The difference between salary sacrifice and car leasing 🤔🚗
If you are looking at switching to an electric car, you might be considering electric car salary sacrifice or car leasing. Both options can be beneficial depending on your situation, so to make sure you have all the information, we have highlighted the key differences and similarities for each.
Car leasing is a way to drive a new car without having to purchase it outright. You agree to rent the car from the leasing company for a fixed period of time, typically 2-4 years, then you return the car. You pay for the car on a monthly basis using your post tax (or net) income.
Electric car salary sacrifice is an employee benefit that was introduced by the UK government to support more drivers make the switch to an electric car and get the nation close to achieving net zero by 2050.
The key difference between car leasing and an electric car salary sacrifice scheme (like us), is that the fixed monthly payments are taken from your salary before any income tax or National Insurance is paid. As this is an employee benefit, it is classed as a ‘company car’, so there is a company car tax payable. However, the value of this “benefit-in-kind” (BIK) is set by HMRC, and set at very low rates until at least 2028.
This is how you are able to save 30-60%!
Here are some important points to note:
Ownership
With car leasing, you are simply renting the car for the agreed period of time. However, with The Electric Car Scheme, the company leases the car on your behalf - making it a company car. So in both cases, you do not own the car, although you may have the option to do so at the end of the lease (this is dependent on various factors).
Upfront costs
These are dependent on the leasing company, but car leases typically require a deposit and along with any other fees. On the other hand, The Electric Car Scheme does not require any upfront costs, the cost on your payment plan is what you get.
Maintenance costs
With car leases, the leasing company is usually responsible for all maintenance and repairs. However, on salary sacrifice costs such as home chargers and maintenance can be added onto the cost, or you can manage this yourself.
Length of agreement
On this point, agreements for both car leasing and salary sacrifice are not that different. Car leasing is typically between 2-4 years, with The Electric Car Scheme, it is also between 2-4 years however there is also the option of car subscriptions enabling you to have a car for as little as 12 months.
End of the agreement
With both options, the end of the agreement is also the same - you are required to return the car at the end of the lease.
Before choosing either option, it is important to look at your long term goals and income as well as your current situation. With our market leading Complete Risk Protection, you are protected from factors like family friendly leave, dismissal, sick leave etc, from day 1. However, if you are considering making changes, for example resignation within the first 3 months, then a car lease may be the best option.
Learn more about how The Electric Car Scheme works in our explainer video 👇 or book a call with a specialist
