Pros & Cons of Leasing a Car with Salary Sacrifice
As with all financial offers, leasing a car through a salary sacrifice has both benefits and disadvantages. Here at SalSac however, we feel very strongly that the benefits far outweigh the small number of potential drawbacks. Here we aim to explore leasing a car via salary sacrifice enabling you, the employee, to make a clear fully informed decision.
So lets start with the easy one, saving money. Leasing a car via salary sacrifice enables you to save hard cash as the money for the vehicle comes out of your salary before you are taxed. You therefore pay less National Insurance and Income Tax to the government. A disadvantage of this is that you are then seen to have a non cash benefit and thus have to pay BIK or "Benefit In Kind". This is where the choice of car comes into it.
Different cars have vastly different levels of BIK. For example, a 4x4 Diesel Land Rover could attract up to a 37% BIK rate. However, on the flipside, a Tesla Model 3 only attracts a 2% BIK. This is due to the low emissions and would likely only cost you around £34.91 per month. Now the tax savings for this vehicle depending on spec and earnings could be around £427.81, making this Salary Sacrifice example on this Tesla extremely advantageous.
Simply put, the lower the emissions of the vehicle leased the smaller the BIK Percentage. This makes leasing an electric vehicle the cheapest form of salary sacrifice. The UK government have fixed this 2% BIK Rate until 2025 therefore guaranteeing this saving until this time.
Upgrade to an Electric Car with Salary Sacrifice
Apart from the obvious tax savings, a salary sacrifice could enable you to ditch the internal combustion engine once and for all and switch to a clean Electric Car or EV. This brings even more savings by the way of fuel. We estimate that to drive 30,000 miles the average fuel bill is around £4,500. Compare this to charging an electric car and the same miles would only cost £1200. This nets to an estimated monthly saving of over £91.00 per month. With fuel costs on the rise, this saving is extremely likely to increase in future years.
Save More and Add Car Insurance to the SalSac
To increase the savings and effectiveness of the salary sacrifice you can also bolt on the car insurance. This means you sacrifice more but ultimately save more of your hard-earned cash. The great thing about this is that there is no BIK cost for insurance and just simply saves you money. Adding insurance does increase the salary sacrifice total but also is fixed for the entire term of the contract. No price increases and no surprises. If you are quoted £700 per year for insurance over 36 months your salary will simply be reduced further by around £58.00 each month.
Add a Home Charger and the Installation Cost
As you have probably realised reading this article most salary sacrifices are based around electric car leases as the savings are huge. The Tesla Model 3 example discussed earlier has the potential to save you over £17,400 over 3 years, but it gets better. You can also wrap up the cost of a fully fitted home charger so you can easily charge your car at home where electricity is at its cheapest. For more information on electric chargers please call our team or explore our electric charger page.
One disadvantage of a salary sacrifice is that of affordability. Some staff members will not be able to take a car if the monthly payment brings their salary underneath the minimum wage, regardless if they feel that it is affordable. In this case SalSac would suggest choosing a cheaper electric car and not including insurance or a charger. You could also reduce the annual millage allowance to reduce the total sacrifice which may enable the SalSac.
As you can see the benefits of a salary sacrifice car lease far outweigh the negative elements. This is also before you factor in all the benefits of leasing a car in general and the benefits that a brand new electric car offers such as great driver aids and increased safety for you and your passengers. For more information about SalSac or to get a quote please call our expert team on 0330 174 6768 or email us at firstname.lastname@example.org.