Electric Car Salary Sacrifice

*Kat*

I've been looking into this and wanted to know if there are any cons to this scheme? It seems too good to be true....thoughts pleae?

Brie

It will completely depend on the T&Cs of the scheme.  I looked into this with my employer a couple of years back.  The monthly deductions from my salary looked a bit better than what I might pay on finance from a dealership so that was ok.  But what stopped me was the fact that at the end of the 3 year salary sacrifice contract I wouldn't actually own the car.  AND they couldn't tell me how much I would have to pay to acquire it as it would depend on the market at that point.  So it was impossible for me to do a valid price comparison.  

The extra kicker was that the car I wanted wasn't going to be available for a minimum of 8 months.  Not sure what delivery times are looking like now.  

Grumpy_chap

Too few details have been shared for detailed comments.

If you are going to get an EV anyway, SS schemes can often be attractive.

One major factor that is sometimes not assessed is any impact on pension.

lisyloo

I used to work for a large employer who had a “fleet” arrangement, so the price could be better due to scale.
so there are valid reasons as to why it may not be too good to be true

zagfles

Basically the govt are encouraging sal sac for EVs by having a ridiculously low BIK value, and excluding EVs from the new 2017 sal sac regulations (where you normally get taxed on the amount sacrificed or the BIK whichever is greater). So you get a big taxpayer subsidy when you sal sac for an EV. That subsidy could change in future years...

norsefox

The answer, in general, is that it is a generous scheme that can significantly benefit some employees.  As noted above, the general pitfalls are where you have employer pension contributions or a DB scheme career average linked to your salary which is being reduced because of the salary sacrifice arrangement.

Generally speaking, you are able to source a electric vehicle, typically on a lease, at the market rate but charged through gross salary.  Typical savings would therefore be expected to be 32% - 42% (higher for Scottish taxpayers, or those earning £100k+).  With a BIK of 2%, the tax isn't quite negligible, so reduces the taxable saving by a small amount.

Comparisons with what you can source privately are difficult, as typically arrangements are not identical.  The SS arrangement will typically have insurance and servicing included, whilst privately you would arrange the former - at least - yourself.

The greatest benefit is where an employer buys/finance the vehicle through PCP as they get a 100% Corp Tax write off in year one.  The employee then covers the financing/depreciation/running costs through their SS for an agreed period of time.  After that period, the employer then disposes of the vehicle, selling it to the employee (or anyone else for that matter) at its market rate.

For that to work effectively and efficiently, the SS value needs to be arranged to match the depreciation of the vehicle.  Too little, and the SS hasn't been used as tax efficiently as possible, too much and the employee would be in a net 'overpaid' position relative to disposal value (i.e. A £40k vehicle with £20k in SS payments, but is worth £18k at disposal; or conversely, a £40k vehicle with £20k in SS payments, but is worth £25k at disposal).

My employer has electric vehicles in different schemes - some leased as company vehicles; some leased and arranged through SS; one purchased with a third party; and another through PCP with an optional balloon payment.

zagfles

norsefox said:

The answer, in general, is that it is a generous scheme that can significantly benefit some employees.  As noted above, the general pitfalls are where you have employer pension contributions or a DB scheme career average linked to your salary which is being reduced because of the salary sacrifice arrangement.

Most (probably the vast majority) of employers will base salary related benefits eg pension, overtime etc on pre sacrifice salary.

norsefox

zagfles said:

norsefox said:

The answer, in general, is that it is a generous scheme that can significantly benefit some employees.  As noted above, the general pitfalls are where you have employer pension contributions or a DB scheme career average linked to your salary which is being reduced because of the salary sacrifice arrangement.

Most (probably the vast majority) of employers will base salary related benefits eg pension, overtime etc on pre sacrifice salary.

I can't speak to how companies approach this across the UK, but what I stated is consistent with circulars that the BMA issued to NHS staff.

Grumpy_chap

zagfles said:

norsefox said:

The answer, in general, is that it is a generous scheme that can significantly benefit some employees.  As noted above, the general pitfalls are where you have employer pension contributions or a DB scheme career average linked to your salary which is being reduced because of the salary sacrifice arrangement.

Most (probably the vast majority) of employers will base salary related benefits eg pension, overtime etc on pre sacrifice salary.

AIUI, there are quite a lot that don't.  Those that don't also seem to be the employers with the best pension schemes - final salary - where the impact can be greater.

zagfles

Grumpy_chap said:

zagfles said:

norsefox said:

The answer, in general, is that it is a generous scheme that can significantly benefit some employees.  As noted above, the general pitfalls are where you have employer pension contributions or a DB scheme career average linked to your salary which is being reduced because of the salary sacrifice arrangement.

Most (probably the vast majority) of employers will base salary related benefits eg pension, overtime etc on pre sacrifice salary.

AIUI, there are quite a lot that don't.  Those that don't also seem to be the employers with the best pension schemes - final salary - where the impact can be greater.

Possibly public sector then, sal sac came a bit late to the public sector and IIRC when they last changed the pension schemes they made a promise of no more changes for 25 years or something, so if the definition of pensionable pay is based on actual salary they might not be able to change it to accomodate sal sac.

Grumpy_chap

The OP needs to assess the benefits and costs of the SS scheme versus the amount of mileage they do and the suitability of the vehicle for their needs.
If they would not pay for a car on finance then it is irrelevant whether the car is EV or otherwise.

In another thread, the OP indicated they only do a low annual mileage:

*Kat* said:

My car is 12yrs old, I drive 3,000 - 4,000 miles per year 

On a purely financial assessment, that likely does not support the expense of any brand new car, whether ICE or EV or via SS.
Of course, if the OP is going to choose to have a brand new car anyway, and can afford to, then the SS EV may still be an attractive way to go.