The short answer: While electric vehicles (EVs) still face steeper depreciation than petrol cars in their first three years, premium EV models are increasingly holding their value better than expected. The gap is narrowing as the market matures, making this a crucial consideration for both buyers and insurers in 2025.
Electric cars have gone mainstream, and they’re no longer just about making an environmental statement. If you’re thinking about buying one in 2025, you’ll want to know how that choice affects your car’s long-term value – and what it means for your insurance costs.
What the current numbers tell us
The AA states the average new car loses around 60% of its value after three years, based on a mileage of 10,000 miles per annum. However, the depreciation story differs significantly between fuel types.
Electric Vehicle Performance: Drive Electric calculate the Mercedes-Benz EQC holds around 65% of its value after three years or 36,000 miles, while the Tesla Model S Performance Ludicrous holds 60%. Top of the pile when it comes to electric car depreciation is the Porsche Taycan, which is expected to hold on to a massive 77% of its value.
Mixed Results Across the Market: The EV depreciation story isn’t uniformly positive. The data suggests that EVs on average will lose 51 percent of their purchase value from 2020 to 2023, compared to just 37 percent for petrol vehicles. This equates to a massive £15,220 loss for EV owners, while petrol vehicles lose £9,901.
However, this data reflects the earlier EV market correction and doesn’t capture the improvements seen in 2024-2025.
Premium EVs leading the pack
The most encouraging news comes from premium electric models. Oracle Finance research shows that the Volkswagen ID.Buzz Style Pro LWB variant, with a list price just short of £65,000, retains a residual value after 3 years and 36,000 miles of just under £34,000 – a retained value of 52.6%, making it one of the slowest depreciating EVs available.
Other standout performers include:
- Porsche Taycan: Retains up to 77% of its value (Drive Electric)
- Volvo EX90: Expected residual value of just over £45,000 after 3 years and 36,000 miles, indicating a retained value of 54.5% (Oracle Finance)
- Lotus Eletre: The 450kW Sport variant (list price £103,795) should see an expected return of £56,425 after 3 years and 36,000 miles, signifying a retained value of 54.4% (Oracle Finance)
Petrol car depreciation: the established baseline
According to Zutobi’s 2025 Motoring Depreciation Report, cars in the USA experience a 32.36% depreciation rate over three years, while vehicles in the UK face a slightly higher average depreciation rate of 38.72%. This provides a useful benchmark, though individual models vary significantly.
According to Auto Express, as a general rule, you might expect a car in the UK to lose around 15% of its value on average every year over a 20-year life cycle. However, certain factors are accelerating petrol car depreciation.
Why things are changing
Factors supporting EV values:
Regulatory Pressure: According to Auto Express, the London congestion charge and Ultra Low Emissions Zone (ULEZ) have had a big effect on car values on a local level, and with more areas across the country introducing similar schemes, similar effects are expected elsewhere.
Market Maturity: Drive Electric notes that initially, residual values on EVs were poor due to limited market demand for used electric vehicles. However, the market has since expanded significantly, and with large demand for used electric cars, they are retaining their value much better.
Challenges for petrol cars:
Environmental Regulations: According to Motorway, older petrol and diesel vehicles are losing value in the UK, particularly when they are not Euro 6 compliant.
Long-term Uncertainty: Drive Electric research indicates that car buyers are increasingly aware of the time limit internal combustion cars now have, with the UK set to ban the sale of new petrol and diesel cars in 2035.
Insurance costs: what you need to know
The depreciation differences directly impact insurance costs, creating a complex equation for vehicle owners.
EV Insurance Reality: According to NimbleFins research, the average cost of EV car insurance is around £654 for the most popular electric car models in the UK, while Uswitch data shows the average cost of insuring a petrol car in the UK was £541 as of 2023.
Why EVs Cost More to Insure:
- Higher replacement costs due to expensive battery technology
- According to WePowerYourCar, the battery is the most valuable part of an EV, sometimes making up 30-50% of the car’s overall cost
- Limited specialist repair networks
- The Electric Car Scheme reports that claims for EVs are approximately 25.5% costlier than their internal combustion engine counterparts
Gap Insurance Considerations: With EVs potentially facing steeper initial depreciation, gap insurance becomes particularly relevant. This is especially important given the higher purchase prices of electric vehicles and the rapid pace of technological advancement that can make older models less desirable.
Regional variations and market dynamics
Where you live makes a big difference to how well your car holds its value. According to Auto Express, London’s ULEZ and other clean air zones (CAZs) such as Bristol’s Clean Air Zone and Birmingham’s Clean Air Zone are affecting pricing of all cars locally, with compliant models generally retaining their value while non-compliant models fall behind.
What's coming next
Experts think we’re about to see a big shift. According to TyrePoint, as more EV buyers enter the second-hand market, demand and resale values are expected to rise further, especially for models with longer range and good software reliability.
John Clark Motor Group research suggests that as even more electric cars arrive on the road, and the closer we get to the UK Government’s ban on buying a petrol or diesel car brand new, costs are expected to fall further to a point where they will be lower than petrol and diesel cars.
Our advice for car buyers
Choose Wisely: According to Drive Electric, Tesla, Mercedes-Benz, BMW, and other premium brands are showing the strongest value retention, helped by increasing ultra-low emission zones and rising congestion charges and fuel prices.
Consider Timing: TyrePoint research indicates that newer models from Tesla, Kia, Hyundai, and MG are holding up surprisingly well in terms of value retention.
Insurance Planning: Factor in the higher insurance costs when calculating total cost of ownership. Electric Car Guide research shows a £113 annual difference between EV and petrol insurance should be weighed against fuel savings and other running cost benefits. Additionally, drivers with previous convictions should be aware that finding competitive car insurance with a conviction can be particularly challenging for EVs due to their higher risk profile and limited insurer options.
Avoid the Worst Performers: Some EVs still depreciate heavily. According to Zutobi’s research, the Renault Zoe (electric supermini costing over £31,000) depreciates at over 71% in three years, recovering only around £9,000 of its original value.
What this means for insurance
From an insurance standpoint, understanding depreciation patterns helps in several ways:
- Comprehensive vs Third Party: Higher-value EVs with better retention rates may justify comprehensive coverage longer
- Total Loss Valuations: Insurers use current market values, making depreciation rates crucial for claim settlements
- Premium Calculations: As EV values stabilise, insurance costs should become more competitive
So, Which Should You Choose?
Right now, petrol cars still offer more predictable depreciation, but premium electric cars are starting to challenge this. The key is choosing the right model and understanding that the EV market is still maturing.
Here’s what the numbers show for buyers prioritising value retention in 2025:
- Premium EVs (Porsche, Tesla, Mercedes) are performing surprisingly well
- Established petrol models remain the “safe” choice for predictable depreciation
- Mid-range EVs still carry higher depreciation risk
- Insurance costs favour petrol cars, but the gap is narrowing
Electric cars are changing how we think about car values in real time. While petrol cars still have the edge on predictable depreciation, things are changing fast – especially for premium electric models that people actually want to buy.
The bottom line: In 2025, your choice between electric and petrol should consider not just environmental impact and running costs, but the increasingly complex value retention equation that affects everything from insurance premiums to trade-in values.
For expert advice on insuring your next vehicle – whether electric or petrol – and understanding how depreciation affects your coverage options, Arma Insurance provides tailored solutions to protect your automotive investment.
Sources list
- AA (Automobile Association) – Car depreciation statistics: 60% value loss after three years
- Auto Express – Car depreciation analysis, ULEZ impact on values, 15% annual depreciation rate
- ChooseMyCar – EV vs petrol depreciation comparison (2020-2023): EVs lost 51% vs petrol 37%
- Drive Electric – Premium EV residual values: Mercedes EQC (65%), Tesla Model S (60%), Porsche Taycan (77%)
- Electric Car Guide – Insurance cost comparison: £113 annual difference between EV and petrol insurance