The UK government is considering stepping in to make electric cars more affordable by guaranteeing loans for buyers. With EV sales falling short of targets, ministers are talking to car finance companies about offering more low-interest or even interest-free loans, according to the Financial Times.
By backing these loans, the government could help shrink the price gap between EVs and petrol or diesel cars. This would be a big win for the car industry, which has been struggling with slowing sales—especially for EVs, which tend to cost more upfront.
Government grants for EVs ended in 2022, with ministers arguing the market was mature enough to stand on its own. But that decision left the UK as the only major European country without financial incentives for electric cars, something car manufacturers called "hugely disappointing."
At the same time, carmakers have been pushing the government to ease up on strict EV sales targets under the zero-emission vehicle (ZEV) mandate. In 2024, manufacturers had to ensure 22% of their sales were electric, rising to 28% in 2025. While no fines were issued last year—thanks to record EV sales—the industry is warning that these targets aren’t realistic long-term.
Despite the UK being a global leader in EV adoption (behind Norway and China), demand hasn't been as strong as expected. Many potential buyers are still put off by high prices and concerns over charging infrastructure.
Now, the government is looking at relaxing EV sales targets to avoid slapping manufacturers with heavy fines. A consultation on potential rule changes is set to close in mid-February.
Meanwhile, this news about possible EV subsidies comes just as Chancellor Rachel Reeves has stepped into a major legal battle over car finance commissions. A court ruling last October found that dealers had unlawfully pocketed “secret” commissions on car loans without telling customers, opening the door for billions in compensation claims. The government is urging judges to ensure any payouts are “fair” rather than excessive.
Would cheaper loans make you consider switching to an EV? Let us know in the comments...
