Battery electric vehicles now make up a growing share of the UK car parc, supported by infrastructure investment, maturing residual values and improving cost profiles. In contrast, hydrogen-powered cars remain scarce, with weak market fundamentals and little infrastructure to support uptake. For funders, the divergence is critical. Lending models based on predictable resale values and insurable assets now favour EVs, prompting motor finance providers to shift products and pricing around the realities of an electric transport future.
As the UK accelerates away from internal combustion engines (ICEs), the debate over whether electric vehicles (EVs) or hydrogen fuel cell vehicles (FCVs) will dominate the future of personal transport is heating up. For those in the financial services sector, this is far more than a technological question. It’s a commercial one, with far-reaching implications for leasing, PCP and hire purchase models, risk management, residual value forecasting, and even vehicle insurance.
On paper, both EVs and hydrogen-powered vehicles offer the same promise: a cleaner, greener alternative to fossil fuels. But as the market evolves, it’s becoming increasingly clear that one technology is racing ahead. By the end of 2024, there will be more than 1.3 million BEVs and 740,000 PHEVs on UK roads. In stark contrast, fewer than 130 hydrogen cars are currently registered in the country. Infrastructure realities reinforce that disparity. Shell recently closed all its UK hydrogen refuelling stations, and only two hydrogen vehicles, Toyota’s Mirai and Hyundai’s Nexo, are available to private buyers. Hydrogen’s limited footprint simply cannot support mass market adoption at this stage.
For finance providers, this divergence is critical. Residual values are at the heart of lease, hire purchase and PCP models. With EVs, improving battery technology, manufacturer warranties, and growing consumer demand are helping to stabilise used values and de-risk end-of-term valuations. The second-hand EV market, once seen as speculative, is maturing fast, enabling lenders to price products more confidently and offer competitive rates.
Hydrogen vehicles, however, present a host of unknowns. They are expensive to produce, complex to fuel, and lack the infrastructure at present to build consumer confidence. Without a clear path to scale, predicting future values is speculative at best, making FCVs difficult to fund and even harder to place in traditional finance models. This presents an unacceptable level of risk for funders that rely on predictable depreciation curves and robust resale markets.
Running costs are another area where EVs are proving more financially friendly. Many EV drivers take advantage of low-cost overnight charging tariffs, sometimes as little as 8.5p per kWh. That translates to as little as £3 for 100 to 170 miles of range, which dramatically improves the total cost of ownership maths. For hire purchase customers, that means lower ongoing running costs and improved affordability assessments. For leasing and PCP providers, it means added value that can be communicated clearly to clients weighing up monthly cost comparisons.
From a customer satisfaction perspective, EVs also benefit from changing habits. Most EV drivers now charge at home or at work, meaning fewer stops at public charging stations. This represents a fundamental behavioural shift from ICE and even FCV models. Convenience becomes a selling point, not a compromise, and that positive user experience supports customer retention and reduces voluntary terminations, which can be an often-overlooked risk in consumer finance.
Insurance is another element worth factoring into this evolving landscape. Historically, EVs carried higher premiums due to expensive battery components and limited repair networks. However, the insurance industry has rapidly adapted. As EV adoption has increased, so has the availability of trained technicians, approved repair centres, and reliable data on claims. This has allowed insurers to stabilise pricing and offer increasingly competitive premiums, making EVs more attractive from a full ownership cost perspective.
Hydrogen vehicles, by contrast, pose more significant challenges. With so few on the road, insurers lack the data to assess risk accurately. Repair infrastructure is scarce, and parts are expensive. The safety profile of high-pressure hydrogen systems is well-managed but unfamiliar to most underwriters, adding yet another layer of caution. From an insurance standpoint, hydrogen vehicles are still uncharted territory, pushing up premiums and adding uncertainty for lenders whose products depend on predictable, insurable assets.
All of this circles back to infrastructure and scalability. The UK already has over 80,000 public EV charging points and over a million home chargers. The electrical grid, while needing continued investment, already exists and is being continually upgraded. In contrast, building a hydrogen refuelling network from scratch would require enormous capital investment, transport logistics, and a public willingness to adopt an unfamiliar fuelling model. None of these appear imminent.
Energy efficiency also tips the scales. EVs convert over 70% of input energy into motion, compared to 30–40% for hydrogen. The environmental cost of producing hydrogen on a large commercial scale for motor fuel is yet to be fully extrapolated, but it can be very efficient, and there are no line (i.e. electrical resistance) losses per se, even if there is a transport and potential environmental cost of getting it from origin to fuel pump. This makes EVs not only more environmentally efficient but also more economically rational in terms of energy cost and infrastructure efficiency.
So, what does all this mean for motor finance? Simply put, electrification is becoming the safer and more strategic path forward. EVs offer a clearer outlook on value retention, cost management, customer satisfaction, and insurability. As such, finance providers are increasingly designing products around electric mobility. From green car loans, salary sacrifice and EV-specific lease plans to bundled energy tariffs and integrated service packages.
Hydrogen may still play a niche role in heavy-duty transport or industrial applications, but the evidence strongly favours battery electric vehicles for personal vehicles. For motor finance businesses, the time to adapt is now. The electric revolution isn’t just reshaping roads; it’s rewriting the rulebook for how vehicles are financed, insured, and valued.
Ali Khan is Head of Sales and Business Development at Vestel Mobility UK
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