Your questions about EV loans and financing, answered.
If you’re interested in purchasing an electric vehicle and curious about financing options, you’ve come to the right place. Read on for answers to your top questions about EV financing and loans so you can make an informed decision when purchasing an electric vehicle.
What is an EV loan?
An electric vehicle (EV) loan is a loan specifically designed for the purchase of a new or used hybrid, plug-in hybrid, or fully electric vehicle. EV loans are also called “green auto loans” because they’re made for zero- or low-emission vehicles like EVs or hybrids. While you can get a regular car loan to finance your electric car, EV loans may feature lower interest rates, longer repayment terms, and other benefits.
Since electric vehicle financing isn’t tied to a specific manufacturer, you could use it to purchase an EV from any brand.
How does EV financing work?
Just like a conventional car loan, you can apply for an EV loan through an automotive lender. If your loan is approved, the lender will supply you with the funds to purchase the vehicle. You will select a repayment term and then make regular payments (with interest) to the lender over the life of the loan. Your interest rate and loan terms will depend on many factors, which may include your credit score, the price of the vehicle, and how much you need to borrow.
Tip: Consider getting pre-qualified for an EV loan before heading to the dealership so you have a better idea of how much you can spend on a vehicle.
What’s the difference between electric vehicle loans vs. traditional car loans?
Since electric vehicles tend to cost more than gas-powered cars, EV auto loan rates are typically lower than conventional car loan rates. You may also be able to get a longer repayment term for an EV loan. These incentives are designed to help an EV purchase work for your budget.
Electric vehicle loans may include features and services unique to electric vehicle ownership, such as:
EV rebates automatically applied to your monthly payment
The cost of installing a home charging station rolled into the loan
Higher loan limits than those for gas-powered cars
What’s the difference between new vs. used EV loans?
EV loans are available for both new and used electric vehicles. Loans for used and new EVs are available through banks, credit unions, auto lenders, and car dealerships. EV manufacturers offer loans for new vehicles only. Keep in mind that interest rates are usually higher for used cars than for new cars.
How long can you finance an EV?
The length of a conventional car loan ranges from one to seven years, and the most common loan term is approximately six years. Historically, the sticker price of EVs has been higher than that of gas-powered vehicles, causing some lenders to offer longer repayment terms for EV loans—up to eight years.
Do banks finance electric cars?
While some banks offer electric vehicle loans, EV financing options are more commonly found through a local or national credit union. You may have to become a member of the credit union before you can apply for its EV loan.
Beyond banks and credit unions, you can find EV loans at traditional auto lending companies, EV-focused lenders like EV Life and Tenet, the dealership, or directly from the manufacturer. Note that a lender might offer both traditional loans and EV loans.
Does CarMax offer EV loans?
CarMax offers financing through several finance sources, including CarMax Auto Finance, a division of CarMax. While CarMax Auto Finance does not offer any EV-specific financing, you can bring your own financing from your bank or an outside lender to purchase a vehicle at CarMax. Be sure to research whether your financial institution offers EV-specific loans.
As battery technology improves and more manufacturers offer hybrid and electric vehicles, EV costs are changing. And with electric vehicle financing incentives like lower rates and longer terms, now is a great time to shop for a new-to-you EV.
Robyn Tellefsen is a New York City-based freelance writer and editor with more than 20 years of experience covering lifestyle, personal finance, and more. Her work has appeared on sites such as Wayfair, Chase, SoFi, CareCredit, Brightspot, LoopNet, and others. When she's not writing, you can find her absorbed in the pages of a novel.
