Busting The Myths Surrounding Car Salary Sacrifice In 2021

Choosing a new car is a big decision. Whether you need something big enough for a growing family or something city sleek to fit in the tightest of parking spaces choosing a vehicle isn’t easy. Add to this, debating over a car salary sacrifice scheme adds even more stress to the mix. We’re going over the myths around salary sacrifice in 2021.

Let us begin with the basics; car salary sacrifice schemes mean you can exchange some of your pre-tax salary for the benefit of a car instead. If this is the path you choose, you will not have to pay a deposit and all of the main running costs will be included in the price. Ahh, suddenly there is a lot less stress, isn’t there?

Below, we shall tackle the myths most commonly found on the internet surrounding car salary sacrifice. 

Expense

A lot of people assume that this scheme is costly, however, this statement is false. You can save all of your national insurance on the amount you sacrifice for the car, as well as benefiting from generous manufacturer discounts. 

In addition, by partaking in this scheme, you remove the cost of road tax, servicing, MOT, breakdown cover and maintenance including replacement tyres. Furthermore, cars which produce no CO2 emissions are favoured by a 0% benefit in the car tax rate.

Minimal choice

Another myth busted; there is a massive variety of salary sacrifice cars to choose from. From sporty to chunky off-roaders, even a range of electric and hybrid vehicles, there is something for everyone!

Whether or not salary sacrifice can impact your pension depends on the pension scheme your employer runs and its rules.

There is a great deal to consider, and some employers create what is known as a reference salary. This is your pay rate before any salary sacrifice arrangements. So, for instance, if your salary is £30,000 before a salary sacrifice, your employer will use this as a reference when calculating other benefits such as pensions. 

On the other hand, if you are in your final salary pension scheme, it will only be impacted if you reduce your salary in the years before retirement or leaving the organisation. 

Therefore, to make the right decision, you must ask your pension team to calculate the impact on your pension and compare this with the savings being made through salary sacrifice. 

It Will be More Challenging to Get a Mortgage

The good news is a company car scheme can actually reduce your outgoings; this is, of course, providing you secure a good deal. Your employer is likely to use your salary sacrifice as confirmation of your earnings when applying for a mortgage. Therefore, the better deal you get your hands on, the higher the excess income you will have. With this in mind, you can present greater affordability when applying for a mortgage. 

Many benefits run alongside salary sacrifice car schemes. You can save money, access tax benefits, reduce maintenance costs and pick out the perfect car for you. If you are interested in gaining more knowledge, why not calculate your savings? Or, get in touch!

Want to find out about the more common myths surrounding electric cars and salary sacrifice? Check out our MythBusting series here!

Want to know more about electric cars? Get the guide!