Author: Beth Twigg | Reading Time: 4 minutes | Published 09/05/2023
Author: Beth Twigg
Reading Time: 4 minutes
Published 09/05/2023
With no personal credit checks involved, an electric car salary sacrifice scheme is one of the best – and most affordable – ways to get behind the wheel of a brand-new EV, without having to work on your credit score first.
Traditional personal contract hire deals rely on you having a good credit score. When leasing a car, the funder financing the vehicle would normally carry out a credit check to assess your eligibility, and the long-term risk of lending the money for you to lease the car.
But with a salary sacrifice scheme, there are no credit checks.
Instead, you benefit from the buying power of your employer who has implemented the scheme, which means you can choose from a wide range of electric car lease deals without the stress of being turned down for finance.
Your credit score can be labelled as poor, and you’d still have access to the same range of electric cars as someone whose credit score is good through the salary sacrifice scheme.
There are some considerations though. You will be entering a finance agreement and you’ll be liable to make your agreed monthly payments, so you’ll need to make sure the car you opt for is affordable. You also won’t be able to lease a car should it take your earnings below the National Minimum Wage.
But if your credit score doesn’t actually reflect your current circumstances, leasing a salary sacrifice car is one way to get the vehicle you want at a price that suits you.
A salary sacrifice scheme is an arrangement between you and your employer that reduces your salary in return for a non-cash benefit. These can include additional pension contributions, childcare vouchers, or – in Corparison’s case – company cars.
And because you’re effectively earning less, your income tax and National Insurance payments are reduced, maximising your take-home pay and allowing you to get behind the wheel of a brand-new electric car for significantly less.
Your employer saves money too, on their National Insurance Contributions that they pay on your income, making it a win/win for both you and them.
There are numerous benefits to taking out a salary sacrifice scheme. These include:
If you’re looking for sustainable ways to maximise your income, then opting to lease a car through your employer’s salary sacrifice scheme will be the right choice for you.
There are not many disadvantages to a salary sacrifice scheme – it’s reasonably risk-free for both you and your employer – but there are several considerations to take into account.
If you’re looking at making a mortgage application in the near future, you’ll want to consider whether or not your reduced salary (because of the sacrifice) could prevent you from borrowing the amount of money that you need.
Even though you’ll be benefiting from savings on tax through the scheme, and might even be taking home the same or more than before, it’s still your gross salary that mortgage lenders will be interested in.
You’ll also be tied into the lease contract through your employer for the term that you chose (generally between two and four years), and you could be liable for early termination costs if you move jobs before your car lease is up.
The short answer: yes, you could save up to 60% in comparison to a personal lease deal.
The long answer: yes, but only if you go about it in the right way.
Although you might be able to lease a more premium car through salary sacrifice than you would have done on your own, thanks to the tax savings at hand, it still pays to be pragmatic, so you can live the life you want as well as driving the car you like.
Both you and your employer will save money though, because the sacrificed portion of your salary is taken pre-tax. Ultimately, it will look like you’re earning less, and so you will pay less tax and NI. The set monthly payment will also include road tax and comprehensive car insurance, which can help you to budget month on month.
Be careful though: a salary sacrifice scheme for a company car will only result in savings if you lease an electric car, thanks to the higher rate of Benefit in Kind tax payable on cars with higher emissions. But with an electric car costing less over its lifespan than a petrol or diesel equivalent, you’ll continue to save money throughout the term of your lease.
Corparison’s salary sacrifice calculator has been designed to show you exactly how much money you could save on an electric car lease through the scheme.
Simply pick the car, or cars, you’re interested in leasing, and watch the savings stack up as our calculator compares it to what you’d pay through a personal lease deal.
See how much you could save
