How to finance buying a car…

disgruntled01

Hello, maybe this is a straightforward question. We are in need of a new car as our 15yrs old car is getting too small for the growing family and the odd reliability issue creeping in. 

Through my employer I have access to a “preloved” Tusker EVs with salary sacrifice. 

A Kia Nero comes out at an effective cost to my take home of £334/month. This includes insurance, servicing, tyres, breakdown etc. I.e. all costs. It’s a 36 month term. So £12k. It’s a 2021 registration with 64kWh battery and 47000miles. 

Autotrader suggests I can get a similar age (less milage) model for £12.5k, I.w. £0.5k more than tusker. I would be liable for costs - insurance/breakdown, tax, servicing. But assuming a budget for those of £400/200/500=£1.1k respectively a year, then over the years owning the car would be an extra £3.8k). 

Am I missing something in the costs? It seems that buying is the fairly obvious solution if we can afford the upfront cost (and admittedly taking the risk of the car continuing to work for more than 3yrs). 

I’m just struggling to see the benefit of the lease scheme (even with the tax savings). 

MattMattMattUK

disgruntled01 said:

Hello, maybe this is a straightforward question. We are in need of a new car as our 15yrs old car is getting too small for the growing family and the odd reliability issue creeping in. 

Through my employer I have access to a “preloved” Tusker EVs with salary sacrifice. 

A Kia Nero comes out at an effective cost to my take home of £334/month. This includes insurance, servicing, tyres, breakdown etc. I.e. all costs. It’s a 36 month term. So £12k. It’s a 2021 registration with 64kWh battery and 47000miles. 

Autotrader suggests I can get a similar age (less milage) model for £12.5k, I.w. £0.5k more than tusker. I would be liable for costs - insurance/breakdown, tax, servicing. But assuming a budget for those of £400/200/500=£1.1k respectively a year, then over the years owning the car would be an extra £3.8k). 

Am I missing something in the costs? It seems that buying is the fairly obvious solution if we can afford the upfront cost (and admittedly taking the risk of the car continuing to work for more than 3yrs). 

I’m just struggling to see the benefit of the lease scheme (even with the tax savings). 

Removal of risk. 

Lease - Fixed and known cost with no asset at the end, no real risk to you, all costs are covered.
Buy - Variable costs, could be very low, equally the car could fail catastrophically and you would be left with a scrap vehicle. Cheaper, asset with residual value at the end, but the risk is on you.

If you lease you are paying them to take on the risk, if you buy you are taking that on yourself, but make a cost saving because of that. Whether you see a benefit depends on your personal appetite for risk. 

Bigphil1474

Just a word of warning on salary sacrifice - your reduction in gross pay will also mean a reduction in your employers (and yours) contribution to your pension. Depends on how much they contribute, but should be considered as part of the overall costs. Also depends on your pension scheme and your age.

Would you buying with cash or a loan - add in the loan interest if the latter.

It's mainly as Matt says - the lease scheme gives you worry free motoring for 3 years at a fixed monthly cost, whereas you never know what is gonna happen with a car you buy. £334 sounds a lot for a 4 year old car though. Is that the net cost? My car had it's most expensive service at year 6 - around £1k which included timing belt etc. Obviously that would have been free on a lease.

I looked at a brand new Kia, think it was a Nero, through the NHS fleet scheme, and the net cost to me would have been around £150 a month - £350 off net wage minus around £200 a month on payments I wouldn't be making (petrol, VED, insurance, MOT, repairs/Maintenance etc.), and add a bit on for electric. It was tempting but I'd have lost £120 a month into my pension pot.

jimjames

disgruntled01 said:

Through my employer I have access to a “preloved” Tusker EVs with salary sacrifice. 

A Kia Nero comes out at an effective cost to my take home of £334/month. This includes insurance, servicing, tyres, breakdown etc. I.e. all costs. It’s a 36 month term. So £12k. It’s a 2021 registration with 64kWh battery and 47000miles. 

That sounds very high. Our EV salary sacrifice scheme was that sort of amount for a brand new EV.

WellKnownSid

jimjames said:

disgruntled01 said:

Through my employer I have access to a “preloved” Tusker EVs with salary sacrifice. 

A Kia Nero comes out at an effective cost to my take home of £334/month. This includes insurance, servicing, tyres, breakdown etc. I.e. all costs. It’s a 36 month term. So £12k. It’s a 2021 registration with 64kWh battery and 47000miles. 

That sounds very high. Our EV salary sacrifice scheme was that sort of amount for a brand new EV.

Yes it does sound high.  I've just run the numbers on our scheme - NIRO EV ESTATE 150kW 2 Nav 65kWh 5dr Auto over 3yr / 12,000 miles per annum and it's £338.

sheramber

disgruntled01 said:

Hello, maybe this is a straightforward question. We are in need of a new car as our 15yrs old car is getting too small for the growing family and the odd reliability issue creeping in. 

Through my employer I have access to a “preloved” Tusker EVs with salary sacrifice. 

A Kia Nero comes out at an effective cost to my take home of £334/month. This includes insurance, servicing, tyres, breakdown etc. I.e. all costs. It’s a 36 month term. So £12k. It’s a 2021 registration with 64kWh battery and 47000miles. 

Autotrader suggests I can get a similar age (less milage) model for £12.5k, I.w. £0.5k more than tusker. I would be liable for costs - insurance/breakdown, tax, servicing. But assuming a budget for those of £400/200/500=£1.1k respectively a year, then over the years owning the car would be an extra £3.8k). 

Am I missing something in the costs? It seems that buying is the fairly obvious solution if we can afford the upfront cost (and admittedly taking the risk of the car continuing to work for more than 3yrs). 

I’m just struggling to see the benefit of the lease scheme (even with the tax savings). 

Have you checked what your tax on benefit in kind  is for the car? 

ididgetwhereiamtoday

What risk would there be in buying it yourself? The car will still have over 3 years Manufacture warranty. This is why the lease company are quite happy to lease a 4 year old Kia, little risk to them. 
Check its been serviced on time and by Kia and all should be good. The Kia Eniro is a brilliant car especially in 4+ spec.

eschaton

With the figures you give, I’d be buying the car. 

I bought my current car nearly new with 1000 miles 56 months ago. I’ve added 39k miles and it’s still worth £15550 today, I paid £23k. It has dropped £7,450 in value. 

If I’d bought a new one on a lease (not SS) then it would have cost £19,200 for 48 months and it wouldn’t have been my car. 

Aretnap

Bigphil1474 said:

Just a word of warning on salary sacrifice - your reduction in gross pay will also mean a reduction in your employers (and yours) contribution to your pension.

Not always. Confirm with your employer whether they'll calculate pension contributions as a percentage of gross or net salary. 

daveyjp

Definately not a 'will', its a detail to be checked.

 Some pensions are based and paid on full time salary regardless of any salary sacrifice arrangements.
.
Same goes for any redundancy calculations.

Goudy

Generally, Defined Benefit Pensions are worked out on the number of years in the scheme and your salary (average or final salary).

Obviously if you sacrifice part of that salary you will alter the average/final salary you earn.
These types of pensions are common in the public sector and there are some government approved sacrifice schemes that get around this, but you need to check.


With Defined Contribution Pensions, the contribution calculations are agreed before any sacrifice. This means you'll contribute the same with or without any salary sacrifice and generally won't alter any pension.
These types of pensions are more common in the private sector.


As for state pension, it's unlikely but not impossible to alter that.
You'd need to be sacrificing enough to take you below the lower earning limit (around £6300) long enough to reduce your contributions below the 35 years you need to get a full state pension to have any effect.

So even if you did drop below the lower earnings limit for a year or two, as long as you pay in the full 35 years you'll get a full state pension.