Salary sacrifice offers huge savings for employees, says Fleet Alliance

Obtaining an electric car through salary sacrifice can save an employee up to 50% of the monthly cost of a personal contract hire (PCH) agreement, according to Fleet Alliance.

The savings, primarily due to the huge tax and national insurance efficiencies from paying for the benefit out of pre-tax salary, can make a huge difference to a household’s income during the current cost-of-living crisis.

To illustrate the point, Fleet Alliance analysed the costs of an all-electric Mercedes-Benz EQC Sport obtained through its salary sacrifice scheme, compared to the same car under a PCH agreement.

The full monthly fee for the employee under salary sacrifice (including servicing, maintenance and insurance) was £681. The price also took into account the savings in income tax and national insurance achieved from the reduction in gross pre-tax pay as well as the 2% benefit-in-kind tax payable for a zero emission vehicle.

However, the same vehicle under a PCH arrangement, based on three years/10,000 miles per annum, no deposit, one payment in advance, fully maintained and including insurance, would cost £1,354 per month – almost twice as much as the salary sacrifice vehicle.

“It really is a no-brainer,” said Fleet Alliance CEO, Andy Bruce (picured above). “Over a three-year deal, the savings under our salary sacrifice scheme for the electric car add up to a massive £24,000 – a huge boost for any household with inflation currently at 9% and fuel prices at record levels.

“There is little wonder we are seeing such a huge interest in our salary sacrifice scheme when British household incomes are under cost pressure like never before,” he added.

More than 50 companies have signed up to Fleet Alliance's salary sacrifice scheme since its launch at the start of this year, making the benefit available to more than 4,000 employees.

“A salary sacrifice scheme takes maximum advantage of prevailing tax regimes and the growing movement to electric cars. And it provides an excellent opportunity to reduce a business’s carbon footprint while providing employees with a brand-new electric vehicle at minimal benefit-in-kind impact," said Bruce.

He added: “The savings don’t just stop there. There are huge fuel cost savings to be made when switching from an ICE vehicle to an EV due to record prices at the pumps.”

An EV can deliver a fuel cost saving of around £2,000 per annum compared to a fossil-fuelled equivalent, the Glasgow-based fleet management and leasing specialist calculates.