Westpac will offer cheaper loans to customers financing electric vehicles, as the big banks muscle in on the green lending space being dominated by smaller non-bank lenders.

After Commonwealth Bank said it would discount mortgage lending rates for customers whose homes met strict environmental standards, including no gas and seven-star energy efficiency ratings, Westpac said it would cut more than a percentage point off loan rates for EVs and hybrids.

The car loan rates start from 4.99 per cent a year, compared to 6.21 per cent for loans of between $10,000 and $100,000. The discounted rates also apply to used hybrid and electric vehicles up to seven years old.

Westpac’s head of consumer and business banking, Chris de Bruin, said the discount was designed to offset the higher cost of electric and hybrid vehicles, which was a deterrent for many customers.

“Given the recent increase in petrol prices, electric and hybrid vehicles appeal to the environmentally conscious, and the financially conscious too,” Mr de Bruin said.

“We expect demand for these vehicles will continue to rise, with many Australians already planning to make the change.”

Non-bank lenders Plenti and Pepper Money have targeted the EV space, with the latter offering a 3.99 per cent comparison rate.

Although Westpac research showed more than two thirds of Australians were put off by the cost of EVs, Plenti released a report in March that showed electric vehicles could pay off against internal combustion engines in 15 years when bundled with renewable power sources.

Easing household budget pressures

“We know the majority of Australians are now actively considering an electric vehicle as their next car and this initiative will help them make the shift. Given the average Australian household currently spends $3700 a year on petrol and diesel, the purchase of an electric vehicle would ease real pressure on the monthly budget,” Electric Vehicle Council chief executive Behyad Jafari said.

Plenti’s research showed power bills could be as low as $230 a year when EVs and green energy are bundled. The emerging non-bank lender said on Wednesday it had entered into a funding agreement with an electric vehicle manufacturer, after reporting its first cash positive result, underpinned by growth in car loans.

Mr Hynds warned that funding cost increases would take time to be pushed through to loan customers, limiting expected first half of 2023 cash profit to $3.4 million.

“Second half of 2023, expectations are for an improved net interest margin and therefore stronger loan portfolio growth and an expected $9.2 million in net profit,” he said.

Extracted in full from: Westpac offering lower rates for electric and hybrid vehicle car loans (afr.com)

Its auto loan originations were up 177 per cent to $639 million compared with last year, helping achieve cash net profit of $500,000 for the full year and loan originations of $1.1 billion up 134 per cent year-on-year. In the second half of this year, cash profit was at $2.7 million.

“Automotive remains the largest and highest growth vertical and is poised for accelerated growth near-term with the launch of commercial automotive loans, finance agreements in the electric vehicle market and the launch of a dealership point of sale program,” Wilsons analyst John Hynds said.