A new £650 million government grant is aiming to bring down the cost of electric cars — and it’s more than just private buyers who will benefit. From 16 July 2025, both fleet operators and salary sacrifice schemes can access the Electric Car Grant, offering up to £3,750 off eligible EVs.
To qualify, vehicles must have a recommended retail price below £37,000, and crucially, meet minimum sustainability standards. The scheme introduces two tiers — with Band 1 vehicles (those with low embedded carbon and production emissions) getting the full £3,750, while Band 2 models receive £1,500. The government is tying eligibility to environmental performance, so OEMs must have a verified Science-Based Target. That rules out some popular Chinese EVs — a subtle but deliberate nudge toward cleaner supply chains.
The grant applies automatically at point of order and stacks neatly with incentives, such as 3% BIK and significant tax savings for employers and employees alike on Salary Sacrifice. For Business Contract Hire Agreements, businesses could potentially save £70 per month once funders have calculated the residual value impact of the discount.
There’s no cap on fleet volumes, and providers are already welcoming the change. It’s a rare move that apparently ticks several boxes at once: lowering total cost of ownership, driving EV adoption, and rewarding greener manufacturing — all while keeping fleet procurement teams firmly in the frame.
However, Managing Director of CBVC Vehicle Management, Mike Manners sounds a note of caution:
“While I absolutely welcome the government’s decision to encourage EV take up and its wider attribution to the fleet and salary sacrifice sector, I suspect the funders will reduce residual values to take account of the grant’s impact on residual values. Nevertheless, the Electric Car Grant is a real boost and will help further the take up of qualifying electric cars.”
