hybrids are also fine.

"Some lenders also specify slightly different interest rates and other conditions for hybrid versus electric cars, so that's something to keep in mind. I've noticed that a few banks have discounts if you're getting an electric car."

Which lenders offer electric vehicle loans?

As Whitten notes, it is possible to use many regular car loans to fund an EV purchase, but there are also a number of lenders offering specialised electric vehicle loans.

"It's fairly broad set of options for borrowers to choose between. Thinking about the big four banks, Commonwealth Bank and Westpac both have specific electric vehicle loans.

"Then you've got online lenders like loans.com.au, and there are also more and more credit unions starting to offer specialised electric vehicle loans."

How do electric vehicle loans compare in cost?

Despite the interest rate increases of the past two years, Whitten says that car loan rates in general are relatively competitive, particularly the rates available with green car loans and electric vehicle loans.

"At the lower end of the market you're looking at around 6% p.a. or slightly less for some of the green and electric loans. That's based on a borrower having an excellent credit score though, who's probably buying a new car which is used as security - so, from a lenders perspective, a relatively low risk profile.

"But if you don't tick all those boxes, you might be looking at a rate in the 8% to 9% range or even higher if you don't shop around."

Whitten stresses that interest rates do vary between lenders though, as do the application and maintenance fees charged with each loan, which is why he recommends comparing a few different options before settling on one.

What EV incentives are available?

Many of the rebates and concessions that were previously introduced for electric vehicle buyers have since been stopped, but there are still a few incentives available for EV owners depending on where they live:

• Australian Capital Territory: The ACT government is offering two years of free registration to owners of new or used zero emissions vehicles (such as fully electric cars) purchased between May 24, 2021, and June 30, 2024. Similar vehicles purchased after August 2022 are also exempt from stamp duty.
• Northern Territory: From July 1, 2022, to June 30, 2027, the NT government is offering free registration for new and existing plug-in electric vehicles and a stamp duty concession of up to $1500 (for vehicles valued up to $50,000).
• Queensland: The Queensland government is currently providing rebates of $3000 to $6000 on eligible new zero emission vehicles purchased from April 21, 2023. The rebate scheme does have a limited amount of funding though, so it's first in first served.
• Victoria: Green cars, which are defined as models with combined tailpipe carbon dioxide emissions of 120 grams or less per kilometre, are currently eligible for a reduced rate of transfer duty compared to some other passenger vehicles in Victoria.
• Western Australia: The Western Australian government is offering rebates of $3500 to purchasers of eligible zero emission vehicles. The scheme will only run for a limited time though: either until 10,000 rebates have been handed out, or until May 10, 2025 - whichever comes first.

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