AS demand for electric vehicles (EVs) starts to rise, finance providers and brokers 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 or law firm 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 ownerships 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.
Dawson added: “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.
“At a time when major manufacturers are increasingly prioritising the development of EVs, everyone along the supply chain, from manufacturers through to dealerships, needs to work closely with their finance partners to ensure that proposed EV-friendly finance offerings cover all the issues associated with purchasing EVs
“This could create a need for multiple agreements, both legally and practically, with customers having to sign a combination of regulated hire and credit agreements as well as agreements for other services.
“There are huge problems ahead for both the industry and consumers if the financing for EVs isn’t overhauled to meet the demand of this growing market.”