Salary sacrifice EV savings

djt91

Hi, just hoping someone can confirm that my workings / though process is correct. I have been offered an EV through a salary sacrifice. It is a BMW i4, which are over £50k to buy new.

At the moment, I have an 8 year old diesel, however the mileage is getting a little high so would be looking at changing anyway, as I do around 300 miles per week, which is mostly commuting to/from work.

The net reduction in my take home pay would work out around £450 per month after savings in tax/NI, which a lot of people are telling me I am wasting over £16k over 3 years without anything to show for it. However when I run the figures it actually seems like a pretty good choice, considering I will be driving a brand new car vs a 9 year old one, and don't need to worry about any repairs/maintenance.

I would also get around £8k for my current vehicle if I sold now, which I could put into a savings account and get interest on.

I have worked out I will gain the following monthly savings with the EV lease:

Fuel = £200 (Currently spend around £300 per month on diesel, would guess cost would be around £100 electricity with a suitable tariff for overnight charging?)
Servicing/repairs/MOT's/Tyres etc = £60 (all servicing/tyres etc are included in the lease)
Depreciation on current vehicle = £80 (Think this is about right considering high annual mileage)
Interest earned on car sale proceeds = £40 (£8000 @ 6% on fixed savings)
Road tax saved = £20

Total monthly saving = £400

So the way I calculate it, it will basically be costing me an extra £50 per month to drive a brand new electric BMW for 3 years, compared to keeping my 9 year old diesel. That isn't even taking into account that I would probably need to change my car anyway, so would potentially have some interest to pay on a small loan for the next few years if I was to buy a second hand vehicle.

People I speak to can't seem to understand this, and are convinced that whatever way you look at it I am losing £16k over 3 years just to give them the car back. Do my calculations look reasonable, or am I missing anything?

Thanks in advance.

wolvoman

djt91 said:

Hi, just hoping someone can confirm that my workings / though process is correct. I have been offered an EV through a salary sacrifice. It is a BMW i4, which are over £50k to buy new.

At the moment, I have an 8 year old diesel, however the mileage is getting a little high so would be looking at changing anyway, as I do around 300 miles per week, which is mostly commuting to/from work.

The net reduction in my take home pay would work out around £450 per month after savings in tax/NI, which a lot of people are telling me I am wasting over £16k over 3 years without anything to show for it. However when I run the figures it actually seems like a pretty good choice, considering I will be driving a brand new car vs a 9 year old one, and don't need to worry about any repairs/maintenance.

I would also get around £8k for my current vehicle if I sold now, which I could put into a savings account and get interest on.

I have worked out I will gain the following monthly savings with the EV lease:

Fuel = £200 (Currently spend around £300 per month on diesel, would guess cost would be around £100 electricity with a suitable tariff for overnight charging?)
Servicing/repairs/MOT's/Tyres etc = £60 (all servicing/tyres etc are included in the lease)
Depreciation on current vehicle = £80 (Think this is about right considering high annual mileage)
Interest earned on car sale proceeds = £40 (£8000 @ 6% on fixed savings)
Road tax saved = £20

Total monthly saving = £400

So the way I calculate it, it will basically be costing me an extra £50 per month to drive a brand new electric BMW for 3 years, compared to keeping my 9 year old diesel. That isn't even taking into account that I would probably need to change my car anyway, so would potentially have some interest to pay on a small loan for the next few years if I was to buy a second hand vehicle.

People I speak to can't seem to understand this, and are convinced that whatever way you look at it I am losing £16k over 3 years just to give them the car back. Do my calculations look reasonable, or am I missing anything?

Thanks in advance.

A couple of points:

1. You say you do 300 miles per week. So approx 15,000 per year. Does the EV scheme price for £450 per month cover annual mileage this high, or is there an additional per/mile charge to work into your calculations?

2. I think you're overstating your fuel savings, unless your current car is a giant gas guzzler. 300 miles per week = approx 1300 miles per month. And you spend £300 on diesel? Assume fuel at £1.60 per litre, you're only getting around 30mpg with your current car? Is it really that low?

3. Your depreciation figure might be a little low - With 13k+ miles a year, I'd expect an £8k diesel to depreciate faster than just £1k per year.

4. Your interest figure excludes tax - so account for that too.

El_Torro

Assuming your calculations are correct (especially on the cost of diesel vs eletricity per month) then it does look like an attractive proposition for you. There are various ways to skin this particular cat though. For example:

You could keep your car and sell it / scrap it when you want to. That'll save you £600 a year as you say. 
You could sell your car and replace it with another second hand car, one that is more fuel efficient. 

Ultimately if you value driving a new car at £600 a year or more then your rationale seems fine. Remember that driving an electric vehicle is not the same as driving a petrol / diesel one.

MX5huggy

300 miles per week if you can charge it all at home, because the range of the car is greater than your daily journey. Then you’ll need 100kWh (probably less) if you do 3 miles per kWh. On Octopus Intelligent it’s 7.5p per kWh so your fuel could be £30 per month. 

djt91

Thanks for the replies.

In answer to the points you raised,

1) Yes, the contract is for 15k miles pa.

2) My current car is an SUV with a 3l diesel engine, so isn't the most efficient, however thought it should be getting more than 30mpg. weekly mileage is probably actually closer to 320-330 on a standard work week, and I usually put £70 of diesel in per week. I will obviously have around 6 weeks holiday per year so mileage would be much less those weeks, which would hopefully keep annual mileage under 15k.

3) I was trying not to overestimate the depreciation cost, however as you say would probably be a little more than £80 per month.

4)I don't earn any other interest, so the approx £500 per year interest would be under the tax free savings allowance.

I think the benefit of driving a new car, as well as the peace of mind with the warranty and service plan is going to be worth the relatively small additional monthly expense, just wanted to make sure I hadn't missed anything major.

I understand it will be different to driving a diesel, may be worth me test driving one first. My last few cars have all been automatic though, so hopefully the switch should be a little easier.

Rodders53

Have you factored in the circa £1k+ for a 7 kW EV charger install on your dwelling?  I assume you have a suitable driveway.

EV charger may need Electric supply upgrade if the service cutout fuse is only 60 Amps, say, depending perhaps on what other electrical loads are in the dwelling at additional cost.

sheramber

What about insurance? Don’t see it mentioned.

Bigphil1474

Do you currently receive any mileage payments from work? If you do, then you'd need to account for their loss. If it's just commuting then that won't be relevant of course. Also worth checking the effect on any works pension - they pay a contribution based on your salary after the salary sacrifice, so you get less paid in. As above, Insurance cost or saving? 
I have access to the NHS fleet hire if I wanted it , but because I need a car for work I'd actually lose more than I'd gain in tax/NI savings. Having looked at the Fleet figures, it works out a better deal for people who don't need a car for when at work than those that do - sounds like that's you. 

born_again

https://www.zap-map.com/tools/home-charging-calculator

£6.30 to charge with a 328 mile range, when using Intelligent Octopus (7.5p). £25.20 a month best case.
IO is often not just the 23:30 to 05:30. Also can happen at any point during the rest of the day. I have yet to have a night time charge, all have been during the day @ 7.5p which is also all your other household use. 

djt91

Thanks all.

So my employer will be sorting the charger for home, which I will be paying them back after their VAT/tax savings, so yes will need to take this into account, probably around £600.

It does not include insurance, but I have had some quotes and not much of an increase from my current car.

I do very little business mileage, maybe 100-200miles per year so the mileage payments is not really an issue.

I need to change my gas/elec supplier now anyway as the fixed term has ended, so will definitely be looking at the Intelligent Octopus. It looks like a no brainer really if you have an electric car. Can this be done before I get the vehicle? Or do I need to wait until I have it? And does is Gas available on the intelligent Octopus contract?

Thanks.

jimjames

Something else to consider is the change in company car tax coming along the line and how much that will impact your costs/savings. I'm also looking at a similar scheme but not yet made up mind so your calculations are very handy. I'm fortunate to have solar panels so might be able to make bigger savings in electricity.