Pay per mile road tax for electric vehicles is set to shock the UK used EV market over the next few years. From 2028, EV drivers will pay a distance based charge (currently rumoured to be around 3p per mile for pure EVs and 1.5p for plug‑in hybrids) on top of standard Vehicle Excise Duty. This is to replace some of the tax revenue lost from fuel duty on petrol and diesel cars, from people switching to electric vehicles.
Upfront Price vs Running Cost
Electric vehicle values have a simple premise: higher purchase price > lower running costs. A pay per mile road charge quickly changes the running cost advantage, especially for high mileage drivers. These drivers are likely to factor in the extra 2–3p per mile into the cost of ownership, which can make cheaper petrol cars look more competitive. This downward pressure is most likely to show up as softer residuals and more aggressive discounting on higher mileage, out of warranty EVs.
Behavioural Effects
Because this tax is directly linked to distance driven, some owners may respond by reducing their annual mileage or by keeping a second petrol car for longer trips, which can further weaken demand for used EVs. Car loan providers will also look at their costing for EV buyers, potentially looking at a bigger buffer and higher borrowing costs to the owner. At the same time, the fleet car market, key owners of the used EV supply, will recalculate whole life costs, potentially offloading certain EV models, flooding the market and further depressing used electric vehicle prices.
Outlook for Used EV Prices
The introduction of pay per mile road tax is likely to increase price sensitivity in the used EV market and accelerate depreciation for larger EV models mostly exposed to higher annual mileage. Efficient, smaller EVs mainly used for local driving should hold value better, but across the sector, once the scheme goes live in the UK, pay per mile will no doubt pull used EV prices lower.
