Hybrid Or Full Electric: Which Should You Choose?

01 January 2024

Hybrid Or Full Electric: Which Should You Choose?

Of the new vehicles registered in the UK in September 2023, 23.2% were either fully electric, plug-in hybrid or hybrid vehicles. At the end of 2016, only 0.4% of new vehicles registered in the UK were fully electric, but at the end of 2022 this figure had grown to 16.6%, added to which we can also include 6.3% of plug-in hybrid vehicles and we can see that the figures are increasing, and will continue to do so as the 2035 ban on manufacturing new petrol and diesel vehicles approaches.

So the motorist is left with an interesting dilemma, and while you are probably already aware of the many benefits of leasing a vehicle rather than buying one, there are also many benefits to opting for a salary sacrifice scheme through your employer. A major benefit of this is that opting for a low-emission vehicle below a certain threshold qualifies you for taking the salary sacrifice from your gross salary, and hence you pay less income tax and national insurance. But choosing between a hybrid, plug-in hybrid and full electric vehicle is another decision you need to make, and wherever you are in the journey of making the transition from petrol and diesel vehicle driving, it is important you understand the basics of each type of vehicle along with their pros and cons.

Understanding low-emission vehicles

HEV – Hybrid vehicle – also known as a self-charging hybrid, this is a vehicle with a small electric motor charged by a small electric battery. It will provide a couple of miles of electric charge which is produced typically through regenerative braking (the kinetic energy produced from braking is used to charge the battery). After this the internal combustion engine kicks in as normal.

PHEV – Plug-in Hybrid vehicle – this has a larger battery and motor than a hybrid vehicle and hence offers up to 50 miles of electric driving range, but is required to be charged with a plug-in cable either at home or via the public charging network. Once the charge runs out the internal combustion engine kicks in.

BEV – Battery electric vehicle – this is a 100% battery-powered vehicle where you charge the battery yourself through a home or public charger and are responsible for maintaining this charge.

The pros and cons of low-emission vehicles

Each of these low-emission vehicles have their own advantages and disadvantages, so here we have put together a neat summary to enable you to choose where you fit in, in terms of your driving habits, budget and motoring plans for the future.

  • Hybrid vehicles

The benefits of hybrid vehicles are that they represent an easier transition to low-emission driving, because you won’t experience much change in your driving habits from driving a petrol or diesel car. However, you will still benefit from better fuel efficiency, particularly if you make many smaller trips where you will barely use any petrol or diesel. Generally speaking, hybrids are said to be as efficient as diesel vehicles for short journeys. There are tax benefits for some hybrids in terms of lower road tax and BIK tax, but many hybrids are not in the lowest tax bracket, due to having ‘some’ emissions.

In terms of disadvantages, hybrids are typically more expensive than petrol or diesel vehicles and for long distances are less economic than diesel vehicles. The 2035 ban on new petrol and diesel vehicles will obviously also impact hybrid vehicles, so these may be phased out over the next few years.

  • Plug-in Hybrid vehicles

Plug-in hybrids are considered to be a better stepping stone to full electric driving, because you have to change your habits in order to feel the economic benefit. However, for EV-sceptics with ‘range anxiety’ you always have the fall-back option of the internal combustion engine, so you don’t have to worry about finding a public charger while you are out and about, and while you get used to the national charging network. The average UK car journey is said to be around 10 miles, so for many trips you won’t need the petrol or diesel engine, which reduces your fuel consumption. Most plug-in hybrids will qualify for the lowest tax rate also.

The cons of plug-in hybrids are that they cost roughly the same as full electric vehicles, although this cost is reducing all the time as technology improves. Driving a PHEV does require a change in habits to benefit from the improved cost efficiency, and again, the lifespan of PHEVs is uncertain with the impending UK Government ban on producing new petrol and diesel vehicles.

  • Battery electric vehicles

There has been significant investment in the charging infrastructure for BEVs in recent years, plus incentives for having home charging units installed. There is also considerable investment from major motor brands to improve BEV technology in terms of range and performance, so BEVs are clearly the future and will become cheaper and better performing. BEVs qualify for the lowest tax rates and also for tax and national insurance benefits through salary sacrifice schemes. You have lower running costs than for petrol and diesel vehicles and if you have a home charger you can benefit from cheaper electricity tariffs by charging overnight, outside of peak hours. Because there are much fewer moving parts in a BEV, you will expect lower service and maintenance costs also, and of course you are letting out zero emissions to help the environment.

On the flipside, BEVs are more expensive than petrol or diesel cars, but this cost is coming down, and can be made more affordable through leasing or salary sacrifice. Typically, the range offered by the manufacturers is a ‘guide’ which largely depends on terrain and driving habits, so takes some getting used to in terms of judging available charge and locating charging stations. It is also a potential problem that the rate of development in BEV technology renders some models ‘old’ before their time. But with leasing and salary sacrifice this is much less of an issue, because you are changing vehicles, and effectively upgrading, more often.

Benefit-in-Kind (BIK) Tax

When comparing hybrid and fully electric vehicles, it is necessary to also look at the situation with regards to BIK tax. This is calculated using the P11D value of the vehicle, its CO2 emissions and the employee’s tax band. According to the latest tax rules from the Government’s Autumn Statement in 2022, a hybrid vehicle (HEV or PHEV) with less than 50g/Km emissions currently pays 2% BIK tax, rising to 5% by 2028, as per a zero-emission BEV. However, depending on the range of the vehicle and its emissions, a hybrid with any emissions over 50g/Km could be paying up to 20% in BIK tax by 2028, a significant factor in what vehicle you might end up choosing to drive.

If you need any assistance in choosing between a fully electric, plug-in hybrid or hybrid vehicle, for your salary sacrifice scheme, then contact our sales team at Pink Salary Exchange today.

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