The Department for Transport (DfT) has confirmed that the newly announced Electric Car Grant will be available for businesses as well as private drivers buying eligible vehicles but
The Department for Transport (DfT) has confirmed that the newly announced Electric Car Grant will be available for businesses as well as private drivers buying eligible vehicles but concerns are rising over the impact on the used market.
Announced last night, the ‘Electric Car Grant’ (ECG) commits £650m to the new market, offering discounts of up to £3,750 off the cost of a new electric vehicle with an initial list price up to or under £37,000.
Early details for the scheme reveal that the grant is available to all private individuals and businesses buying an eligible vehicle and there will be no fleet order cap. As with the former Plug-in Car Grant, the discount will be at the point of purchase directly from the dealership or manufacturer.
The Electric Car Grant offers banded grant levels for vehicles priced at £37,000 or below, with eligibility criteria based on the sustainability of vehicle manufacturing.
The highest grant, available for cars with the lowest carbon emission scores, is £3,750. The second level of grant is £1,500.
The grant is only available for vehicles that have been approved as eligible.
To qualify, vehicles must meet the following technical standards, as a minimum:
Manufacturers must hold a verified Science Based Target and the carbon emissions incurred in vehicle assembly and battery cell production locations must be below certain thresholds.
Applications must also provide evidence of which country the vehicle is assembled in. This will contribute to the environmental score given to the vehicle, which determines the grant banding it receives.
The vehicle assembly emissions account for 30% of the overall environmental score given to the vehicle, reflecting the relative carbon intensity of vehicle assembly to battery production for a zero emission vehicle.
Further details of which models qualify for the scheme will be announced in the coming days and weeks.
Currently, the Government has set aside funding until the 2028/29 financial year.
It also says both the level of grant and the criteria for each category is liable to change with no notice.
The ECG can only be claimed for new cars at the point of first registration – despite many in the sector calling for action on used cars.
This has led to some fleet stakeholders, particularly the BVRLA, to warn of the impact on the used car market and residual values.
BVRLA chief executive Toby Poston said: “This generous grant will boost uptake in the retail market but could have serious repercussions for the used market, where rampant depreciation already has red warning lights flashing.
“Further stimulating new EV registrations without supporting the used market risks creating an even greater supply/demand imbalance, putting even more pressure on fast deflating second-hand values. The resulting losses will erode confidence and result in higher finance costs for new EVs, eliminating much of the benefit from the original grant.”
Ayvens has also said it’s concerned of the impact on the used vehicle sector.
Matthew Walters, head of consultancy services and customer value at the leasing and mobility specialist, says the £3,750 grant will help tackle upfront costs, but warns that monthly payments are still being skewed by falling used EV values, down nearly 60% more than petrol cars since 2022.
He commented: “Up to £3,750 per car will help narrow the upfront cost gap between electric and petrol vehicles, making the transition more accessible for thousands of drivers. Especially in the retail sector, which accounts for 40% of new car registrations, but only 20% of new EVs.
“However, demand for new electric cars is already strong. Over 380,000 were registered last year, and we’re seeing a 21.6% market share with 34.6% growth year-to-date as manufacturers offer attractive deals to meet ZEV mandate targets and affordable new models come to market. We also have incentives for low-CO2 company cars and salary sacrifice schemes to the end of the decade, which will help give businesses the confidence to invest in electrifying their fleets.”
Instead, Walters argues that targeted support for the used EV market and a rethink of the Expensive Car Supplement would deliver far greater impact than another purchase grant.
“The BVRLA wrote to the Transport Secretary last week, highlighting how used BEVs have fallen nearly 60% more in value than petrol cars since September 2022. This depreciation is inflating monthly costs for new vehicles even as list prices fall. Used car support, such as Scotland’s 0% interest loans, could help create stability in the market.”
Walters also said there was an opportunity to address the Expensive Car Supplement before April 2026, when the first affected EVs will face VED renewals that could be £425 higher than an equivalent petrol, diesel or hybrid model – an £850+ penalty over a three-year contract.
“An adjustment to the £40,000 threshold would provide targeted support more effectively than another purchase grant,” he went on.
“While this grant will help build consumer confidence, an increased focus on the used market and addressing VED issues can have the greatest impact.”
And Cox Automotive has said it’s concerned for used EV values.
The latest residual value analysis from the car data specialist reveals that EVs up to 24 months old are only holding 46% of their original cost new (OCN) in July 2025. This is a stark comparison to 2022 where vehicles of the same age retained 85% of OCN.
Philip Nothard, insight director at Cox, said: “Heavy discounts on new EVs have already dampened demand for nearly new models available in the used car market. While driving down the cost of new vehicles will undoubtedly increase the EV adoption in the new market, these incentives fail to recognise the impact they will have on the used market. Residual values for cars up to two years old are now at a greater risk of further depreciation if adequate support is not extended to used vehicles.
“The used market is a crucial source of profitability for the automotive sector, so the strength and consistency of the industry is crucial to the success of the Government’s net zero ambitions. To ensure this, the Government needs to consider more support for the used EV sector to put the brakes on the rapid pace of depreciation.”
