What is Salary Sacrifice for Cars? Everything You Need to Know
Key insights
Save 20-50% on a new or used electric car through your employer.
Everything included - insurance, maintenance, breakdown cover and servicing.
There’s no upfront cost - no deposit or credit checks.
Get started in minutes - with some cars delivered in as little as 2 weeks.
Take this real example - a Volkswagen ID.7 costs just £427 per month (compared to £632 per month if you leased it yourself).
What Is Salary Sacrifice For Cars?
Heard of salary sacrifice but not sure how it works? You’re not alone. It sounds technical, but it’s actually one of the easiest and most affordable ways to drive an electric car.
Salary sacrifice lets you lease an electric car by giving up a portion of your gross (pre-tax) salary each month. Because the payments are taken before Tax and National Insurance, you end up saving 20–50% on the total cost of the car.
Your employer sorts everything through a scheme provider like The Electric Car Scheme - so there’s no credit check, no deposit, and no stress.
Think of it like this:
You know how the Cycle to Work scheme helps you save money on a bike by paying through your gross salary?
This is the car version - but with even bigger savings!
How it works:
Choose your electric car - browse every make and model of electric car - new or used - with everything included (insurance, servicing, breakdown cover, home charge point and more).
Pay monthly through your salary - your car cost is taken from your gross pay, so you pay less Tax and National Insurance.
Drive away and enjoy - no credit checks, no hassle. Just clean, green, affordable driving.
How much can you actually save?
The short answer? A lot. Most drivers save between 20% and 50% on the cost of the car through salary sacrifice - and it’s all thanks to the government tax incentives that are available.
Why do you save so much?
When you salary sacrifice,your monthly car payments come out of your gross salary - before Tax and National Insurance are taken. That means:
You pay less Tax
You pay less National insurance
Your employer saves too (and often shares those savings with you)
What about Benefit-in-Kind (BiK)?
When you get a car through salary sacrifice, it’s classed as a non-cash benefit - meaning you are not getting extra salary, but you are getting something of value: a shiny electric car. That’s why the Benefit-in-Kind (BiK) tax applies.
The good news?
Electric cars have the lowest BiK rates of any vehicle type.
BiK on electric cars is just 3% today (until April 2026).
It will increase by 1% each year until it reaches 9% in 2029.
Even at 9%, it’s still far lower than petrol or diesel cars, which can be over 30%.
Here’s the thing, even after including BiK tax, you’re still saving thousands using salary sacrifice each year thanks to the Tax and National Insurance savings.
Real life examples (40% taxpayers)
| Car Make & Model | Gross Monthly Cost | Tax & NI Monthly Savings | BiK Monthly | Net Monthly Cost |
|---|---|---|---|---|
| BYD Sealion 7 | £586 | £246 | £67 | £407 |
| Tesla Model 3 | £448 | £188 | £57 | £317 |
| Renault 5 | £383 | £161 | £33 | £255 |
Prices based on a £70,000 per annum salary (40% tax payer), lease terms shown are 10,000 miles per year, 3 year term and includes maintenance. Prices correct at time of writing 11.06.25. Prices are subject to change.
Want to see how much you could save?
Use our EV Salary Sacrifice Calculator to enter your salary, lease term and dream electric car and find out your real monthly net cost in seconds.
Why Electric Cars Are the Smart Choice
Just 3% Benefit-in-Kind tax vs 25%+ for petrol cars.
Lower running costs: Electricity is cheaper, and servicing is simpler.
Greener driving: Zero tailpipe emissions, better for the planet.
Charge at home: Home charger can be included in your package.
The Pros and Cons of Salary Sacrifice Car Schemes
The Good Stuff
Big savings: Save 20–50% on a new electric car through tax and NI savings (use our calculator)
All-in-one package: Insurance, maintenance and breakdown cover included
No credit checks: It’s all arranged through your employer
Drive better for less: Get access to premium EVs that might usually be out of budget
Go green: The best savings apply to EVs, making it the most affordable way to drive
Things to Consider
Lower gross salary: Your payslip shows a reduced salary, impacting mortgage or loan applications
Job-linked benefit: If you leave your job, the car usually goes back
Mileage limits: Choose a mileage cap that fits your lifestyle - excess miles can cost more
It’s a lease: You don’t own the car - it’s a long-term hire, not a purchase
Common questions and answers about salary sacrifice cars
What happens if I leave my job?
The car is returned - but with The Electric Car Scheme, you are protected. If you leave due to resignation, redundancy, parental leave or illness, we cover early termination fees.
Will this affect my pension?
EV salary sacrifice schemes have different impacts depending on pension type: they may reduce defined benefit (DB) pensions as these are calculated on salary, but generally won't affect defined contribution (DC) pensions or State Pension entitlements.
Can I choose any car?
Yes - you can choose any electric car on the UK market, including new, nearly new, and used models. From affordable options to top-of-the-range EVs.
How does the tax work?
Your monthly car cost comes out of your gross salary, before tax and National Insurance - which is why you save 20–50%. You’ll pay a small Benefit-in-Kind (BiK) tax too, which is just 3% for EVs.
Can my partner drive it?
Yes - most schemes, including ours, allow you to add additional drivers, such as your partner or family member, as long as they meet the insurer’s criteria.
Can I change my salary sacrifice car during the agreement?
Usually not - it’s a fixed-term lease (typically 2–4 years). You choose your car and mileage up front. But if your circumstances change, speak to us - we’ll help where we can.
How to Get Started in 3 Simple Steps
Getting a car through salary sacrifice is quicker than you think. Here’s how:
Step 1: Check with your employer (2 minutes)
Email your HR or Benefits team if they offer a salary sacrifice car scheme. Use this quick email template:
Hi [HR Team], I’m interested in the salary sacrifice car scheme. Could you send me details on how to access it?
Don’t have a scheme yet?
Talk to your employer and share our Explainer Pack - we’ll help them get set up at no cost. You can also enter your HR team's details using our Convince Your Company page and we’ll do the hard work for you.
Step 2: Choose your electric car (10 minutes)
Login to our online EV salary sacrifice calculator:
Browse any EV on the market - including new, used and nearly new options.
See your monthly net cost instantly, based on your salary and tax savings.
Step 3: Select your car and wait (2-12 weeks)
Select your dream electric car using our quote tool.
Sign your salary sacrifice agreement.
Your car is delivered to your door and ready to drive!
“Salary sacrifice can sound complicated, but it’s actually one of the easiest ways to save money on a new electric car. We’ve built this guide to cut through the jargon and help more people access the savings - no finance degree needed.”
Published: 11th June 2025
Last Updated: 11th June 2025
