EV Salary Sacrifice

[4Foot6FootCess]

Hi everyone.

My TOC has announced a (possible) plan to introduce a scheme for leasing an electric vehicle via salary sacrifice. I say possible plan as that's all they have announced so far because it's dependent on a few other factors.

Are there any TOC's currently offering this scheme? What makes and vehicles are available? Is the scheme a year-round thing or once-a-year? And, finally, was there much of a discount comparered to buying or leasing An EV in the 'normal' way?

Cheers.

 

[styles]

Can't answer most of the questions but I looked at setting this up through my company, and the tax savings for a fully EV were actually quite significant, especially if you roll in things like insurance, maintenance plans, etc.

You can always wait and see what the corporate leasing company offers and compare it with a personal lease to determine whether it's worth it though.

In terms of models, I'm not sure what your TOC may stipulate, but if they're not restrictive you can get anything from a Dacia Spring for £140/month to an Audi RS for closer to £1800/month. Your employer might set limits on the amount you can spend based on your salary, and in all cases your pay after all salary sacrifices can't go below the national minimum wage, but if you're even thinking of trying this you need to give your head a wobble!

 

[Snow1964]

You will need to get full details of the scheme to know the restrictions and values of the scheme. Companies set their own parameters on how big an amount or percentage of salary are allowed.

It should however be noted that these schemes are causing the Treasury to lose some Income tax, so there is a risk that the Chancellor will stand up during the budget (2 months time, or some later budget), and cap the value or scrap the scheme.

Of course if you are tied into 3 or 4 year lease, you might be stuck with it until expiry, and it might have clauses that say tax changes are your responsibility to cover, and not a reason to cancel. So if you are getting into a multi-year commitment costing tens of thousands then really ought to check small print for worst case scenario.

 

[styles]

You will need to get full details of the scheme to know the restrictions and values of the scheme. Companies set their own parameters on how big an amount or percentage of salary are allowed.

It should however be noted that these schemes are causing the Treasury to lose some Income tax, so there is a risk that the Chancellor will stand up during the budget (2 months time, or some later budget), and cap the value or scrap the scheme.

Of course if you are tied into 3 or 4 year lease, you might be stuck with it until expiry, and it might have clauses that say tax changes are your responsibility to cover, and not a reason to cancel. So if you are getting into a multi-year commitment costing tens of thousands then really ought to check small print for worst case scenario.

Agree with this, though from a political point of view, worth noting the chancellor has recently announced quite large grants for EV cars (https://www.gov.uk/government/speeches/electric-car-grant-launched) so the current government is at least backing them quite strongly.

 

[edwin_m]

Agree with this, though from a political point of view, worth noting the chancellor has recently announced quite large grants for EV cars (https://www.gov.uk/government/speeches/electric-car-grant-launched) so the current government is at least backing them quite strongly.

However, this only applies to cars priced under £37k, which excludes most new EVs. Presumably they don't want it to be seen as a perk for rich people to buy expensive cars, and I guess they might apply the same logic to salary sacrifice.

My employer also offers a scheme for secondhand EVs, but not looking for a replacement vehicle at present so I can't say whether they are worthwhile.

 

[WelshBluebird]

If these schemes are worth it really depends on the specifics. Some of the options are pretty expensive and you can get better deals elsewhere, even accounting for the tax savings. But some of them are good deals, especially for ones that have servicing, breakdown cover, insurance etc all included. I'm looking into it and whilst i technically can get the same vehicles for less each month elsewhere, as soon as you add insurance and the like the salary sacrifice options work out better.

which excludes most new EVs.

Not sure that is the case anymore. Or certainly not as much as it was. There's lots of cheaper options coming in, which is exactly why the grants are there.

 

[Crossover]

I believe Northern have something as a friend of mine has an EV on such a scheme. I don’t know the details but I know he was waxing lyrical about the deal he got on it compared to any other option but I think was also saying that the new deals aren’t anything like what he got and he’s not sure what the position will be by the time his comes to an end

 

[Welly]

Salary sacrifice can reduce the payments into your pension scheme so I do not think anything involving salary sacrifice can be counted as a worthwhile perk.

 

[JamesT]

Salary sacrifice can reduce the payments into your pension scheme so I do not think anything involving salary sacrifice can be counted as a worthwhile perk.

That depends on the scheme. Salary Sacrifice is often a method used for pension contributions themselves. The main thing is whether things like pension are calculated on the gross salary before the sacrifice.

 

[WelshBluebird]

That depends on the scheme. Salary Sacrifice is often a method used for pension contributions themselves. The main thing is whether things like pension are calculated on the gross salary before the sacrifice.

And even then you can choose to increase your contributions to make up for it.
It also depends on your tax and childcare situation - it can be incredibly worthwhile to use any kind of salary sacrifice scheme for some people regardless of the benefits they get in exchange (car, pension etc) just to keep things like free childcare hours or to not lose their personal allowance etc.

 

[4Foot6FootCess]

Thank you everyone for your replies.
I'm still debating as to whether an electric car is worth it for me in the first place but, depending on the deals and types available, I might just bite.

 

[Snow1964]

Thank you everyone for your replies.
I'm still debating as to whether an electric car is worth it for me in the first place but, depending on the deals and types available, I might just bite.

There are some calculations on running costs in the Are converting to electric cars realistic thread. but gist of it follows.

Exact fuel costs depend on driving style, car, outside temperature, but in general terms is petrol cars get about 400-450 miles to a tank, which is about £60-80 to fill (depending on location and car)

Most electric cars have official range of around 220-260 miles (say 185-230 miles typically), so 2 charges gives similar range to tank full of petrol. (For completeness there are also longer range cars that do 300+ miles, conversely also city cars with less range)

Typical electric car costs £6.50-7 on overnight domestic electricity to go same distance as tank full of fuel (2 overnight charges of £3 to £3.50 each). So overnight electricity is around eleventh of price of petrol

However those using public chargers will only save about 30% vs petrol (if they are registered with app or charger card). But will pay similar amount to fuel if using normal public chargers at turn up and pay rates, and around +10-15% if using expensive rapid chargers priced around 80p /kw

Assume installation of home charger is £1000 (as a one off payment), might be contribution for some new cars. (takes about 8000 miles of cheap electricity saving to offset this cost)

An electric car owner doing about 10,000 miles per year, charging at home, saves about £1300 per year (say £100-110 per month). Typically also saves £150-200 each time on servicing as no engine or oil changes etc. Against these savings car insurance costs bit more

For new cars there are currently massive savings if you search (try carwow etc). As an example a CUPRA Born, gets £7000 off for PCP, another £1500 for Government grant, and a seasonal £1000 off til end of September, and wall box (home charger) for just £99 (saving about 900) so around 30% off the (arbitrary) list price

 

[whoosh]

Isn't there a Benefit In Kind (BIK) tax to pay under these schemes though?

My TOC doesn't do this arrangement, but the union is trying to negotiate one.

At first I thought they looked quite good, but maybe BIK tax can offset the perceived benefits of salary sacrificing the lease (income tax and National Insurance saving)

Would be useful to hear of any real life experience and examples.

 

[4Foot6FootCess]

There are some calculations on running costs in the Are converting to electric cars realistic thread. but gist of it follows.

Exact fuel costs depend on driving style, car, outside temperature, but in general terms is petrol cars get about 400-450 miles to a tank, which is about £60-80 to fill (depending on location and car)

Most electric cars have official range of around 220-260 miles (say 185-230 miles typically), so 2 charges gives similar range to tank full of petrol. (For completeness there are also longer range cars that do 300+ miles, conversely also city cars with less range)

Typical electric car costs £6.50-7 on overnight domestic electricity to go same distance as tank full of fuel (2 overnight charges of £3 to £3.50 each). So overnight electricity is around eleventh of price of petrol

However those using public chargers will only save about 30% vs petrol (if they are registered with app or charger card). But will pay similar amount to fuel if using normal public chargers at turn up and pay rates, and around +10-15% if using expensive rapid chargers priced around 80p /kw

Assume installation of home charger is £1000 (as a one off payment), might be contribution for some new cars. (takes about 8000 miles of cheap electricity saving to offset this cost)

An electric car owner doing about 10,000 miles per year, charging at home, saves about £1300 per year (say £100-110 per month). Typically also saves £150-200 each time on servicing as no engine or oil changes etc. Against these savings car insurance costs bit more

For new cars there are currently massive savings if you search (try carwow etc). As an example a CUPRA Born, gets £7000 off for PCP, another £1500 for Government grant, and a seasonal £1000 off til end of September, and wall box (home charger) for just £99 (saving about 900) so around 30% off the (arbitrary) list price

Thank you for this. Nice to get these figures all in one place.

I actually have an electric charger already fitted to my home (new build) hence why I'm thinking about it. Seems like overall you save quite a bit of money but will see how long that lasts.

 

[Egg Centric]

When I did the maths myself through our scheme for my wife's car it made far more sense to buy second hand. Although the salary sacrifice stuff is theoretically great tax wise, the combo of a) leasing(?) company taking the mickey a bit and b) the crazy depreceation of EVs it was much better to just buy one cash. So run the numbers is the answer.

(I'm also glad cause I much prefer actually owning the car over leasing it / borrowing money; that's not necessarily rational but otoh the finance companies are making money somehow right?)

NB that if you want to buy new and think of cars as a monthly cost then it does seem a no brainer though, and I won't judge you for that.

 

[Snow1964]

At the moment there are hefty discounts on some EVs, a while back there were a few daft stories on social media, and buyers backed off until it became clear if grants would apply. Effect is there are plenty of deals.

The leasing sector got itself in a mess with EVs 2-4 years ago, and completely mucked up some expected residual values, so made loss on quite a few. But of course they need to recoup their losses so have pushed leasing rates up. Ultimately they are better off not doing the volume than losing on each vehicle.

So the sums are currently in favour of those buyers, rather than those leasing. Using same example I quoted above (CUPRA Born), with all the discounts can get one new for nearer £25k. And if you have savings can settle the PCP few days later and avoid the interest too, keeping the discount. You get a car with a 5 year warranty (think it is 8 years on battery). So if you work on 8 years for depreciation to a scrap value of nil (and in practice car should last few years longer), it's around £250 per month for 100 months. (easy sum to do quickly, divide price by 100 to give rough monthly cost)

Above comments said EV might be saving £100 per month in fuel costs if using cheap overnight electricity instead. Suddenly your net cost is £150 (£250 depreciation, less £100 fuel saving). Short term makes leasing option seem expensive, and tax break won't close the difference. So do the sums, rates will stabilise over time, but at moment likely to be better buying.