Smart small businesses look to control their costs and cash flow. The cost of owning and operating a motor vehicle is traditionally a significant expense. As more electric vehicles (EVs) come onto the Australian market, small businesses should be making the switch to electric to immediately reduce outgoings for fuel and maintenance.
Purchasing a vehicle through a chattel mortgage is a good way of freeing up cash flow and since the interest payments are tax deductible it’s usually a very cheap course of finance.
When considering the total cost of ownership, the lower ongoing costs of an electric car vs. petrol car become compelling, not to mention the additional benefits of electric vehicles.
Cash flow comparison
Let’s look at the financial case for two cars purchased on 5 year finance with similar levels of trim based on usage of 20,000 km/year.
|Nissan Leaf (electric)||Mazda 3 SP25 (petrol)|
(incl. on road costs)
|$48,327 excl. GST. incl. stamp duty
(with Good Motive discount)
|$35,200 excl. GST incl. stamp duty|
|Average Annual Costs||Loan interest: $1,015
|Loan interest: $739
|Total Annual Costs||$7,789||$7,885|
The case for electric improves the further the vehicle is driven.In other words, the average cost of operating an electric car is cash flow positive immediately because although the upfront cost of the asset is higher, the savings in fuel and maintenance make up for the additional interest and depreciation costs.
Driving electric also insulates businesses from petrol price increases, especially with petrol prices hitting $1.70 / litre in Sydney in recent months. Although the price of electricity could rise too, it’s a relatively small component of the operating cost (and our calculation doesn't take into account any free public charging). Businesses also have the option of using solar power to make their own cheap electricity, which you can’t do with fuel.
Resale asset value
There is something to be said about the value of the asset at 5 years. Normally a business would turn over a car to reduce the risk of expensive engine repairs. Because an electric car has significantly fewer moving parts it lasts a lot longer than a petrol car and the asset remains cost effective to own. In more mature electric vehicle markets, such as Norway, the second hand market for electric cars is excellent for retaining asset value because the cars have so much life remaining compared to a petrol car with similar kilometres.
The true cost of depreciation is only realised when the vehicle is sold, and given the lifetime of an electric vehicle compared to a conventional car, this cost can be deferred later than would normally be the case.
An electric car has zero tailpipe emissions, and even when powering the car from grid electricity it is significantly better for the environment than an equivalent internal combustion engine vehicle.
Choosing electric has value to your business from a sustainability standpoint not only in the eyes of customers but also employees. As more people become environmentally-minded, offering an electric car may help to attract and retain talent and provide access to vehicles that employees may not be able to afford but businesses can. When combined with the lower operational cost, it’s a win-win for both the sustainability-minded customer, employee and small business owner.
[29th November 2019]