Is it a good idea to lease a car through work?
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We get it – there’s a lot to think about before deciding to lease a car through your employer. Questions like ‘What are the tax implications’, ‘Am I tied to the company forever,’ and ‘What happens if anything goes wrong with the car,’ are a few of the most common concerns.
But don’t be put off, because there are actually lots of great perks to take advantage of. With a little bit of research, you can brush up on your knowledge and decide if a car lease is the right option for you.
In this article, we’re focusing exclusively on electric vehicles (EVs) and we address nine key concerns and break them down to explain why leasing an EV through your employer might be one of the best decisions you ever make.
Are there different car lease schemes through work?
Before we dive in, it’s important to understand that there is more than one option when it comes to looking at an electric vehicle lease scheme. Here’s a quick breakdown of some of the key ones:
- Personal Contract Hire (PCH): A personal lease where the driver pays fixed monthly payments to drive a vehicle for an agreed term and mileage, without owning it at the end. (Note – this is not an option you can take through your employer.)
- Business Contract Hire (BCH): Similar to PCH but for businesses, offering VAT benefits and allowing companies to lease vehicles without ownership obligations.
- Salary Sacrifice: An employee benefit scheme allowing employees to lease an EV by sacrificing part of their gross salary, reducing taxable income and potentially saving up to 40% on costs.
How does a salary sacrifice car lease work?
With salary sacrifice for EVs, an employee agrees to give up a portion of their gross salary in exchange for a fully maintained lease on an EV. This reduces the employee’s taxable income, so you pay less PAYE and NI. The agreement typically covers insurance, servicing, and maintenance (depending on the provider) making it a convenient option for employees.
There’s lots more information on how an electric car salary sacrifice scheme works on our website.
Now, let’s take a look at some of those common queries around getting a car lease through work and see if we can help dispel some myths for you. Here are nine of the top ones we see:
1. Will I have to pay more tax if I get a car lease through work?
While the upfront lease cost for EVs can be higher than that of petrol or diesel cars, salary sacrifice schemes make it more affordable by allowing you to pay from your gross salary (the amount you get before any tax is applied). So, this actually reduces your taxable income, meaning you are spending money that would have otherwise gone straight to the tax office.
This, combined with reduced Benefit-in-Kind (BiK) tax rates for EVs, can result in some very significant savings on a brand-new car. There are also lower running costs that stack up in the long run, such as cheaper electricity compared to fuel, zero car tax (until April 2025), and lower maintenance costs.
2. What about EV depreciation worries and lease-end penalties?
Leasing an EV through your employer means that depreciation isn’t your concern—it’s the leasing company’s. At the end of your lease, you simply return the car without having to worry about its resale value.
In terms of lease-end penalties, sticking within your agreed mileage limits and maintaining the vehicle will help avoid any extra charges. Plus, as EV technology has continued to evolve, concerns about rapid depreciation are quickly disappearing.
3. Will I have to pay upfront costs to install EV charging infrastructure at home?
Another common worry is the cost of installing a home charging point. However, there are some grants available from the UK Government, including the Electric Vehicle Homecharge Scheme (EVHS), where certain individuals can receive a grant of up to 75% of the installation cost, capped at £350. This significantly reduces the initial cost, making the investment more manageable.
Many EV car lease providers, such as ElectriX, also offer a full package when you take out a lease, which means you can asses the cost of the car, charging point and insurance as part of one manageable monthly payment.
4. I’ve heard of range anxiety and I’m worried that my EV won’t travel far enough?
EV range anxiety is the fear that your EV won’t get you far enough on a single charge. It’s been a concern for people wanting to make the switch to EVs for a while, but some newer EV models have helped to quell those fears, as they can travel much further than some of the very first EVs.
For example, some of the latest EV models offer ranges of 200-300 miles on a full charge, which comfortably covers an average UK daily commute.
5. What happens if I have an employee car lease agreement and my EV needs repairs?
Different providers offer different packages, but it’s not uncommon for a salary sacrifice scheme to include access to recommended repair centres.
For example, with ElectriX there’s an extensive list of more than 750 EV repair centres across the UK, many of which also provide EV maintenance support.
6. What about public charging – is there enough charging infrastructure in the UK?
There’s been a nationwide rollout of charging stations in recent years, with plenty of rapid chargers now available at garages and service stations all over the UK. The government has also committed to ensuring that charging infrastructure keeps up with demand, and apps like ZapMap are brilliant for helping you identify places where you can top up your EV battery power.
A lot of workplaces also have charging infrastructure installed already, and the UK government has implemented grants like the Workplace Charging Scheme (WCS), which helps cover the cost of charging installations at business locations, encouraging more workplaces to offer EV charging.
7. If I get an EV car lease through work, what happens if a better car gets released soon after?
It’s true that EV technology is advancing rapidly, with plenty of new EV launches, but that shouldn’t be a reason to delay leasing an EV today. By leasing rather than buying, you have the flexibility to upgrade to the latest model once your lease ends.
This ensures you’ll always have an opportunity when the lease is up to access the latest technology without worrying about things like depreciation. With an EV salary sacrifice scheme, you can benefit from incentives that exist today and save money immediately, rather than waiting for future technology.
8. What happens to my EV lease agreement if I decide to leave my job?
Many people think that getting a car lease agreement ties them to the business they work for, but this isn’t the case. Typically, if you decide to leave your job, then you will need to hand your EV back to the company.
Depending on the agreement in place, you may be liable to pay for some of the outstanding costs of your contract. But with a salary sacrifice scheme like the one provided by ElectriX, it’s possible for your employer to have early termination protection in place and this is designed to ensure neither the employer nor the employee has to pay additional costs in the event of the individual or the company deciding to part ways.
9. Could the government change some of the incentives that exist when getting an EV car lease agreement?
The transition to electric vehicles has been supported by various government policies in recent years, and the intention is still to ban the sale of all new petrol and diesel cars by 2035. This is all part of a wider plan to achieve Net Zero in the UK by 2050.
Additionally, the Zero Emission Vehicle (ZEV) mandate is pushing manufacturers to produce more affordable EVs, meaning that more EVs will be available and leasing schemes are likely to remain a cost-effective option for the foreseeable future.
However, it’s impossible to predict how the various schemes and incentives may change as the EV rollout gathers more speed. That’s why it may be wisest to take advantage of the opportunity to switch to electric now rather than gamble on better incentives in the future.
A final point – why you really should consider leasing an EV through your employer
Leasing an EV through a salary sacrifice scheme can be a fantastic way to reduce your environmental impact, lower your BiK tax liability, and get behind the wheel of a brand-new electric car.
Don’t let outdated worries hold you back from making the switch — explore the salary sacrifice EV leasing options available today and enjoy the benefits of driving electric.
Getting started is a simple process – with free setup, expert advice, and guidance at every stage. Get in touch with the team at ElectriX to start your EV journey today.
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