Would you ever swap from owning a car to personal lease/PCP?

DrEskimo

The costs aren't comparable as your £390/month is simply you spreading the initial purchase cost...it could have been anywhere from £0 - £1000/month depending on how you personally decided to pay it off.

Apple to apple comparison is expected depreciation over the same term as the EV lease with the expected servicing/maintenance and other costs. Given it's an EV, also difference in fuel costs over the term. I somehow expect that keeping your current diesel won't cost as much as £560/month when you add it all up and divide it over a set term.

Then there is the most important point for me....your free to do whatever you want with your current car. No contractual obligations on how long, or how much you drive it, with any punitive additional mileage costs or repercussions if your situation changes. The EV lease scheme at my work has horrendous additional mileage costs and what if you want to keep the car longer or change earlier.

Big EV fan though, but sticking with standard second hand purchase with cash. Minimise depreciation and no interest costs.

hieveryone

DrEskimo said:

The costs aren't comparable as your £390/month is simply you spreading the initial purchase cost...it could have been anywhere from £0 - £1000/month depending on how you personally decided to pay it off.

Apple to apple comparison is expected depreciation over the same term as the EV lease with the expected servicing/maintenance and other costs. Given it's an EV, also difference in fuel costs over the term. I somehow expect that keeping your current diesel won't cost as much as £560/month when you add it all up and divide it over a set term.

Then there is the most important point for me....your free to do whatever you want with your current car. No contractual obligations on how long, or how much you drive it, with any punitive additional mileage costs or repercussions if your situation changes. The EV lease scheme at my work has horrendous additional mileage costs and what if you want to keep the car longer or change earlier.

Big EV fan though, but sticking with standard second hand purchase with cash. Minimise depreciation and no interest costs.

Thank you - that's really interesting. Current costs for this car are rising (insurance is horrendous!), diesel, repairs/servicing. We know nothing of EQ's though so it's a massive change and of course, financially. Thanks for the pointers re: mileage, that's definitely something to consider. 

facade

the test would be how many other employees are taking advantage of the deal- especially people aged 40+.

If it is salary sacrifice it will affect a defined benefit pension negatively (one where the pension payment is a % of gross salary- and the pension depends on what you earn) because it reduces the gross salary,which also reduce tax liability.

A defined contribution pension (where you pay a fixed amount of £ each month and periodically review how much that is- and the pension depends on how much you have managed to save overall) is unaffected

The 40+ thing is because stereotypically people don't worry about any effect on pensions until they realise that they will soon be claiming it.

Octopus are into salary sacrifice schemes for EVs, obviously they don't say anything negative, but they manage to manipulate figures to make it look like a great deal. Have a look at their propaganda information, it will be typical, and may even be what is being offered. https://octopusev.com/

doningtonphil

I imagine the scheme, being for an electric car, is for a Salary Sacrifice scheme.  What that means is that the cost of the car is taken out of the 'before tax pay'.  So, what you lose from your take home pay is much less.  These are very rought figures as an example.

A car cost £500 per rmonth.  If you wanted to buy it on a 'personal' PCP you would use £500 of your take home pay to pay for it.  Which woudl be £650-750 of 'before tax salary'.

Doinfg a Salary Sacrifice, they give you a car, in turn your give up £500 of your salary, which becomes only about £350 less in your take home pay.

So the car costs you £350 per month rather than £500.

THis is because you are not receiving cash to be taxed on.  However, instead of cash -m your employer is giving you a car - a Benefit in Kind.  The advantage of an electric car is theat the benefit in kind is only 2%. (2% of list price of the car multiplied by your tax rate - so a £40000 car has a bik of £800.  If you are a stadnard rate tax payer you would be taxed 20% of that - £160 per year).  THis is much less than the tax you pay on your salary to buy the car yourself

35har1old

Brie said:

I looked at doing this at my previous employer.  First problem was that there was going to be a minimum of 6 months before the car would be delivered.  Next was the fact that while they could tell me the monthly amount that would be deducted from my pay they couldn't say what the final payment might be in 3 years when the deal ended.  So basically I had no idea what the car would cost me.  Unlike if I buy a car with cash (well never done that I've always used credit cards) or even with a loan where all the costs, down payment, monthly, final, are known at the beginning.  Final problem would have been the fact that they made me redundant before the car would have been delivered so you never know what's going to happen.  

If you buy a car though PCP you decide on the deposit and the term you are given the monthly payments amount and the final payment amount.Dealerships usually contribute to the plan and you can if you wish pay the car of which can mean that the cost to you is less than the cash price

hieveryone

facade said:

the test would be how many other employees are taking advantage of the deal- especially people aged 40+.

If it is salary sacrifice it will affect a defined benefit pension negatively (one where the pension payment is a % of gross salary- and the pension depends on what you earn) because it reduces the gross salary,which also reduce tax liability.

A defined contribution pension (where you pay a fixed amount of £ each month and periodically review how much that is- and the pension depends on how much you have managed to save overall) is unaffected

The 40+ thing is because stereotypically people don't worry about any effect on pensions until they realise that they will soon be claiming it.

Octopus are into salary sacrifice schemes for EVs, obviously they don't say anything negative, but they manage to manipulate figures to make it look like a great deal. Have a look at their propaganda information, it will be typical, and may even be what is being offered. https://octopusev.com/

Great thank you, that's definitely something to consider. As far as I know his pension is one that he can choose the % of input, ad his company matches up to 7% I think? 

I will check that link out, thank you.

hieveryone

doningtonphil said:

I imagine the scheme, being for an electric car, is for a Salary Sacrifice scheme.  What that means is that the cost of the car is taken out of the 'before tax pay'.  So, what you lose from your take home pay is much less.  These are very rought figures as an example.

A car cost £500 per rmonth.  If you wanted to buy it on a 'personal' PCP you would use £500 of your take home pay to pay for it.  Which woudl be £650-750 of 'before tax salary'.

Doinfg a Salary Sacrifice, they give you a car, in turn your give up £500 of your salary, which becomes only about £350 less in your take home pay.

So the car costs you £350 per month rather than £500.

THis is because you are not receiving cash to be taxed on.  However, instead of cash -m your employer is giving you a car - a Benefit in Kind.  The advantage of an electric car is theat the benefit in kind is only 2%. (2% of list price of the car multiplied by your tax rate - so a £40000 car has a bik of £800.  If you are a stadnard rate tax payer you would be taxed 20% of that - £160 per year).  THis is much less than the tax you pay on your salary to buy the car yourself

Yes that's exactly it, thank you. The quoted figures are something like £900 but salary sacrifice is £560 or there abouts. He's a higher rate tax payer so it's hard to know whether it's a benefit to us or not.

Lavendyr

I've just done exactly this and sold my 2019 Ford Focus to take out a personal contract lease on a new hybrid car - something I've never contemplated before but had a need to pay off debt incurred on my cat's medical bills (over and above his £7k a year lifetime insurance - he was very poorly and the medication he needed was incredibly expensive). We are a one car household and my Focus was at the point where things were starting to need doing to it, it was out of warranty, and being a petrol car it wasn't particularly economical, especially for short town journeys - around 30mpg.

For us it therefore works much better to have a leased car, which is under warranty, with maintenance included in the monthly cost of £390 a month. Fuel costs are lower as it is managing around 50 mpg even just with short journeys. I don't have to worry about unexpected repair or maintenance costs as they are all covered, as is breakdown (including at home and onward travel). It is more expensive than owning a car. However, I am able to drive a car I really love and couldn't afford otherwise, with a fixed cost and no surprise bills. 

The only difference for me is that I didn't want to go to an EV car just yet especially as we only have the one car in the household, and like your OH my work only offers EV leases, so I didn't go through the salary sacrifice route. But I did get a really great deal on the car I am leasing, and at this point in time it makes sense for our family. 

Hope this helps!

Stateofart

Pros

Don't have to worry

Cons

Pay through the nose for it usually

What do you prefer more...saving money or noth having to think about it.  The SS deals are for people who don't like dealing with or don't have the time to deal with cars.

fred990

https://www.telegraph.co.uk/money/consumer-affairs/cheap-car-finance-deals-britain-poorer-luxury-cars/

Hmmm...says it all really?