The UK Government’s Electric Car Grant (ECG) is now active, designed to support the adoption of fully electric vehicles by reducing upfront costs. While the grant is aimed at both individuals and businesses, a number of recent changes, including a wider model list and stricter pricing rules, have made the scheme more complex. For fleet operators, company car drivers and leasing clients, understanding how it works is key to making the most of it.
What is the Electric Car Grant?
The Electric Car Grant is a government-backed discount applied to brand-new, zero-emission electric cars. It launched in July 2025 and applies to vehicles purchased or leased with the discount automatically applied at the supplying dealership. The idea is as simple as making EVs more accessible by cutting the purchase price at the point of sale. Both private buyers and businesses are eligible, and the grant is available across fleets, salary sacrifice schemes and personal lease agreements.
How much support does it offer?
There are two levels of support available under the grant. The first is £3,750 for cars in Band One, these are the most environmentally efficient models, built by manufacturers who meet higher sustainability standards. The second is £1,500 for Band Two cars, which still meet zero-emission standards but don’t reach the same level of environmental criteria. The discount is applied automatically by the dealership when the vehicle is purchased or leased, so there is no need for buyers to submit a separate claim. The grant is funded as part of a £650 million government programme, and is being actively updated as new models meet the eligibility criteria.
Which vehicles are eligible?
To qualify, the vehicle must be a fully electric passenger car with no tailpipe emissions and a minimum WLTP electric range of 100 miles. It must also come with a battery warranty lasting at least eight years or 100,000 miles, whichever comes first, and include a guaranteed replacement if battery capacity drops below 70% in that period. Crucially, only vehicles listed on the government’s approved eligibility register can be included, and the vehicle must be supplied by a manufacturer that meets strict sustainability benchmarks around production, materials and battery sourcing.
In late August 2025, the Department for Transport confirmed that six more models had been added to the grant list, bringing the total to 28. Notably, the Ford Puma Gen‑E became the first vehicle to qualify for the full £3,750 Band One discount, alongside the Ford E‑Tourneo Courier. Other newly eligible models include the Cupra Born, Volkswagen ID.3, Peugeot e‑208, e‑2008 and e‑Rifter, all of which fall under Band Two. As the list expands, more manufacturers are expected to gain approval, but only select trims within those ranges meet the full eligibility criteria.
What is the £42,000 cap and why does it matter?
A key update introduced in late August 2025 is a hard cap on vehicle pricing. If any trim or derivative of a model has an RRP above £42,000, it will no longer be eligible for the grant, even if lower-spec versions of the same model qualify. The rule is designed to stop higher-priced variants slipping through when only the entry model meets the £37,000 threshold. Importantly, the RRP calculation does not include cosmetic extras such as paint or alloy wheels, but it does include options that affect the battery size, drivetrain or power output. Businesses should still take care, because if the total purchase price on an order goes above £42,000 before the grant is applied, that order can also be rejected. This clarification closes a previous loophole and adds new complexity to procurement decisions.
Can businesses claim the grant, or is it only for private buyers?
Businesses absolutely can use the grant. Whether purchasing outright, leasing through a finance provider, or offering vehicles via a salary sacrifice scheme, the discount applies. There is no limit on the number of vehicles a business can claim for, as long as each individual unit meets the full eligibility criteria. The dealership will apply the grant automatically when the vehicle is ordered. Funders and leasing companies are already incorporating the grant into monthly rental calculations, with some fleets reporting savings of up to £70 per month on Business Contract Hire.
What are the complications businesses should be aware of?
There are several areas where the scheme introduces added complexity. The first is around the £42,000 variant cap, which affects specific trims and options. Fleet managers must ensure that the final vehicle configuration does not breach this threshold, or the grant will not apply. Secondly, not all manufacturers are currently approved. A car may appear suitable on paper but still be excluded if its brand has not met the government’s environmental requirements. Thirdly, although the model list is growing, it remains relatively limited, and within those 28 models, only select versions qualify. Finally, vehicles that are incorrectly registered, ordered or delivered can be subject to audit, and the grant may be withdrawn if any step is not completed properly.
Are there other financial benefits for businesses choosing electric cars?
Yes, beyond the grant, electric vehicles come with strong tax advantages. Benefit-in-kind (BiK) rates remain low, which significantly reduces the cost for company car drivers. Limited companies can also claim 100% first year writing down allowance, improving cashflow and overall tax efficiency. VAT can be reclaimed partially on leased vehicles, or fully, if the car is used solely for business purposes. In addition, businesses can access further support to install charging infrastructure on-site, which can help lower total running costs over the long term.
How long will the Electric Car Grant last?
The grant is part of a broader £650 million government fund aimed at accelerating electric vehicle adoption. It is expected to run through the 2028–2029 financial year, but like all incentive schemes, it is subject to review. With more models being added and pricing rules becoming tighter, businesses are advised to act early while funding is secure.
Assistance on the Electric Car Grant
If you need further help with the Electric Car Grant and qualifying vehicles, then talk to one of our CBVC leasing specialists on 01283 351200.
