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The United Kingdom has established a legally binding commitment to achieve net zero emissions by 2050. Nonetheless, transport-related emissions have remained unchanged since 1990, presenting challenges to this objective (Marshall 2024, p.6). This blog examines the potential role of consumer credit in enabling lower-to-middle income (LMI) households to transition to electric vehicles (EVs). For meaningful progress, attention must be given to the second-hand EV market. Furthermore, LMI households will likely require access to a scrappage scheme and support to assess both their likely savings to running costs and anticipated carbon emissions reductions.
Electric vehicle (EV) ownership in the UK is largely concentrated among urban, full-time workers with household incomes exceeding £52,000 (Bhagat et al. 2024). This means that most EV owners fall within the top 16% of the income distribution (HM Revenue & Customs, 2025), which is not unexpected considering a new EV currently costs about £47,500 (Smith, 2026). Even with the Electric Car Grant Scheme—introduced last July and offering up to £3,750 off eligible new EVs priced at or below £37,000—the price remains out of reach for most LMI households. High upfront costs continue to be a significant barrier to adoption (OZEV 2025), reflecting a common challenge with low-carbon policies (Committee on Fuel Poverty, Cook 2021). Consequently, LMI households are still excluded from a just transition unless further support is provided (Owen & Barrett 2020).
The Scottish Scheme
While purchasing a new EV is beyond the reach of many, there is now a burgeoning second-hand market (LV=GI 2022), which, with some help, LMI households could be able to access. This has been the focus of an initiative in Scotland that has been running since 2020/21.
The Used Electric Vehicle Loan (UEVL) scheme is administered by the Energy Savings Trust on behalf of Transport Scotland, as part of the broader Low Carbon Transport Loan (LCTL) scheme. It provides interest-free loans to support second-hand EV purchases to people living in households with gross incomes below £50,000 per year, although this condition can be waived if the applicant is living in a rural and remote area or island of Scotland. Eligible EVs are those costing up to £23,000, and loans can be made for the full amount, repayable over periods of up to six years, depending on the age of the vehicle.
In 2023/2024, there were 1,433 loan applications submitted, totalling £31.4 million (Scottish Government, 2024). However, about 36% of approved loans were not taken up, indicating a significant drop-off rate. So far, no evaluation of the scheme has been published to explain this. Additionally, we still lack information about the scheme’s effects on both carbon emissions and household finances.
Nevertheless, the Scottish scheme appears to have been well received and, in England and Wales, Government's Warm Homes Plan commits to providing interest-free loans for other green technologies. It is therefore feasible that Government could be persuaded to extend the Scottish scheme into other UK countries. However, it may also consider a completely interest-free scheme to be too expensive. A potential alternative is for a subsidised credit scheme, which could still be beneficial for some LMI households provided the long-term financial gains outweigh interest and fees. However, informing households of the likely financial benefits is complex, for reasons that we now discuss.
How Driving Habits Influence Electric Vehicle Cost Savings for LMI Households
The financial incentive to transition to electric vehicles (EVs) is highly influenced by both mileage driven and running costs, which are themselves correlated with transport modes and income levels. LMI households are less likely to own a car than higher-income households. Additionally, among LMI households that do own vehicles, average annual mileage is typically lower.
According to data from the National Transport Survey (NTS) 2024, households in the lowest two income quintiles (bottom 40%) who own a car travel an average of 4,990 miles per year. This works out to about 96 miles each week. At this rate of driving, even interest-free schemes are unlikely to be appealing.
For example, we used the calculators available from the U.S based ChooseEV.com to compare a 2015 Ford Fiesta with a 2020 Nissan Leaf, factoring in efficiency, mileage, and local fuel prices. This exercise required us to take account of the fact that U.S gallons are around 20% smaller than those in the U.K. Driving 96 miles per week, switching to the Leaf would save about £524 a year on running costs and cut CO₂ emissions by 3,129 lbs annually. Even with all savings applied to an interest-free loan for the £7,000 upfront cost, repayments would take 13.4 years—much longer than Scotland's maximum loan term. Extending this scheme UK-wide would still leave many LMI households unlikely to switch to EVs.
However, for those who drive significantly more than the average, the benefits may be significant. If we adjust our example to someone driving 250 miles each week, annual savings in running costs increase to £1,367 (£114 per month) and CO₂ emissions decrease by 8,152 lbs per year. With an interest-free loan, repayments for a Nissan Leaf would be possible within the the six year qualifying period of the Scottish scheme.
A Subsidised Interest Scheme?
It follows that moving away from a completely interest-free scheme to a subsidised interest bearing one would require the maximum repayment period to be increased for many LMI households. Purchasing the Nissan Leaf over 8 years with a loan rate of 5% APR would mean a monthly repayment cost of £98, which would extend the eligibility of the scheme to households with a weekly mileage under 250 miles, therefore reaching a higher percentage of LMI households. This is however, only feasible if the second-hand Leaf has an expected battery life of more than 8 years.
The Importance of a Car Scrappage Scheme
For many LMI households, the decision to transition to EV vehicles would therefore be finely balanced, and is sensitive to numerous factors including the number of miles driven, charging costs, car models (being replaced and bought), length of loan repayments, and battery life expectancy. The insurance costs for EV vehicles are also likely to be higher.
In the absence of a dramatic reduction in the costs of second hand EVs, the provision of a car scrappage scheme is therefore going to be important. Car scrappage schemes are incentives to retire older, high polluting vehicles in exchange for cash grants, discounts on new cars, or sometimes public transport credits. Currently, there is no UK wide government scrappage scheme in place and the Government has explicitly ruled out bringing one back due to spending cuts and shifting priorities (Scrap Car Network, 2025). There are however some local initiatives and manufacturer-led schemes. If an interest-free or subsidised loan scheme were to be introduced, then Government should reconsider the case for an associated UK wide scrappage scheme, considering its Net Zero goal.
The Need for a Better, UK Focused, Online Calculator and Further Research
In any event, LMI households will also need much better tools to help them weigh the financial costs and benefits. While there are some generic UK calculators, such as this one provided by HSBC, these do not allow for specific models and car ages to be input, nor do they take account of insurance costs or facilitate consideration of battery life expectancy. These are major shortcomings, and an industry-wide approach, shaped by research with LMI households, would be beneficial to ensure that future tools are both accessible and fit for purpose.
Finally, more research is also needed to understand the high dropout rate in the Scottish scheme. For a successful UK scheme to be developed, we need to have a clearer understanding of the reasons for this. We also need to have better data concerning the distribution of miles driven by LMI households to scope out the likely scale of any future scheme. And we need the active involvement of LMI households in the creation of a national online calculator. Ensuring people can make informed decisions about both the financial and carbon impacts of the transition to EVs will be just as important as providing affordable loans for them to do so.
References
Bhagat, Y., Robertson, K., Vanson, T., O'Shea, C., Branzanti, C., Spray, Y., & Leeder, G. (2024). Car ownership: Evidence review. National Centre for Social Research.
Committee on Fuel Poverty (2024). Understanding the barriers and enablers to supporting fuel poor households achieve net zero.
Cook, A., (2021). New report highlights UK won’t reach net zero without support for poorer households. National Energy Action.
Department for Energy Security and Net Zero (2026) Warm Homes Plan. GOV.UK. Available at: https://www.gov.uk/government/publications/warm-homes-plan (Accessed: 12 February 2026).
Free Price Compare (2024) UK car insurance in 2024. Available at: https://freepricecompare.com/car-insurance/guides/uk-car-insurance-in-2024/#how_much_does_it_cost_to_insure_an_electric_car (Accessed: 18 February 2026).
LV= General Insurance, 2022. Almost a third of second hand car sales to be electric by 2030. Available at: https://www.lv.com/insurance/press/almost-a-third-of-second-hand-car-sales-tobe-electric-by-2030
Marshall, J. (2024). Net zeroing in on investment: Priorities for the new Government in delivering a fair transition. Resolution Foundation.
Mehlig, D., ApSimon, H. & Staffell, I. (2022) Emissions from charging electric vehicles in the UK. Transportation Research Part D: Transport and Environment, 110, p. 103430.
Office for Zero Emission Vehicles, Department for Transport & Alexander, H. (2025). Discount of up to £3,750 on electric cars set to slash costs for thousands. GOV.UK.
Owen, A. & Barrett, J. (2020). Reducing inequality resulting from UK lowcarbon policy. Climate Policy, 20(10), pp.1193–1208.
HM Revenue & Customs (2025). Table 3.1a: Percentile points from 1 to 99 for total income before and after tax. GOV.UK. Available at: https://www.gov.uk/government/statistics/percentile-points-from-1-to-99-for-total-income-before-and-after-tax (Accessed: 12 February 2026).
Smith, C. (2026). The Average Cost of an Electric Car in the UK 2026. Wecovr. Available at: https://wecovr.com/guides/average-cost-of-an-electric-car-in-the-uk-2026/ (Accessed: 12 February 2026).
Scottish Government (2024). Used EV Loan scheme for both domestic and business: FOI release (FOI/202400393680). Available at: https://www.gov.scot/publications/foi-202400393680/ (Accessed: 12 February 2026).
Scrap Car Network (2025). Is there a government scrappage scheme in the UK? A comprehensive guide. Available at: https://www.scrapcarnetwork.org/news/is-there-a-government-scrappage-scheme-in-the-uk-a-comprehensive-guide/ (Accessed: 18 February 2026).
