Before embarking on the purchase of a professional electric vehicle, it is advisable to calculate its TCO. But what is TCO? Total cost of ownership is a way of assessing the total cost of an asset over a given period. It takes into account the purchase price, as well as usage and ownership costs. Thanks to this indicator, the manager of a vehicle fleet can get an idea of the costs incurred by a vehicle over the entire period of its operation. They can compare the TCO of different vehicles before purchase and determine when it is worth renewing their existing fleet. Let’s take a closer look.
What is the TCO of an electric vehicle?
For an electric vehicle, as for an internal combustion engine vehicle, the TCO takes into account numerous variables linked to the cost of acquiring, using and owning the asset. However, the specific features of electric cars often make them more attractive.
The various factors influencing the TCO of an electric vehicle
We might mistakenly think that the cost of owning a good only includes its purchase cost. But in the case of a vehicle, the expenses don’t stop there. In fact, when you become the owner of an electric car, a number of additional costs are incurred: charging, insurance, maintenance, etc.
Generally speaking, these can be divided into 3 categories:
- Acquisition costs: the purchase price, any interest if a loan has been taken out, grants and subsidies, registration fees.
- Running costs: the cost of energy and maintenance.
- Ownership costs: insurance, any taxes and depreciation losses.
These costs are different for all car models, even similar ones. That’s why a careful comparison of the TCO of each vehicle is a good indicator before you buy one.
Why is the TCO different for an electric vehicle?
According to LeasePlan’s Car Cost Index 2022, the TCO of electric vehicles is regularly lower than that of internal combustion engine vehicles, particularly in France.
By way of example, the TCO of a compact vehicle, such as a Renault Megane or Peugeot 308 is €919 for an electric model compared with €954 for a petrol model and €941 for a diesel model.
There are several reasons for this. Firstly, although the purchase price of an electric car is higher than that of an internal combustion engine vehicle, government financial aid helps to reduce this initial investment.
Furthermore, an electric vehicle costs less to run. Electricity is cheaper than fuel, and maintenance is lower. Even if an electric battery is expensive to change, this does not make up for the numerous checks and replacements of parts needed to keep a car running properly on unleaded petrol or diesel.
Finally, the depreciation of an electric vehicle is often lower. This is due to the trend in sales on the second-hand market. Electric cars are increasingly sought after, unlike internal combustion engine vehicles, which will be banned in a few years’ time.
Why is it worth calculating TCO?
Now that the concept of TCO is clear. Why is it so important to calculate the total cost of ownership of an electric vehicle?
To compare models before buying
TCO helps to compare different vehicle models or financing methods (purchase, leasing, etc.), taking into account not only the purchase price, but also the costs of maintenance, charging, insurance, taxes, and depreciation. This makes it easier to choose the most economical solution over the long term.
To identify the major cost items and optimise them
By accurately identifying the biggest costs, the company can put strategies in place to reduce them. For example, it can choose more fuel-efficient vehicles or negotiate insurance contracts.
To estimate future expenditure
TCO makes it possible to accurately estimate future expenditure on the vehicle fleet. This helps to better forecast annual budgets and avoid unpleasant financial surprises.
How to calculate the TCO of an electric vehicle
To calculate the TCO of an electric vehicle, you first need to define the calculation period. This corresponds to the lifetime of the asset. Most often, this is 5 years.
As we saw earlier, we then need to identify all the costs relative to buying, using and owning the vehicle. Some of these factors are intrinsic to the electric car:
- The purchase cost includes the price of the vehicle, as well as the various tax incentives and financial assistance, depending on government decisions.
- Running costs are calculated differently, taking into account the price of electricity and the average frequency of charging. As for maintenance, don’t forget the battery, which has a limited lifespan and may need replacing.
- Ownership costs are made up of insurance and depreciation. While depreciation costs are lower for an electric vehicle than for an internal combustion engine vehicle, insurance is more expensive because it has to be comprehensive.
- Other costs may include the cost of installing a charging point or subscribing to a public charging network.
Once all the costs have been identified and estimated, the TCO calculation is simple and takes the following form: total costs – residual value (resale price).
How to optimise the TCO of your electric fleet
Calculating TCO is particularly useful for making comparisons between different car models, helping with the decision on whether to buy or lease, and for managing your company’s car fleet. Above all, however, it is essential for assessing costs over the long term in order to optimise them.
Choosing the right electric vehicle
Before reducing the TCO of an electric vehicle, you need to select the one that will offer the best benefits for the company. Choosing solely on the basis of TCO is not ideal. Depending on your needs, it’s also important to look at the range, power and electricity consumption of each model.
Negotiating contracts
Once the vehicle model has been selected, it is possible to optimise its average TCO through negotiation.
From the moment of purchase, the price of a vehicle, or its options, can be negotiated. However, this is easier for large companies, which can buy in large quantities and benefit from economies of scale.
Smaller companies will find it easier to optimise insurance costs. To do this, you can use an insurance broker and compare all the offers available.
Implementing an effective charging strategy
The running costs associated with charging the vehicle represent the second largest item of expenditure after the initial investment. So to keep costs down, there are several options:
- Select the most cost-effective public charging points.
- Check tyre pressure frequently to avoid unnecessary over-consumption.
- Install workplace charging points to manage costs and set up a usage policy (off-peak hours, maximum charging time, etc.).
- Install charging points at employees’ homes and benefit from better rates.
- Track expenditure in real time thanks to connected charging points and charging cards for public charging points.
Benefit from expert support
As a specialist in electric vehicle charging, Chargemap Business offers you comprehensive support in your company’s transition to electric mobility.
Offering you a range of easy-to-use tools and a 24/7 support service, Chargemap Business helps you to optimise the TCO of your vehicle fleet.
Thanks to a perfectly controlled charging strategy, you have a complete overview of all the costs associated with the energy consumption of your vehicles, whether at work, at home or on the move.
