Using a total cost of ownership procurement method

Battery electric vehicles (BEVs) currently have higher purchase or lease costs than their internal combustion engine (ICE) counterparts, but they generally have lower running costs. It’s essential that you consider all aspects of vehicle ownership when working out cost comparisons between ICE and BEV models. The areas to consider include:

• Purchase and depreciation (if purchased) / lease costs (if leased)
• Service, maintenance, and repair costs
• Vehicle excise duty
• Fuel and electricity costs
• Class 1a national insurance contributions (NIC) if applicable
• Vehicle insurance
• Grants that may be available for specific vehicles and charging infrastructure
• Applying an internal shadow carbon price (placing a cost on emissions, which can be for illustration only or could be collected as a means of funding low-carbon improvements in your organisation)

Adopting a total cost of ownership (TCO) or whole life cost (WLC) based policy often satisfies both financial and environmental objectives. This is because more efficient vehicles which use less fuel will have a lower TCO. Organisations using a different approach to TCO will often buy vehicles that are cheaper to acquire but more expensive to run over their operational life.

When considering BEVs the TCO can be highly dependent on mileage and fuel or electricity prices achievable. If you only charge your BEV from the rapid public infrastructure, the TCO is likely to be higher than for a comparable ICE vehicle, whereas using depot-based charging and cheaper electricity tariffs will lower the TCO considerably.

You should also factor in the cost of electric vehicle charging infrastructure (EVCI). EVCI will add to the initial outlay, but will have a much longer lifecycle than the vehicle lease or purchase period, and will enable you to achieve much lower running costs for BEVs.

There will be many internal factors that influence the procurement approach used. Whether you lease or purchase, using a TCO analysis will make sure you select the most suitable and cost-effective vehicle models. BEVs may not always be the lowest cost option, but they are the lowest carbon option, and using the TCO model allows you to put a cost on your carbon reduction programme.