莲花直播

Written by Rob Buckland

With an increasing squeeze on the cost of living, many people find it very difficult to save up and buy a new car outright. That’s why over 2.2 million people in the UK last year chose to finance their car instead of buying it outright.

The overwhelming majority of new cars are financed, and that’s particularly the case with electric cars due to their generally higher list prices. There’s also a lack of affordable, older EVs to choose from on the used market. Once you’re over the hurdle of getting one, though, you’ll find an electric car substantially cheaper to run in the long-term than a petrol or diesel car. 

There are a few ways to finance an electric car for personal use. Many chose a personal contract hire (PCH) lease, but what about if your company enrols in a salary sacrifice scheme? Which is the more affordable way to go?  We’ll explain all in this one-stop guide.

What is an EV salary sacrifice scheme?

Simply explained, a salary sacrifice scheme is an employee benefit that gives you or your team access to the wide variety of new electric cars on the market with no upfront cost. Employees pay for the car through their gross salary each month, saving on income tax and national insurance contributions in the process. 

To find out more information check out our .

What is Personal Contract Hire (PCH)?

Personal Contact Hire (PCH) is different because it’s entirely separate from your employer. Also known as simply ‘leasing’, it’s a bit like renting a car long-term. You pay a set monthly amount for an agreed period of time to use the car, and then hand it back when the contract period is up. Unlike PCP (Personal Contract Purchase) there is no option to buy the car at the end of the contract. 

Which is Cheaper: Salary Sacrifice or PCH?

Generally speaking, you'll save a substantial amount of money by opting for a car lease through your business with salary sacrifice rather than opting for a personal lease. That's because the monthly cost of the car is deducted from your pre-tax earnings, saving you money on income tax and National Insurance Contributions. 

You'll also get an all-inclusive package with salary sacrifice, no cost to pay up front, and no need for any credit checks. 

When comparing the costs of both options it's important to consider whether your annual earnings fall into the lower (20%) or higher (40%) tax band. To cover all bases we've laid out examples of both to show you the potential savings salary sacrifice can offer: 

The Cost Breakdown for 20% Tax Payers

Here we have one of the most popular affordable electric cars on sale, the capable and strong value MG4 in top-spec Trophy Long Range form. These figures are based on a 30 year-old male from Canterbury, a leasing period of three years and a mileage limit of 10,000 a year: 

The Personal Lease figure includes an estimated cost for maintenance and insurance - both of which are included in the salary sacrifice cost. 莲花直播 Leasey's Personal Lease package also already includes breakdown cover and tyres (many rival schemes don't) which are also included with salary sacrifice. 

The Cost Breakdown for 40% Tax Payers

The savings are even greater for higher rate taxpayers on a salary sacrifice scheme. Here we look at the Polestar 2, a desirable premium EV with a high level of technology, a long range and a sporting drive. 

Our example below is also for a 30 year-old male in Canterbury (but with higher earnings), a three-year leasing period and 10,000 miles a year: 

Again, the Personal Leasing cost includes the total 'motoring cost' with estimated insurance and maintenance cover included. 

EV Salary Sacrifice vs. PCH: The Bottom Line

Overall, it's clear to see the potential savings available to you (or your employees) if your business opts in to a salary sacrifice scheme. The 20% taxpayer in our example can save nearly £250 a month on an MG4 when compared with personal leasing, including insurance and maintenance costs. 

The savings are even more stark for 40% taxpayers. The person in our example can save almost £460 a month on their total motoring costs, which is a substantial amount. The additional cost of company car tax barely makes a difference in either scenario. 

Want to find out more about salary sacrifice schemes beyond the potential cost savings? If you're an employee, check out our , and if you're an employer than you'll want our .