Leasing an electric car through salary sacrifice

El_Torro

I've gone down a bit of a rabbit hole today, looking at schemes which allow you to lease an electric car through salary sacrifice. Just wondering if anyone has done this, or aware of anyone who has. I'm looking to hear from people who don't personally promote these schemes basically.

I already salary sacrifice my pension contributions at work. I believe my employer does allow this electric car scheme, though that's one of many things I'd have to check. 

I've never had a long term lease on a car. I think it's crazy that people do this, essentially paying the lease company for the depreciation of the car and then trading the car in at the end of the lease for another one. However if I'm paying for it out of my gross pay (rather than my net pay) then suddenly it becomes a lot more interesting. I would be paying for it out of money that would incur a 40% income tax too, which helps. 

I had a quick mess around with quotes and found a decent car for about £250 a month reduction in take home pay for a 4 year lease. This includes MOTs, annual service, breakdown cover and car insurance (the car insurance is an optional extra, you can take that out and find your own, which would make the quote cheaper). It's possible to pay a lot more than this of course, just depends on what kind of car you want. This was a very rough and ready quote though. To get exact figures the company quoting would have to ask me a lot of additional questions.

£3,000 a year to run a car isn't cheap of course, there are much cheaper ways to get by. However part of the advantage is not paying for petrol / diesel. My company has charging stations at the office and I guess it would make sense to get one at home too for convenience. How much you save paying for electricity instead of petrol / diesel depends on how much you use the car.

My current car still has a few years left in it, so I'm not going to be jumping into this scheme any time soon. Just wondering what other people's thoughts were on the scheme.

Brie

My company had a lease scheme with EVs which I looked into a few years back.  I didn't go for it.

Now I did want an EV and still do eventually.  But this would have cost me a fair whack, £350 a month over 3 years for a car that was about £20k.  VW up-e I think.  My problem though was they couldn't tell me in advance how much it would cost to buy the car outright at the end of the 3 years.  And there was a 6 month wait for delivery. So that would be me handing over more than £12k without getting a car at the end.  And I already owned a VW up bought second hand for about £7k.  It just didn't make sense. 

Roll forward 3 years and the company made me redundant (which would have messed up the lease deal royally) and EVs and second hand cars are attracting a premium so I doubt buying the car would have been affordable.  Hindsight is great but I think I was right at the time for not jumping for this immediately.

Grumpy_chap

El_Torro said:

I've gone down a bit of a rabbit hole today, looking at schemes which allow you to lease an electric car through salary sacrifice. .

I believe my employer does allow this electric car scheme, though that's one of many things I'd have to check. 

Really, before looking at anything else and potentially getting excited at the prospect of a new car on an attractive EV SS scheme, you need to establish whether your employer offers a scheme and the rules of that scheme.

You might look at some super scheme online, think a car type X for £Y per month would be fantastic.  If your employer does not offer a scheme, or if the car type is not available or much more expensive, then that will all be in vain.

To respond to the point from @Brie about the price to purchase at the end, there are rules around company lease schemes that mean they cannot give a cost to buy at the outset because it is a lease and not a conditional purchase.  If a cost to buy was set at the beginning that would fall foul of the rules for lease.  There are some significant differences in tax treatment between purchase and lease.

Bigphil1474

OP, company lease's through salary sacrifice are usually cheaper, but it's not always the case. Where I work, we have access to the NHS Fleet scheme, which is one of the best around. The cars are cheaper than a none company scheme would be, and you save the tax and NI. However, I get a car user allowance, and a mileage rate which is okay but not great. If i took on a car on the NHS Fleet scheme, I'd lose my car user allowance, and get a much lower mileage rate. Both of those would wipe out the savings from the tax and NI. Although there'd be saving on the cost of fuel, overall I didn't think it was worth it for me at the moment. I'm only on 20% tax rate though, although it doesn't make a huge difference, as Tax and NI is 32%, and NI stops roughly where 40% tax kicks in.

El_Torro

Bigphil1474 said:

OP, company lease's through salary sacrifice are usually cheaper, but it's not always the case. Where I work, we have access to the NHS Fleet scheme, which is one of the best around. The cars are cheaper than a none company scheme would be, and you save the tax and NI. However, I get a car user allowance, and a mileage rate which is okay but not great. If i took on a car on the NHS Fleet scheme, I'd lose my car user allowance, and get a much lower mileage rate. Both of those would wipe out the savings from the tax and NI. Although there'd be saving on the cost of fuel, overall I didn't think it was worth it for me at the moment. I'm only on 20% tax rate though, although it doesn't make a huge difference, as Tax and NI is 32%, and NI stops roughly where 40% tax kicks in.

Good point about the car allowance. I get one too and if I were to lose it by signing up to this scheme it would definitely make this endeavour not worthwhile. I'll see what I can find out from my employer this week. 

Brie

Grumpy_chap said:

To respond to the point from @Brie about the price to purchase at the end, there are rules around company lease schemes that mean they cannot give a cost to buy at the outset because it is a lease and not a conditional purchase.  If a cost to buy was set at the beginning that would fall foul of the rules for lease.  There are some significant differences in tax treatment between purchase and lease.

Thanks for explaining that!  Shame the person I talked to at the time didn't know about it!!  But frankly I wasn't surprised they were so badly informed despite doing customer service strictly for salary sacrifice car lease schemes!! 

Other times I've had the "finance guy" at major car dealerships tell me that APR doesn't matter so there was no need to tell me what it was or it didn't matter how much the final payment would be because by then I'd be happy to just pay the loan off!!

DullGreyGuy

Brie said:

Grumpy_chap said:

To respond to the point from @Brie about the price to purchase at the end, there are rules around company lease schemes that mean they cannot give a cost to buy at the outset because it is a lease and not a conditional purchase.  If a cost to buy was set at the beginning that would fall foul of the rules for lease.  There are some significant differences in tax treatment between purchase and lease.

Thanks for explaining that!  Shame the person I talked to at the time didn't know about it!!  But frankly I wasn't surprised they were so badly informed despite doing customer service strictly for salary sacrifice car lease schemes!! 

Other times I've had the "finance guy" at major car dealerships tell me that APR doesn't matter so there was no need to tell me what it was or it didn't matter how much the final payment would be because by then I'd be happy to just pay the loan off!!

Sounds like you are mixing up Leasing/PCH and PCP

Most company schemes will be leasing, which is just long term rental. There is no APR as there is no financing, you are just agreeing to borrow the car for X years at Y per month. The car at the end is worth whatever the car is worth. Normally the hirer cannot purchase the car because that then looks and smells like a finance deal not a leasing deal which has different VAT treatment with a company lease it may be different as the company not you are technically the hirer.

With PCP you are financing the car itself, you agree a balloon which is based on the estimated value at the end of the contract. You make repayments towards the loan through the period of the contract and at the end get the choice to buy it by paying the balloon (directly or indirectly) or handing the car back.  

Brie

DullGreyGuy said:

Sounds like you are mixing up Leasing/PCH and PCP

No I'm not actually.  I'm talking about 2 different situations - the common factor though is how one might pay for a car.  And in both situations the people I talked to didn't seem to know their Audi from their Edsel.  

Bigphil1474

I do know people who have bought their lease car at the end of the 3 year lease, but I think it has involved some jiggery pokery between the lease company, the employer, and the employee.