Salary sacrifice car schemes – consumer rights warning

Sullypants

Just wanted to share my experience as I think it exposes a serious gap that could affect anyone using a salary sacrifice car scheme.

I got a brand new Mercedes EQB in June 2025 via my employer’s salary sacrifice scheme (through Arval UK). Within 3 days, I reported major suspension issues. After 5 failed repair attempts and over 15 days in workshops, the fault still isn’t fixed.

When I rejected the car, Arval refused. Their legal team even told me:

• Consumer law doesn’t apply because the contract is technically between them and my employer.

• The Ombudsman has no jurisdiction.

• Scots law doesn’t apply because the contract specifies English law.

All of this is completely wrong. I’m the one paying (through salary deductions) and the car is for my personal/family use only. The Financial Ombudsman Service has now accepted my case.

The bigger issue:

Salary sacrifice schemes are growing fast, but providers seem to be exploiting technicalities to deny employees their consumer rights. Many people would be misled by what I was told and simply give up.

If you’re in a salary sacrifice scheme, please be aware: you do have consumer rights, and the Ombudsman can take your case.

If anyone is going through something similar please share your thoughts or experience. Also anyone needing any help regarding this, I’ll do my best to help. 

Ectophile

All of this is completely wrong. I’m the one paying (through salary deductions) and the car is for my personal/family use only.

The problem is that you're not the one paying.

You agreed a pay cut with your employer.  Your employer is paying for the car.

Okell

Shouldn't your employer be sorting this out?

A_Geordie

I've seen this before. Arval are correct because their contract is with the employer, not yourself. However, the contract you've entered into with your employer is likely to be subject to the Consumer Rights Act with respect to the car. 

If I recall, the CRA does not apply to employment contracts but that's only in relation to services and not goods. So you should be directing these issues to your employer and exercising your consumer rights. These kinds of leasing deals suppliers have with employers usually contain very limited rights for the employer, because quite often the suppliers are financially backed by third party investors and the terms they have with those investors are even more restrictive so the suppliers flow down these terms. 

Suspect your employer will try to push back on this but I would be curious to see what sort of explanation they give as to why the CRA wouldn't apply, if that's their line of argument.

Worst case, your employer may refuse you to order another car since they may be stuck with paying for the the faulty one. 

Grumpy_chap

A_Geordie said:

I've seen this before. Arval are correct because their contract is with the employer, not yourself. However, the contract you've entered into with your employer is likely to be subject to the Consumer Rights Act with respect to the car. 

I don't believe that to be the case, but would be perfectly happy if you can enlighten me with an actual reference that backs up CRA applying to a company car.

We have the following scenarios to consider:

A - OP earns a salary, say £40k.

B - OP earns a salary, say £35k plus company car.

I fail to see where the consumer rights fit into either salary package above.

MattMattMattUK

Grumpy_chap said:

A_Geordie said:

I've seen this before. Arval are correct because their contract is with the employer, not yourself. However, the contract you've entered into with your employer is likely to be subject to the Consumer Rights Act with respect to the car. 

I don't believe that to be the case, but would be perfectly happy if you can enlighten me with an actual reference that backs up CRA applying to a company car.

We have the following scenarios to consider:

A - OP earns a salary, say £40k.

B - OP earns a salary, say £35k plus company car.

I fail to see where the consumer rights fit into either salary package above.

I agree, especially as if the salary sacrifice was set up in explicit contractual exchange for goods and/or services then it would potentially breach the HMRC guidelines on salary sacrifice.

pramsay13

I'm not sure about consumer rights or lack thereof but I'd be looking for my employer to sort out or at least put a bit of pressure on the suppliers. Depending on how many cars they purchase through salary sacrifice as an organisation the power they have might be quite considerable. 

Alderbank

When I administered these schemes on behalf of the Housing Association where I worked, we did not consider the CRA to apply because the HA's trade or business was not Renting and leasing of cars and light motor vehicles (Standard Industry Code N77110), so the HA did not meet the CRA definition of 'Trader'.

We included the various salary sacrifice T&Cs in relevant employees' contracts of employment.

Jenni_D

Grumpy_chap said:

A_Geordie said:

I've seen this before. Arval are correct because their contract is with the employer, not yourself. However, the contract you've entered into with your employer is likely to be subject to the Consumer Rights Act with respect to the car. 

I don't believe that to be the case, but would be perfectly happy if you can enlighten me with an actual reference that backs up CRA applying to a company car.

We have the following scenarios to consider:

A - OP earns a salary, say £40k.

B - OP earns a salary, say £35k plus company car.

I fail to see where the consumer rights fit into either salary package above.

But isn't a salary sacrifice car actually a personal car, not a company car? The employee is (probably) not paying Benefit In Kind tax on the vehicle, rather they are taking some of their "salary" in the form of a car, so it's not a company car?

molerat

Jenni_D said:

Grumpy_chap said:

A_Geordie said:

I've seen this before. Arval are correct because their contract is with the employer, not yourself. However, the contract you've entered into with your employer is likely to be subject to the Consumer Rights Act with respect to the car. 

I don't believe that to be the case, but would be perfectly happy if you can enlighten me with an actual reference that backs up CRA applying to a company car.

We have the following scenarios to consider:

A - OP earns a salary, say £40k.

B - OP earns a salary, say £35k plus company car.

I fail to see where the consumer rights fit into either salary package above.

But isn't a salary sacrifice car actually a personal car, not a company car? The employee is (probably) not paying Benefit In Kind tax on the vehicle, rather they are taking some of their "salary" in the form of a car, so it's not a company car?

Nope, sal sac is a company car with a BIK.  Something a lot of people taking these schemes fail to understand and complain when they get hit with tax.  The taxman ain't gonna pay for 28%+ of personal drive around costs.

Grumpy_chap

Jenni_D said:

Grumpy_chap said:

A_Geordie said:

I've seen this before. Arval are correct because their contract is with the employer, not yourself. However, the contract you've entered into with your employer is likely to be subject to the Consumer Rights Act with respect to the car. 

I don't believe that to be the case, but would be perfectly happy if you can enlighten me with an actual reference that backs up CRA applying to a company car.

We have the following scenarios to consider:

A - OP earns a salary, say £40k.

B - OP earns a salary, say £35k plus company car.

I fail to see where the consumer rights fit into either salary package above.

But isn't a salary sacrifice car actually a personal car, not a company car? The employee is (probably) not paying Benefit In Kind tax on the vehicle, rather they are taking some of their "salary" in the form of a car, so it's not a company car?

No, it is not a personal car.
The employee negotiates a new contract with the employer whereby their base salary reduces but the new reward package includes the company car as well.  The company car is then treated for BIK purposes the same as any other company car.  It so happens that the BIK for EVs is very low (presently).

The rules for SS specifically require that there is a change to the contract of employment:
https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye

Let's consider the scenarios I suggested above, but with a third option added in:

A - OP earns a salary, say £40k.

B - OP earns a salary, say £35k plus company car at the same employer as A.

C - OP leaves employer and starts a new job elsewhere at salary of £35k plus company car.

It would be absurd for B & C to be treated differently.

I think there is wide spread misunderstanding about SS schemes (whether for car, more pension, or whatever).  The reduced salary can impact employer pension contributions, reduced salary in the event of redundancy situation, etc.
On the flip side, the reduced salary can increase entitlement for means-tested benefits.