How much does it cost to lease an electric car compared to salary sacrifice?
Electric cars have been talked about as a greener alternative to petrol and diesel cars for a long time now. But many people are still nervous to make the switch because they worry about how much it will cost.
Recent surveys suggest that the upfront cost of an EV is one of the biggest barriers to making the switch to electric for 45% of people. But this is significantly less than the 65% of people who felt it was a barrier when this survey was done just a year before. We can see that attitudes towards the cost of electric cars are changing as more people understand that it’s cheaper to run an electric car than a standard petrol or diesel car.
Luckily, there is a way that you can save thousands of pounds a year on an electric car. There’s a little-known benefit called EV salary sacrifice that will allow you to drive the latest brand-new electric cars, giving you large savings on electric driving compared to the cost of a personal lease or buying an EV outright.
So let’s see how the figures stack up.
What’s the price difference between salary sacrifice and personal leasing?
We’ve compared the monthly cost of three popular electric cars: the Tesla Model Y, the Polestar 2, and the MG4. We'll look at the cost of leasing each car through leasing.com, a popular car leasing website, and compare it to the cost of getting an EV via a salary sacrifice scheme with Octopus Electric Vehicles.
With our salary sacrifice scheme, all of your running costs (apart from the costs of charging) are covered in your monthly payments. You're also saving money on tax each month. Money that you’d normally never see (because it goes straight to HMRC from your paycheck) will now go towards your car payment. These price comparisons take all of these extra costs into account to help you see the final savings of using a salary sacrifice scheme.
Tesla Model Y
The Tesla Model Y is a small SUV with a lot of storage space, the latest technology, an impressive panoramic roof, and the performance of a sports car. With an upfront cost starting at £44,990, you’d expect to be paying a fair bit each month to drive this high spec EV.
If you were to lease this car through leasing.com, you’d be paying £905.65 each month for your car - including the lease payments, insurance, tyres, maintenance, and the cost of home charger installation.
With our salary sacrifice scheme you could save yourself £375 each month on the cost of a brand-new Tesla Model Y compared to a personal lease with leasing.com. The monthly cost of a Tesla Model Y for a 40% taxpayer through Octopus Electric Vehicles salary sacrifice is just £530.49.
Taking a car through the Octopus Electric Vehicles salary sacrifice scheme gives you a huge saving of £4,500 per year on a brand-new Tesla.
The savings are even more significant with the Polestar 2. Polestar is the all-electric sister brand of Volvo. The Polestar 2 is quick and responsive, secure and dependable, and powerful - it’s practicality and performance at its best. Buying one upfront will set you back anywhere between £43,150 to £63,950.
Getting behind the wheel of the Polestar 2 with a personal lease through leasing.com would cost you £857.04 per month.
But through a salary sacrifice scheme with Octopus Electric Vehicles, the same car would cost just £464.14 per month for a 40% taxpayer. That's a whopping £4,800 in annual savings.
Even with a more affordable electric car like the MG4, there are savings to be had. The MG4 is MG’s first dedicated EV, and a top addition to their well established electric lineup - offering an affordable, practical, and stylish mid-size hatchback that’s ideal for young families.
The price of a brand-new MG4 starts at £26,995, which isn't much more than the price of a new regular petrol-powered equivalent. If you’re looking for lower monthly payments, the MG4 via salary sacrifice is a very budget friendly option. Let’s look at the costs.
If you were to take this car through a personal lease via leasing.com, it would set you back £560.63 per month.
For a 20% taxpayer taking this car through Octopus Electric Vehicles salary sacrifice, you’ll only be paying £361.17 per month.
Through salary sacrifice, you could save £2,400 per year compared to a personal lease.
Plus, if you can save £150 a month on fuel costs, like a quarter of our customers, you can see why going electric is the best choice for your wallet.
Of course, these figures are based on specific scenarios, and individual circumstances may vary, including the way the employer sets up the scheme. But they show how a salary sacrifice scheme can help people save money, which is especially important during the cost of living crisis.
Calculations are based on 20 and 40% taxpayers at 40 years old, taking out 36 month contracts, with 8k annual miles with NI Passback at 10% and
VAT Recovery at 100%. Charging based on Intelligent Octopus Go off peak rate, 100% of charging done at home, fuel cost based on 2023 gov average as of Jan. Servicing, breakdown, tyres costs averages from Nimble Fins, insurance based on group.
Prices taken from leasing.com, including no admin fees, correct as of 23/1/23. Tesla Model Y example from iCarLease. Polestar 2 example from Santander Consumer Finance. MG4 example from Vanarama.
What is an EV salary sacrifice scheme?
A salary sacrifice scheme is a tax-efficient way to lease a car. Essentially, you sacrifice part of your salary in exchange for a car lease. Because the lease payments are deducted from your salary before tax, you pay less tax and National Insurance. This can make electric cars significantly cheaper to run than they would be through a personal lease or to buy outright. You could save up to 40% on the monthly cost of an electric car.
Plus, with Octopus Electric Vehicles salary sacrifice, we include everything you need to hit the road in your brand-new EV - including maintenance, repairs, tyres, servicing, insurance (if your company chooses to take it out), and free miles. All of this saves you money on the monthly maintenance and running costs of your car.
How much does it cost to buy an electric car outright?
An electric car can set you back a fair bit if you want to buy one outright. Let’s say you wanted to walk into a car dealership today and drive out with a brand-new EV. At the lower end, you’d be paying around £26,500 for an MG4 with a range of 225 miles and a 0-60mph speed of around 7.7 seconds.
At the higher end, you’d get the Porsche Taycan Sport Turismo with top of the range tech and a top speed of 143 mph. This would set you back more than £140,000.
And of course, there’s everything in between.
Which option is right for you?
If you're considering an electric car, it's worth exploring your options and seeing if a salary sacrifice scheme could make it more affordable for you. Most people can save hundreds, if not thousands, of pounds by getting an EV this way. You can ask your employer to set one up at zero cost to the organisation. Not only will you be helping the environment, but you could also save a lot of money in the process.