Salary sacrifice - making it cheaper to drive electric than petrol
Using analysis we pulled together; The Sunday Times reported that, through Electric Dreams, the Salary Sacrifice Scheme from Octopus Electric Vehicles*, a brand new electric car is cheaper than it’s petrol equivalent. Wow, that’s big news.
How big are the savings?**
Let’s take the popular £24,000+ petrol-fuelled VW Golf and compare it to a new £29,000+ all-electric VW ID.3. On the surface, it looks like the Golf is cheaper than the ID.3, but what if we look at the monthly costs, including maintenance? The best personal lease we found on the Golf was £260+, compared to a net monthly cost for an ID.3 of £234 for a basic-rate taxpayer on Electric Dreams - our salary sacrifice scheme. That’s a saving of £1,227 over four years. For a higher-rate taxpayer it was £2,404.
Take another example. The Peugeot e-2008 - an ideal family car - works out at over £1,300 cheaper for a 20% taxpayer over a 4 year period on Electric Dreams, when compared to its polluting petrol counterpart the Peugeot 2008.
In case you were wondering. The same applies to more expensive cars, too. Just take the Audi e-tron. It’s valued at around £61,000+, about £18,000 more than its diesel equivalent, the Audi Q5. Yet on Electric Dreams, it is £45 a month cheaper for a basic-rate taxpayer and £99 a month cheaper for a higher-rate taxpayer!
A little bit about the analysis. We excluded insurance (although many employers opt to include this). We used the same profile for both cars; using a 48 month term, with 1 month payment up front, and 8,000 miles per year (that of an average UK driver). It’s just our way of ensuring the comparison stacked-up and was as fair as possible.
How does Salary Sacrifice work?
You’re probably already familiar with Salary Sacrifice, it works the same as childcare vouchers, additional pension contributions and cycle to work schemes. Under the scheme an employee makes a monthly payment using their gross salary, before income tax and national insurance are deducted. Thanks to super-low Benefit in Kind rates for EVs (just 1% between 2021-22), the savings compared to a petrol or diesel vehicle are huge.***
The complete package
Electric Dreams includes maintenance, tyres and more. Plus optional insurance. You just need to add electricity.*
As for charging and renewable energy tariffs - we have you covered there too.
You may be getting your first electric car, so we’ll also include a smart home charger, installed by our sister company Octopus Energy Services, and enough free electricity for an average UK driver to travel for free for a year.****
Even if you don’t have a driveway, we’ll keep you moving, with 5,000 miles of public charging credit on the incredible Electric Juice Network from Which? recommended Octopus Energy.*****
One card and App, 13 networks, thousands of chargers, one bill.
Like what you hear?
If you’re as excited as we are about these incredible savings, head over to our Salary Sacrifice page to get the ball rolling. We’ll be able to provide you with all the advice and information you need, whether you’re an employer looking to implement this, or an employee hoping to persuade your HR team to join the electric revolution!
*Subject to availability and eligibility. Terms and Conditions apply.
**The petrol car prices are based on a Personal Contract Hire (PCH) lease with maintenance for basic spec on 48 months with 1 month up front, based on 8.000 miles per year, from Leasing.com 12th of July 2021. The VW ID.3 City Performance was compared with the VW Golf TSI Life 5 door. The Peugeot e-2008 Active Premium was compared with the Peugeot 2008 1.2 PureTech Active Premium. The Audi e-tron was compared with the Audi Q5 Diesel. Electric Dreams pricing is based on a 48 month term and 8,000 miles per year on 12th of July 2021, and assumes the employer can recover VAT and has selected to return any national insurance savings they make back into the scheme. It includes maintenance, tyres, MOT, road tax, breakdown recovery, and generous early termination terms should the employee have a life event or leave the business, as well as support from the Octopus EV team at every stage of the journey. Prices may vary. Subject to credit.
***Savings are made through National Insurance and income tax. Benefit in Kind (BiK) for EVs is currently only 1%, rising to 2% between 2022 to 2025. BiK for petrol and diesel cars can be as high as 37%.
****Received in the form of credit to your Octopus Energy account when you switch to the Octopus Go tariff on delivery of your car. Please note that this is calculated based on charging your car during the off-peak window (at 5p kWh this is £100 of credit). Available on PCH, BCH and selected Salary Sacrifice deals. Octopus Electric Vehicles reserves the right to stop this promotion at any time. The calculation for the 8,000 free miles; on average it takes 1 kWh of energy to travel 4 miles. 8000 miles is therefore 2000 kWh of energy. On Octopus Go it's 5p per kWh during off peak charge time, hence it's £100 to use 2000 kWh of energy. Valid for cars ordered in 2021. Smart charger of our choice, including a standard installation - https://octopus.energy/services/standard-ev-install/ - and assumes £350 Government Grant.
*****5000 miles of public charging is based on an avg. daily mileage of 20 miles, 250 working days a year and an avg. cost of electricity of 30p kWh & a 4p/mile efficiency = £375 ex VAT received in the form of credit on your Electric Juice Network account. Valid for cars ordered in 2021.