Salary Sacrifice - Ioniq 5
Discussion
My company has recently opened up an avenue where we can get an EV through salary sacrifice, with Octopus. I've been looking at all the options they have and had my heart set on an Ioniq 5 - test drove one and it's amazing! Got some figures through and its coming out at £600+ net difference on the take-home pay, which seems like a lot in my books. For reference, the package they offer comes with the car (4 years, 8k miles pa), insurance, maintenance and a free charger at home. I specced an Ultimate trim with the tech pack + heat pump, in blue.
Does this sound like a good deal? I've been driving the same car (BMW 320D) for the past 9 years and although it's been mostly reliable up until this point, a few things have started to go wrong. It's currently in the garage getting the ABS system refurbed (for £650) and the clutch release bearing is sounding a little noisy (which is a £900 replacement, not being done right now though).
If I go for head over heart, it makes little financial sense to swap a car that owes me nothing and costs about £110 a month to keep running, vs £600 for a shiny new car on the drive. I WFH, so it would only go out at weekends or the occassional trip to the office (once every few months). I know the gov is trying to get everyone to get into an EV in order to save the planet - my car doesn't help because it's a EURO4 diesel (which isn't exactly what you would call efficient). But EV prices are going through the roof and not everyone can afford a new car - even decent 2nd hand (petrol/diesel) cars are crazy expensive.
My current options are:
1) Suck it up and pay the monthly, help save the planet and get an awesome EV for 4 years (once it arrives - lead times suck)
2) Look for a slightly cheaper car, but lose out on range/charging speed/space/features/looks
3) Stick with the current car, run it for a few more years and hope that EV prices drop, efficiency increases and the world becomes a better place
4) Buy/PCP/lease a petrol car for a few years and then go with option 3
If you were given the choice, which way would you go?
Does this sound like a good deal? I've been driving the same car (BMW 320D) for the past 9 years and although it's been mostly reliable up until this point, a few things have started to go wrong. It's currently in the garage getting the ABS system refurbed (for £650) and the clutch release bearing is sounding a little noisy (which is a £900 replacement, not being done right now though).
If I go for head over heart, it makes little financial sense to swap a car that owes me nothing and costs about £110 a month to keep running, vs £600 for a shiny new car on the drive. I WFH, so it would only go out at weekends or the occassional trip to the office (once every few months). I know the gov is trying to get everyone to get into an EV in order to save the planet - my car doesn't help because it's a EURO4 diesel (which isn't exactly what you would call efficient). But EV prices are going through the roof and not everyone can afford a new car - even decent 2nd hand (petrol/diesel) cars are crazy expensive.
My current options are:
1) Suck it up and pay the monthly, help save the planet and get an awesome EV for 4 years (once it arrives - lead times suck)
2) Look for a slightly cheaper car, but lose out on range/charging speed/space/features/looks
3) Stick with the current car, run it for a few more years and hope that EV prices drop, efficiency increases and the world becomes a better place
4) Buy/PCP/lease a petrol car for a few years and then go with option 3
If you were given the choice, which way would you go?
Depending upon how old you are and how much you've paid into a pension, you may want to look at the overall impact of salary sacrifice for your long term finances;
"However, other pension schemes, particularly defined benefit pensions – like career average schemes – will be impacted. That’s because employers look at an individual’s average pay over the course of their career and calculate the pension on that basis. A reduction in pay via salary sacrifice will reduce your average earnings across your career and therefore your pension.
If you’re in a final salary pension scheme, salary sacrifice will only impact your pension if you exchange (and therefore reduce) some of your salary in the years before retirement or leaving the organisation. This would impact your final salary on which your pension calculation is based. Does this mean it’s not worth taking up a car via salary sacrifice if you’re in a final salary pension scheme? Not necessarily. A salary sacrifice car could be vital in getting you to work to earn a wage and accrue a pension. And, if the arrangement is better than any deal you could get on the high street, what you lose in pension could be offset in savings. Plus, you could always stop any salary sacrifice arrangements pre-retirement or upon leaving the organisation to ensure your final salary is at its highest.
There’s a lot to consider here, so ask your pensions team to calculate the impact on your pension and compare this with the savings you’ll make via salary sacrifice. This way, you’ll be armed with the facts to help you make the right decision."
https://tuskercars.com/knowledge-hub/busting-the-m...
"However, other pension schemes, particularly defined benefit pensions – like career average schemes – will be impacted. That’s because employers look at an individual’s average pay over the course of their career and calculate the pension on that basis. A reduction in pay via salary sacrifice will reduce your average earnings across your career and therefore your pension.
If you’re in a final salary pension scheme, salary sacrifice will only impact your pension if you exchange (and therefore reduce) some of your salary in the years before retirement or leaving the organisation. This would impact your final salary on which your pension calculation is based. Does this mean it’s not worth taking up a car via salary sacrifice if you’re in a final salary pension scheme? Not necessarily. A salary sacrifice car could be vital in getting you to work to earn a wage and accrue a pension. And, if the arrangement is better than any deal you could get on the high street, what you lose in pension could be offset in savings. Plus, you could always stop any salary sacrifice arrangements pre-retirement or upon leaving the organisation to ensure your final salary is at its highest.
There’s a lot to consider here, so ask your pensions team to calculate the impact on your pension and compare this with the savings you’ll make via salary sacrifice. This way, you’ll be armed with the facts to help you make the right decision."
https://tuskercars.com/knowledge-hub/busting-the-m...
Can't comment on the choice of EV or rights/wrongs of the various options but do have some thoughts on the salary sacrifice.
I investigated this to offer as a benefit for staff earlier in the year and, thanks to useful help from this forum, concluded it was worthwhile offering incurring minimal operational overhead and risk of early exit covered by the provided insurance. So far two orders in and delivery dates have kept being pushed out so I would say treat the estimated delivery dates as the earliest time of arrival.
As for the financials I worked out it was anywhere between 30%-40% cheaper than leasing and running a car as an individual - no upfront contribution & doesn't appear on your credit record.
If you claim mileage from work today then factor in that you can only claim 5p a mile rather than 45p a mile because it is a company car.
I think the leasing companies are making hay whilst the sun shines on EV's at the moment. The underlying leasing costs seem to have gone through the roof in the last 12 months whilst residuals have stayed solid, possibly even improved.
If you are set on leasing then I don't think there is a cheaper way.
I investigated this to offer as a benefit for staff earlier in the year and, thanks to useful help from this forum, concluded it was worthwhile offering incurring minimal operational overhead and risk of early exit covered by the provided insurance. So far two orders in and delivery dates have kept being pushed out so I would say treat the estimated delivery dates as the earliest time of arrival.
As for the financials I worked out it was anywhere between 30%-40% cheaper than leasing and running a car as an individual - no upfront contribution & doesn't appear on your credit record.
If you claim mileage from work today then factor in that you can only claim 5p a mile rather than 45p a mile because it is a company car.
I think the leasing companies are making hay whilst the sun shines on EV's at the moment. The underlying leasing costs seem to have gone through the roof in the last 12 months whilst residuals have stayed solid, possibly even improved.
If you are set on leasing then I don't think there is a cheaper way.
£600 net monthly for 8k/year sounds insane... I believe you could PCP the car for practically the same and at least have some equity in it at the end or hand it back if that's not the case, but either way be in full control and not tied in to a company scheme that's providing zero financial benefit.
I do roughly 8k miles a year, which is just below average. I've had the same car for 9 years and it's not particular exciting - it just so happened that a few bits went wrong at the same time the scheme was introduced (DTC/ABS module died and the clutch started to act weirdly, making noise when you dip and engage the pdeal), so it seemed like the ideal time to look for a replacement!
Yes I do agree that I use the car more for occasional use now, but it's always good to think about the future!
Yes I do agree that I use the car more for occasional use now, but it's always good to think about the future!
£30k+ over 4 years would buy any number of far better suited cars for your needs and after that time you'll have something still worth £10-20k. In your circumstances I'd be looking at interesting ICE alternatives for £20-25k and considering the true TCO over the term.
Where EV's work less well is occasional long trips as often reliant on expensive rapid charging + with the ever increasing cost of domestic electricity unless you can lock into a cheap tariff savings in running costs over ICE are being sigificanly eroded.
We've been running EV's for 3 years but are seriously considering our options going forward as our daily use has dropped due to WFH and looking at overall costs + pros/cons the case for EV has never been less compelling IMHO.
Where EV's work less well is occasional long trips as often reliant on expensive rapid charging + with the ever increasing cost of domestic electricity unless you can lock into a cheap tariff savings in running costs over ICE are being sigificanly eroded.
We've been running EV's for 3 years but are seriously considering our options going forward as our daily use has dropped due to WFH and looking at overall costs + pros/cons the case for EV has never been less compelling IMHO.
IMO its a terrible time to buy a car at the moment. Personally I would be tempted to hang on to the BMW for another year and see where the market goes. Failing that spend £5-10k on a decent ICE car, preferably buying into something a bit special that might retain its value. £600 a month on salary sacrifice seems huge to me, if it was £3-400 it might seem more reasonable.
PS, I don't think having a brand new EV built just to go places at weekends really qualifies 'as saving the planet'
PS, I don't think having a brand new EV built just to go places at weekends really qualifies 'as saving the planet'
I would tend to agree - spending all that money just for it to sit on the drive for 5 days of the week seems silly. Thankfully I managed to lock into a decent energy tariff last year before the world went mad, so I should hopefully be able to ride out the storm! Petrol/diesel costs are starting to come down again, so it would make sense to hang on to what I have for another 1-2 years considering it basically costs me nothing to run and I can start to build up a decent savings pot for when me and SWMBO move house again.
If I was using the car every day/every other day to get around then I could probably warrant paying out money for a new/newer car, but right now it doesn't make any financial sense to lock into a deal for 4 years when what I have is good enough for now (and is great for tip runs due to the large boot).
I did enquire with Octopus to see why the costs were so high, considering SS was meant to be the cheaper way into EV's - all they said was that the prices were governed by the manufacturer and whatever deal they managed to secure with them. Perhaps things will be different in 1-2 years when the chip shortage ends and cars can be ordered, built and delivered in 2-3 months instead of "possibly 1 year, not really sure...". It should also bring the costs down for everyone because (hopefully) by then, there will be lots more chargers available and electric prices won't require you to sell a kidney just to cook toast!
If I was using the car every day/every other day to get around then I could probably warrant paying out money for a new/newer car, but right now it doesn't make any financial sense to lock into a deal for 4 years when what I have is good enough for now (and is great for tip runs due to the large boot).
I did enquire with Octopus to see why the costs were so high, considering SS was meant to be the cheaper way into EV's - all they said was that the prices were governed by the manufacturer and whatever deal they managed to secure with them. Perhaps things will be different in 1-2 years when the chip shortage ends and cars can be ordered, built and delivered in 2-3 months instead of "possibly 1 year, not really sure...". It should also bring the costs down for everyone because (hopefully) by then, there will be lots more chargers available and electric prices won't require you to sell a kidney just to cook toast!
CarWow were offering the I-5 Ultimate for £4,624.23 down and £513.80pcm on a 48 month 8k mile deal.
Seems like you'd be paying about the same price over the term, but with free insurance and maintenance thrown in - plus the company carries the risk for the contract.
Doesn't seem like dailylight robbery, but it's far from a no-brainer deal!
Seems like you'd be paying about the same price over the term, but with free insurance and maintenance thrown in - plus the company carries the risk for the contract.
Doesn't seem like dailylight robbery, but it's far from a no-brainer deal!
If the net difference had worked out at about £350-400 I would have gone for it, as it would be acceptable in my books. But the gross amount was £920 a month, which is madness. I have no idea how to calculate what that means against the true cost of the car (easier with a lease/pcp because you are paying a fixed cost every month that you can quantify). The gross figure over 4 years comes to £44k, and considering the P11D value was £50k, it's very close! The net £600 comes to £29k over 4 years, so about 58%.
Similar position to OP in fully time WFH (but no DB pension sadly) and hankering after a new car but I'm going the opposite way and thinking fuel prices and recession are going to put pressure on used prices for bigger engine cars, like V8 and V10 and such.
Regarding salary sacrifice to purchase a car over 4 years what happens if your work arrangement changes either through choice, or forced.
Regarding salary sacrifice to purchase a car over 4 years what happens if your work arrangement changes either through choice, or forced.
Meerkat88 said:
I would tend to agree - spending all that money just for it to sit on the drive for 5 days of the week seems silly. Thankfully I managed to lock into a decent energy tariff last year before the world went mad, so I should hopefully be able to ride out the storm! Petrol/diesel costs are starting to come down again, so it would make sense to hang on to what I have for another 1-2 years considering it basically costs me nothing to run and I can start to build up a decent savings pot for when me and SWMBO move house again.
Or save the money and get a couple of decent holidays in while it's still feasible? That's what I'm planning at the moment!bmwmike said:
Similar position to OP in fully time WFH (but no DB pension sadly) and hankering after a new car but I'm going the opposite way and thinking fuel prices and recession are going to put pressure on used prices for bigger engine cars, like V8 and V10 and such.
Regarding salary sacrifice to purchase a car over 4 years what happens if your work arrangement changes either through choice, or forced.
Normally, there's a built in termination fee for salary sacrifice schemes so that if the employee leaves the car can be returned and the lease is terminated. If you leave voluntarily or via dismissal then I imagine most of the paperwork leans in favor of the employer and the termination fee is deducated from final salary. If you're made redundant then I would expect that the employer isn't legally allowed to pass that cost on.Regarding salary sacrifice to purchase a car over 4 years what happens if your work arrangement changes either through choice, or forced.
Toaster Pilot said:
Some of these salary sacrifice “deals” are absolutely insane. Surely you can lease one personally for less than £600pcm - I know they’re inclusive of insurance etc but that doesn’t add much to the actual cost for the provider. They’re taking your tax savings as profit.
Nope. Lease prices on EV's are staggering at the moment, a 4 year, 8k per year lease on an Ioniq 5 Utlimate with Tech Pack comes in at £715 a month, or £34.5k in total. All being driven by SS and company cars where savings on income tax and BIK make them look more attractive. The finance companies/manufacturers are rubbing their hands together as zero risk to them even if values were to crash overnight. In 2019 we signed up for a zero commitment, 1k mile per month, fully insured and mantained deal on a £55k Model 3 Performance for £799 a month. Today we would have to pay £1299 for an LR with 800 miles per month with the same provider. A personal lease with a 4 year commitment for the Model 3 P would cost us £900 a month without insurance, maint or public charging. a 2 year comitment, £1200.
Prices are mental and combined with the price of a kWh of energy rocketing upward and average annual mileages coming down I'm not convinced they make any finaincial sense now for many. A couple of years ago it was an absolute no brainer.
The question really boils down to "do I want to pay more money for a new car?"
Only you can answer that. There's no magic formula which will magically justify it for you. Unless you're secure in your job, mortgage is fixed, have excess disposable cash, and can cope through whatever the next two years will throw at the world (both post Covid hangover and the current inflation and fuel issues), then I'd be sitting at the cautious end of the spectrum.
Only you can answer that. There's no magic formula which will magically justify it for you. Unless you're secure in your job, mortgage is fixed, have excess disposable cash, and can cope through whatever the next two years will throw at the world (both post Covid hangover and the current inflation and fuel issues), then I'd be sitting at the cautious end of the spectrum.
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