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Financing for electric vehicles - adapting finance in a new world

As demand for electric vehicles (EVs) starts to rise with even electric aeroplanes being trialled, the finance providers, be that the captive or non-captive finance houses, need to develop a controlled and compliant approach to providing the correct type of financing (at competitive rates) to consumers.

Historically the offerings have been cobbled together from elements of existing financing offerings.  But this no longer meets the growing market demand, nor captures the distinctive characteristics of electric vehicles. Lack of the correct financing offerings also threatens to hamper the growth of EVs if private individuals are unable to secure the financing they want and need.  

Stephen Dawson, sector head, financial services, Shoosmiths said: "Finance providers have generally tried to make their agreements as simple as possible, designing and building their IT systems to support these. This has worked well for petrol and diesel cars bought and sold as a single asset. But EVs are different as they require a battery, often worth several thousand pounds, and there is also the need to take account of the  installation of new charging technology, and specific maintenance and use limitations. Without addressing these EV issues, finance providers may find it increasingly challenging to produce finance documents for their EV loan books that are fully compliant with the law."

Consumer demand is also shifting with an appetite to move away from ownership towards a user-based subscription model, enabling them to swap their small weekday run-around for a larger vehicle at weekends for longer journeys and activities. Added Stephen:

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Subscription models lend themselves to hire rather than credit plans, but this presents additional challenges.  With customers also wanting to bundle more elements into the core price such as insurance, batteries, Amazon deliveries to the boot, for example, this could require a plethora of agreements.

Stephen Dawson, Sector Head Financial Services

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Financing for electric vehicles

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This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2022.


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