Jack Cameron
07 November 2024
The motor industry is evolving at a relentless pace. There were over 33 million registered cars in the UK at the end of March 2024, and that number continues to rise. Not only are we seeing new cars hit the market, we’re also seeing new ways of buying them.
With cars getting more expensive by the day, you’ll need to crack the books and find out the easiest and most cost-effective way to acquire a vehicle for you, of which there are many.
We often get asked from those enrolled in our EV Salary Sacrifice Schemes about the differences between the scheme and a Personal Lease, and if one is better than the other. Both options have their merits, but the right choice depends on you and your priorities.
So, how do you make this choice? Well, that’s where we can help! Without further ado, let’s compare the two, and find out which one is best for you!
Personal leasing
First up is Personal Car Leasing (also known as Personal Contract Hire or PCH). Personal Leasing now accounts for almost 2 million vehicles in the UK, and continues to grow in popularity with its transparency in fees and freedom of choice. As one of our core services at P+B, we’ve helped thousands of clients drive away in the perfect car for them through a Personal Lease.
A reminder of how it works
This is a straightforward agreement where an individual leases a car for personal use for a set period of time. This type of lease is typically on a fixed-term contract (usually between two to five years), and at the end of the term, the person returns the vehicle without the option to own it.
At the end of the contract, the vehicle is returned, leaving you free to lease another car or explore another car acquisition option if you wish. You’ll find that the monthly payments are often lower when compared to the alternative Personal Contract Purchase option, as you’re basically paying the depreciation of the car every month. The big difference here is the fact that you don’t own the car at the end of the agreement, which will definitely put a few people off.
At Pike+Bambridge, our Personal Lease clients are assigned an expert relationship manager to guide them through each step, but still allow them complete control of the management of their lease. It’s a basic step that sits in the core of our award-winning service.
The benefits of personal car leasing
The first advantage you’ll notice is the freedom of options to tailor your contract to your individual needs. You have freedom over the choice of car, your annual mileage allowance, your length of contract and the structure of payments.
The fixed monthly payments in a Personal Lease make for easier budgeting, especially if servicing, maintenance, and Vehicle Excise Duty are included in your agreement.
Personal leasing requires a significantly lower upfront payment when compared to PCP or buying a car outright.
Leasing allows you to drive a newer or higher-specification car than you might otherwise afford.
What you need to consider
The biggest consideration here is that you won’t own the car at the end of the lease. While this suits many who prefer changing cars frequently, others may prefer owning the vehicle long-term.
Personal leases come with mileage restrictions, and exceeding these can lead to additional charges from your provider.
Since the car isn’t owned by you, you cannot customise the vehicle in any way.
Who is this for?
Personal leasing is for people who prefer a fixed budget with predictable monthly costs. If your plan involves maintenance and tyres, you also have the added security should something go wrong with your vehicle.
Driving a new car without worrying about depreciation is certainly a nice touch, too.
Electric vehicle salary sacrifice scheme
The idea of a Salary Sacrifice Scheme has been around since the 70s, but the emergence of the EV Scheme is certainly a sign of a new age. This innovative approach to acquiring a new vehicle can save you significant time and money, but it’s not for everyone, and we’re aware of that.
A reminder of how it works
Similar to the longstanding “Cycle to Work” scheme, EV Salary Sacrifice allows you to pay the costs associated with leasing, insuring, and maintaining your car, before you pay any tax or national insurance on that income. This typically saves you 30-60% off the price of your next car.
At Pike+Bambridge, our EV experts help you choose the EV that fits your individual lifestyle, budget and needs. There is no deposit, just a set number of equal monthly payments, all deducted before you pay tax.
The benefits of an EV Salary Sacrifice Scheme
Thanks to the lower Benefit-in-Kind tax on electric vehicles (currently just 2%), this is a significantly better option than a petrol or diesel business lease, meaning employees can drive an electric vehicle at a fraction of the cost.
EV Salary Sacrifice Schemes often include an all-inclusive package, including insurance, maintenance, servicing, and breakdown cover, simplifying the process and reducing unexpected expenses.
Making the switch to electric is a significant step towards sustainability. While it’s true that it creates slightly more emissions to build an EV than a combustion-powered alternative, EVs have zero tailpipe emissions, and easily offset the emissions created within a short period of time.
What you need to consider
Unsurprisingly, the biggest consideration here is that your gross pay every month will be reduced, which can sometimes affect other benefits tied to salary, such as pensions or mortgage applications. This is different for every person, so it’s best to talk to your provider about how you will be personally affected.
If you’re provided a car through your job, you need to stay in that job for the remainder of the contract. If you were to leave your job, you may incur an early termination fee from your provider.
While the scheme is brilliant for those looking to drive an electric vehicle, it won’t suit employees or companies with different needs. Safe to say if you’re not a fan of electric vehicles, you can rule this one out.
Great, tax-efficient benefit to employees.
Who is this for?
From an employee perspective, the scheme is a tax-efficient way to drive off in a brand-new electric vehicle at a fraction of the cost. They’re fun to drive, so we don’t blame you!
From an employer’s perspective, the scheme is perfect if you’re committed to sustainability and looking for ways to offer tax-efficient benefits to employees.
Let’s compare…
Now that you know a little bit more about your options, let’s compare them to find out which ones for you. Firstly, if convenience is your top priority, then both options would be sensible choices. The fixed monthly payments take away the worry of maintenance and unforeseen issues eating up your savings.
A Personal Lease has the advantage of not being tied to your work. Personal Leasing also comes with a greater freedom when it comes to your choice of vehicle. EV Salary Sacrifice Schemes unsurprisingly focus on electric vehicles, which is great if you’re already committed to going green but may limit your options if you’re after a hybrid or petrol car.
The monthly payments on an EV Salary Sacrifice Scheme may seem higher at first, but the tax savings can make this option much more affordable, particularly for those in a higher tax bracket. However, it’s important to remember that salary sacrifice is only available if your employer offers the scheme in the first place.
Neither a Personal Lease nor EV Salary Sacrifice leads to outright car ownership at the end of the agreement. With both, you’re simply leasing the vehicle for a set period and returning it once the contract ends. There’s no risk associated with the depreciation of the vehicle, as you don’t own it. However, you’re still liable for excess mileage and wear and tear fees as set out by the BVRLA.
So, which one should you choose?
It’s a tricky one. The choice between a personal lease and an EV Salary Sacrifice Scheme ultimately comes down to your specific needs and circumstances. If you’re a higher-rate taxpayer EV Salary Sacrifice is likely to be a more cost-effective option due to the tax and BIK savings. That being said, no matter your tax bracket, an EV will always be cheaper through a scheme.
If your employer doesn’t offer an EV scheme, or you value having a broader choice of vehicle types, a personal lease is undisputedly better for you. If you’re an eco-conscious motorist, the EV scheme becomes a more attractive option due its reduced environmental impact over time. We think they’re both sensible options for the average working driver, so it’s really up to you.
At Pike + Bambridge, we believe in empowering you with expert advice tailored to your unique situation—whether it’s a Personal Lease or exploring an EV Salary Sacrifice Scheme. It’s not just about finding a vehicle, it’s about finding the right vehicle, in the right way.
Want to know more about how one of these methods can benefit you? Maybe it’s time to speak to one of our team. Feel free to get in touch below.
