Salary sacrifice schemes could be key to driving the uptake of electric cars from private buyers, according to experts.
With the UK’s zero emission vehicle mandate due to be implemented from 1 January 2024, after which time manufacturers will be required to sell an increasing proportion of EVvs, schemes that promise drivers access to cheaper EVs look to be a potent weapon in their efforts to register sufficient numbers.
“Salary sacrifice is a no-brainer and much cheaper than buying and running a new petrol or diesel car,” said Paul Hollick, chairman of the Association of Fleet Professionals.
“However, the reduction in salary does have an impact on an employee’s pension, while employers have to make sure the scheme they use is insured against the employee leaving during the contract, potentially rendering the employer liable to the payments.
“And although salary sacrifice could reduce the cost of a VW ID 4 by about £250 a month, salary sacrifice still costs an employee a few hundred pounds a month, and not everyone can afford this.”
Even so, according to a recent industry survey, more than a third of companies now offer the scheme through both established leasing companies and new ones that offer EVs exclusively.
Among the former is Arval UK, which, with the reduction in the BIK rate in 2020, began to throw its weight behind its Arval Ignition scheme. “EVs have really boosted salary sacrifice,” said Richard Cox, an Arval consultant.
“We have around 5000 cars on employers’ schemes, 88% of them EVs. Since 2020, at some companies we’ve been seeing penetration rates among employees in the high single digits, right up to 12-15%. We consider 10% to be a high participation rate for what is an optional benefit.”
What is an electric car salary sacrifice?
Salary sacrifice allows employees to finance a new car, leased by their employer, out of their gross (meaning pre-tax) pay. For employees, the benefit is a new car at significantly less cost than one they could source and finance privately.