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A new report claims that electric vehicles are cheaper to own over a period of seven years than an equivalent car with a petrol or diesel engine because they are over £1,300 less expensive to run a year.

Popular battery-powered models offer such lower annual running costs that it bridges the premiums drivers pay to purchase them, according to LV= General Insurance.

The claim was made as part of its newly published Electric Car Cost Index, which takes into account the combined cost of purchase price, tax, insurance, fuel and maintenance costs for nine EVs compared to rival models with engines running on fossil fuels.

Are EVs cheaper than ICE cars? A new index has been launched to compare to ownership costs of a battery-powered model versus one with a petrol or diesel engine. It claims the higher premium purchase price of an EV is made back after 7 years of cheaper running costs

Three of the nine electric cars included in the study – Nissan's Leaf, Volkswagen's ID.3 and MG's ZS EV – work out cheaper whether bought outright, leased or via finance.

It found that the MG ZS EV offers the biggest long-term savings – £13,316 on outright purchase over seven years, £5,772 via a standard lease agreement over four years and £2,320 via a standard PCP finance arrangement over three years.

The savings on electric cars are predominantly driven by lower average annual running costs.

The report calculates that - on average - the electric models reviewed were almost 50 per cent cheaper to run.

While an EV costs £1,304 on average per year, a petrol or diesel model is £2,610 - meaning an average saving of £109 a month for owners of the former. 

'Within seven years of purchase, electric cars owners who buy their vehicle will save money compared with those who purchased a petrol or diesel car, due to the regular saving that comes with lower running costs,' the report concludes.

'Additionally, with electric cars traditionally having a longer life span and requiring less maintenance, the savings can be even bigger.' 

The report calculates that - on average - the electric models reviewed were almost 50 per cent cheaper to run

Biggest saving from fuel as ICE drivers face escalating petrol and diesel bills 

Fuel offers the biggest saving, with electric car drivers saving over £900 a year, though that's based on a high annual mileage of 12,000 miles, with the national average less than 8,000 miles even before the pandemic struck. 

Home charging, which accounts for 90 per cent of all EV charging, using a standard electricity tariff costs an average of £405 a year, while the 10 per cent of charges undertaken at public charging stations cost an average of £105 a year.

LV= says the average annual cost for petrol or diesel is £1,435 - though these costs could rise, especially with oil prices surging and the introduction of E10 unleaded likely to make petrol models less efficient.

Fuel costs offer the biggest savings to EV drivers, with most charging their battery cars (like the Nissan Leaf pictured) at home and just 10% of charging sessions taking place at more expensive public devices

EVs 'cheaper to maintain', especially as cars get older 

For an internal combustion engined (ICE) car, average maintenance costs amount to £657 a year, whilst for an electric car it’s £384 - over £272 cheaper. 

With certain vehicles, that difference can be even bigger; the service costs for the MG ZS EV electric car are £494 cheaper than a 1.5-litre turbocharged petrol Seat Ateca, the report says.

The study also highlights that savings on maintenance are likely to increase even more so over time. 

As an ICE vehicle approaches seven years or reaches 84,000 miles, several components which aren’t found in electric vehicles may need to be replaced such as the timing belt, spark plugs and the exhaust gas regulator, which can cost hundreds of pounds each.

EVs are said to be less expensive to maintain and service. For instance, index claims the average servicing cost for the MG ZS EV (pictured) are £494 cheaper than a petrol Seat Ateca

EVs are cheaper to tax...for now

Nearly all the electric cars analysed are cheaper to insure than their ICE equivalent. 

Data from LV= GI shows that the VW ID.3 costs £288, compared to £342 for the VW Golf. Similarly, the VW e-Up! costs £226 to insure, as opposed to £314 for the petrol powered Up!.

Electric vehicle owners currently also benefit from not having to pay car tax, meaning that over a seven-year ownership period they can save up to £1,274.

That said, with the government looking to potentially introduce a road pricing scheme to sit alongside - and eventually replace - Vehicle Excise Duty in order to generate funds for the Treasury from EV drivers, this might not be the case forever. 

Furthermore, since Benefit-in-Kind for electric company cars is taxed at just 1 per cent in 2021/22, there are considerable additional savings for people able to purchase or finance a company car through their employer. 

In 2022/23, it will rise to 2 per cent and the Government has yet to clarify if - and by how much - they will rise by from April 2023.

As more and more electric cars join company-car fleets and the Chancellor looking at means of replenishing the Treasury's coffers, don't expect it to remain as low as it is today.

While electric cars like the VW ID.3 might be exempt from car tax for now, the potential arrival of a much-touted road pricing scheme could see that running cost rise in the future

People looking to lease an electric car can save even more money by using a workplace salary sacrifice scheme to pay for an electric car lease pre-tax.

Alex Borgnis, Head of Motor Underwriting at LV= General Insurance, said: 'With this new Electric Car Cost Index we’re really trying to show, in the most comprehensive way, how the costs breakdown for people considering taking the plunge and making an electric model their next car. 

'While the initial purchase will seem intimidating for some, once you break down the monthly costs, especially on a lease or PCP, and then throw in the lower running costs each year, suddenly it becomes something that provides great value over the course of the ownership period. 

'You really don’t need to remortgage to get yourself on the electric car ladder!'

Consultant battery electrochemist Dr Euan McTurk of Plug Life Consulting - which partnered on the study - added: 'The good news is that the cost of new electric cars is coming down, and should reach parity with petrol and diesel cars by the mid-2020s. 

'Also, such is the reliability of an electric vehicle’s components, including the battery, it is entirely feasible to buy an electric car, van, taxi, bus etc and run it for hundreds of thousands of miles, much longer than you’d run a petrol or diesel car.'