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Car Leasing Salary Sacrifice Myths
Choosing to lease a car with a salary sacrifice can seem overwhelming.
Read on to discover the truth and dispel the myths surrounding a SalSac.
Myth - Salary Sacrifice is too Expensive
Here at SalSac, we find this statement wildly misleading. If you lease a fully electric vehicle through a salary sacrifice then the savings can be higher than 40% when compared to a personal lease hire or PCH. Salary Sacrifices do however get more expensive as the emissions of the vehicle increase due to the UK's Benefit In Kind Tax or BIK. This is however a sliding scale with good savings to be had on plug-in hybrids, especially those with larger electric ranges.
Myth - A Salary Sacrifice Will Impact My Pension
This is not an absolute truth. It is true that a salary sacrifice reduces your effective salary and therefore can affect other salary-dependent benefits like pensions etc. However, many employers and companies use what is called a "notional" or "reference salary" when calculating pension contributions. This is the employee's salary before any salary sacrifice is deducted. In this case, a pension may not be affected. As there are many types of pensions such as defined contribution pensions, defined benefit pensions and state pensions it is best to talk directly with your employer or a pension adviser to gauge the potential changes.
Myth - A Salary Sacrifice Lease Car Affects Mortgage Applications
Not necessarily, many providers use a "notional" or "reference salary" which is the employee's salary before any salary sacrifice is deducted to calculate the amount they will lend. It is important to note that affordability is usually assessed as part of a mortgage application and the salary sacrifice is likely to be taken into account. We advise that you carefully consider this before you decide to join the scheme and take independent advice if you are unsure.
Myth - There is a Lack of Car Choice
Currently, there is a huge choice of both full electric and plug-in hybrid cars that make great salary sacrifice choices. With many car brands bringing new affordable options to the market there has never been such a large range to choose from. So whether your looking for a fast sports saloon like the Audi Etron GT, a family SUV like the Mercedes EQC or a small hatchback like the VW ID3, there is something for everyone to SalSac.
Myth - BIK will Soon Make Salary Sacrifice too Expensive
The UK government has laid out plans to hold Benefit In Kind (BIK) Tax at 2% on electric cars until 2025. After this date, the BIK percentage will only increase by 1% every year until 2028. This means that savings on all-electric vehicles will stay extremely strong until at least 2028. After 2025 however, the increase in BIK will make a SalSac slightly more expensive.
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