Electric Vehicle Savings: How to Lower the Cost of Your Salary Sacrifice Car
We all know that salary-sacrifice cars are great value for money. Tax savings, NI savings, and discounts can make an electric car via salary sacrifice not just much cheaper than retail, but in many cases cheaper than running a 5-year-old petrol or diesel car. If you’re nervous about the monthly commitment, what can you do?
Dealing with Your Existing Car
When you opt for a salary sacrifice car, you’re committing to fixed outgoings, but you likely have an existing car that needs replacing. Before you commit, make sure you can either return your current car or sell it. Many PCP agreements allow you to return the car without a penalty or even buy it to sell on. With contract hire, returning the car penalty-free is rare. If selling is an option, we recommend using services like Motorway.co.uk, where dealers bid for your car and even collect it from your home. Improving its condition before the sale can often increase its value more than the cost of simple refurbishments.
Managing Lump Sum or Sales Proceeds
A key rule here: NEVER pay a deposit or advance payment for a salary sacrifice car. The finance structure is usually based on the car’s depreciation plus interest, and with salary sacrifice, you save on tax and NI – up to 28% or more! It’s smarter to use any lump sum to pay down other debts or invest in an ISA than to forego those tax savings.
How to Lower Monthly Repayments
To reduce your monthly outgoings, consider extending the lease term. While this may significantly impact your costs, or sometimes none at all, our quote engine can show you the specifics. Also, avoid choosing a car with a large battery for infrequent needs, like an annual family holiday. Opting for a car that suits 95% of your driving habits and renting a car for occasional larger trips can be more cost-effective. We offer corporate rates for rentals. Moreover, if considering additional features, opt for a higher trim level instead of adding extras, as this can help with the car’s resale value.
Lowering Running Costs
Charging an electric car at home is usually economical, but it can be even cheaper with an off-peak or EV tariff. Be careful with these tariffs though, as they often have slightly higher standing charges or peak-time rates. If your daily electricity usage is high, this might not be beneficial. However, for typical users, an EV tariff could allow you to charge your car with enough power for up to 140 miles for just a few pounds during off-peak hours!
What Else Should I Know?
A salary sacrifice car is not for life… The agreement typically lasts between 2 to 4 years, depending on what you select. In this period, you can fix motoring costs, which is particularly beneficial when facing rising insurance and maintenance expenses. As your income hopefully increases, your motoring costs stay the same.
Also, consider other less obvious benefits of salary sacrifice. For those receiving certain benefits, the impact of a salary sacrifice might be less significant than expected; of course, check first. Additionally, it could defer student loan repayments, and for those in specific regions like north of the UK border or with children, it could provide further tax savings or income adjustments to qualify you for additional benefits. Always remember, our quote engine provides a worst-case scenario; you might find the benefits are even greater!