A salary sacrifice car scheme can work out to be a good option for some people. But, there are quite a few things that you need to understand before deciding whether it’s the right way to go. If you’re considering using a salary sacrifice car scheme for your next vehicle purchase, read on and see what you need to know first.
What Is a Salary Sacrifice Car Scheme and How Does it Work?
A salary sacrifice car scheme is a facility that allows employed individuals to get a new car without paying for the entire cost upfront. Instead, a certain amount is deducted from your salary by your employer and goes towards paying off the cost of your car.
This amount is often set to a lower amount than the actual cost of the car, making it a more affordable way to get a car that you’d normally not afford to pay for in full at the moment.
How Does a Salary Sacrifice Car Scheme Work?
The process by which the salary sacrifice car scheme works is quite simple. You’ll need to start by identifying your car of interest, determining the price range, and informing your employer about the details of the scheme… that’s if they don’t already have a preferred one in place.
From there, calculations will be done regarding how much money will be taken from your gross salary each month (before tax and statutory contributions) to go towards financing the car.
In some schemes, your contributions may also cover things like insurance, road tax, and even maintenance. In case you leave your job or your current contract comes to an end, you and or your company will still need to repay the remaining part of the loan.
Finding the Best Salary Sacrifice Car Scheme
While most of them basically work in the same way, not all salary sacrifice car schemes are alike in every aspect. This is evident in Love Electric’s comparison article on the best salary sacrifice car scheme in the UK, which compares some of the top providers in the region.
Differences may exist in terms of monthly installments, the cars you can qualify for, your company’s eligibility, and whether a deposit is needed. Some schemes have actually been known to have hidden fees, so it’s best to scrutinize a scheme carefully before subscribing to one.
Is A Salary Sacrifice Car Scheme Good Value?
SSCS Benefits
Buying a car through a salary sacrifice scheme comes with numerous benefits, especially to the buyer. In a nutshell, some of the key benefits may include the following.
- Savings on income tax, since your deductions reduce your taxable income
- You could save on other taxes such as road tax or Vehicle Excise Duty (VED)
- You could get a car at a cheaper price
- It lets you own a rather expensive car without having to pay for it upfront
- SSC schemes are often cheaper than other car financing options
- You may have access to a huge variety of cars, including pure electric cars and hybrids
SSCS Downsides
Salary sacrifice schemes also come with several downsides. For instance, subscribing to salary sacrifice will automatically mean a reduction in your salary.
Also, some schemes charge termination fees to the employer in case the beneficiary employee leaves the company. Moreover, you may not qualify for an SSCS if you earn below-average income.
As you may already tell, a salary sacrifice car scheme comes with benefits that far outweigh the disadvantages. This is especially on the employee’s side. With this in mind, it is safe to say that buying a car through a salary sacrifice scheme is truly worth it.