PCP V SALARY SACRIFICE

[Basicbob]

Hi I can get a model 3. Is work salary sacrifice for £410 a month but I will never own it but maybe buy it from arval at them end. They have suggested they will make an offer at the end to buy but that’s based on what they can get for it at the time. Rumour has it they will offer autotrader price minus 5%.

Generally what’s better salary sacrifice of PCP?

Any thoughts?
What route would you take?

 

[bhav]

If you don't care about owning the car and you're going to be happy keeping it for the contractual term, go with the lease.

If you want the option of buying or changing what have (and you realistically think there's a possibility of these things happening), go with PCP.

If you see yourself changing your car every 3 years anyway then the only thing you should look at is total cost of ownership over 3 years, and pick the cheaper one.

There are more permutations to think about, but I really do think a lease is the optimal answer if you don't care about ownership.

 

[NewbieT]

I wouldn’t mix the questions of ownership and cost.

Salary sacrifice has got to be ‘hands down’ significantly cheaper. If you pay 40% tax plus 12% NI, £410 suddenly looks a lot more like £200 in salary sacrifice. No brainer.

As for ownership, so you don’t get to own it. Or from another perspective you don’t lock yourself in. You probably won’t want to have a 3 yr old car in 3 years anyway, get yourself another car.

 

[bhav]

I wouldn’t mix the questions of ownership and cost.

Salary sacrifice has got to be ‘hands down’ significantly cheaper. If you pay 40% tax plus 12% NI, £410 suddenly looks a lot more like £200 in salary sacrifice. No brainer.

As for ownership, so you don’t get to own it. Or from another perspective you don’t lock yourself in. You probably won’t want to have a 3 yr old car in 3 years anyway, get yourself another car.

Fair point - the salary sacrifice route is *significantly* cheaper over 3 years so really should be a no-brainer if it's available to you.

Of course there's the risk that you're forced to take the car on a PCP if you decide to leave the company etc (that's what mine is anyway). So should weigh up being 'locked in' from that perspective.

 

[Basicbob]

£410 is the net reduction in my salary but that does include insurance for me and my wife, all maintenance, breakdown cover and tyres

Does this change things

 

[Ben177]

Assume you won’t buy the car from Arval. The offer they made me for the last car I had from them via my company was completely uncompetitive.

Then compare the salary sacrifice cost with open market lease costs, and add on insurance, maintenance and tyres.

For me, as a 40% tax payer, it was a no-brainer to take the salary sacrifice. For 15,000 miles per year, zero deposit, over 3 years, the Performance I have on order is around 700 per month net salary sacrifice all in. The best I could find on the open market was near 900 per month with zero deposit. Then I’d need to pay for insurance, maintenance and tyres on top of that. And insurance isn’t cheap.

Salary sacrifice isn’t the cheapest way of buying a car, but with the tax breaks on EVs, it probably is the cheapest way of having a car over a few years. Personally, with the continual advancements in EVs and Teslas, I don’t think buying for the long term is actually a good idea until development settles down a bit.

 

[Ant M3]

£410 is the net reduction in my salary but that does include insurance for me and my wife, all maintenance, breakdown cover and tyres

Does this change things

Mate... that’s a bargain... I would defo go down that route if I had the choice

 

[Basicbob]

How much do people pay for insurance just approx.

I want the standard version and have maximum no claims I think 10 years

 

[Ben177]

How much do people pay for insurance just approx.

I want the standard version and have maximum no claims I think 10 years

There are so many variables with insurance, it’s impossible to compare what someone else might pay to you.

Best to run your details through one of the comparison sites. That’ll give you a rough idea. But in general Tesla insurance is more expensive than other cars at a similar price point and performance. Parts are hard to get, the cars are high performance (even the SR+) and insurers still don’t have an accurate view on risk as the Model 3 hasn’t been out in the UK long.

 

[Ant M3]

How much do people pay for insurance just approx.

I want the standard version and have maximum no claims I think 10 years

About £1100 on a M3P ...

 

[NewbieT]

£600 ish SR+

 

[Rob R]

£410 is the net reduction in my salary but that does include insurance for me and my wife, all maintenance, breakdown cover and tyres

Does this change things

It certainly would for me! That's a brilliant deal.

 

[LongRanger]

I agree 410 is a good net figure with the full package around it.

to give you an idea go and look at some of the bigger lease companies for something like a 330d bmw, select full maintenance and see what comes out.

 

[Cnixon]

I used a slightly different argument with my work colleagues who all seemed to get a fairly new car every 3 years. If your lease company does not sell you the car then a similar one will be for sale somewhere at a competitive price. It's nice to know the history but its not crucial if you get a warranty. As previously said cost/m is more relevant.

 

[Jibjab]

£410 is the net reduction in my salary but that does include insurance for me and my wife, all maintenance, breakdown cover and tyres

Does this change things

My long range works out at circa £300 a month net through my ltd company. That doesn’t include insurance or maintenance though. I considered maintenance, but as I’ll only be keeping it 2 years and there isn’t a servicing schedule as such I didn’t bother. I like to swap between summer winter tyres and a lead company wouldn’t stump up for those, so based on my mileage I probably wouldn’t need to swap them.

When I was employed I sometimes took the company car as it’s a no risk approach. No need to worry about resale, if you lose your job it simply goes back. I’d be willing to pay a bit extra for that simplistic, no risk approach, but it seems you’re not paying any extra anyway. For me it would be a no brainier to take the salary sacrifice scheme

 

[browellm]

The main issue, as I think has been pointed out here and elsewhere, is to properly research, factor in and mitigate the pension implication of taking one of these on salary sac. For some people it's a significant hit.

 

[Ben177]

When I was employed I sometimes took the company car as it’s a no risk approach. No need to worry about resale, if you lose your job it simply goes back.

This isn’t something to be underestimated. My current car is a PCP but as above, my new M3P will be a company car on salary sacrifice. I already feel like there’s a little weight off my shoulders knowing I don’t have to worry about continuing to pay for the car should the worst happen.

 

[Basicbob]

The salary sacrifice won’t affect my pension contribution as my pension is calculated on my gross salary.

I believe that as the payments come out of my gross salary it effectively reduces my gross salary. This means that before the car I was not entitled to child benefit as my salary was 60k but now as the car refuses we my gross salary through salary sacrifice I would be entitled to some child benefit?

Anyone else come across this scenario?

 

[browellm]

As I said, you want to research this properly because people are guessing any old bullshit and stating it as fact.

 

[gangzoom]

The salary sacrifice won’t affect my pension contribution as my pension is calculated on my gross salary.

Just make sure that's 100% true. NHS salary sacrifice schemes can have a massive impact on longterm pensions, for me it turns a £560/month 'deal' on a LR 3 into one that actually costs over £900/month factoring in pension losses - This is partly because NHS pensions are so generous, and guaranteed, giving that up to the tune of £300/month for a rental in these uncertain times would have been nuts.

If you are 100% sure you're pension is not effected and you want to swap after 3 years than salary sacrifice will be cheaper than PCP.

As for child benefit if your only coming in below £60k its not worth the effort of claiming than repaying back a graduated amount as your still be earning over £50k.

Child tax credits and the 30hr free child care is much easier to setup and actually worth something even if your in the higher tax bracket.