What is a salary sacrifice car scheme?
Salary sacrifice for cars is a scheme that allows employees to get behind the wheel of a new car by paying for one with their pre-taxed annual salary.
Because the monthly payment for a vehicle is taken before tax is collected from their income, it's a great way for employees to save money on a new car.
There are a host of other benefits with a car salary sacrifice scheme, which saves money for your employees, and rewards them for being a part of your business.
How does salary sacrifice work for a car?
In a sacrifice car scheme, the employer is leasing a new car on behalf of one of their employees.
Once a car has been selected, a monthly sum is taken from an employee's pre-tax salary, helping them save money when compared to paying for a car once they're received their taxed salary.
Cars leased through a salary sacrifice scheme are supplied by a third-party supplier, which is where the Pendragon 'Let's Drive' scheme comes in.
At the end of the agreement, which is typically two to four years, employees hand the vehicle back or buy it outright for a pre-agreed sum.
What are the benefits of a salary sacrifice car scheme?
Tax Savings
The monthly payment is deducted from your employee's pay before tax, providing greater savings over time.
Vehicle Choice
With access to thousands of vehicles nationwide, we're able to find the perfect fit.
Maintenance Included
All of our long-term rentals come with servicing and breakdown cover included.
Better Productivity
Provide employees with the greatest value and ensure travel is no barrier to their work.
What's included in the salary sacrifice car scheme?
Various costs are included as part of the monthly payment when leasing a car through the Pendragon salary sacrifice scheme, including:
- Insurance
- Maintenance and repair
- MOT
- Servicing
- Breakdown cover
- Tyres
- Vehicle excise duty (a.k.a. road tax)
- Accident management
Frequently Asked Questions
Salary sacrifice schemes are worth it for a variety of reasons. It's a great benefit for employees to have access to, since it saves them money on leasing a new car, which is ideal for improving morale. In return, they get access to a host of great deals, which come with maintenance included.
No, employees won't own any car leased through the salary sacrifice scheme. As part of the scheme, businesses are essentially leasing the car on behalf of their employee(s), helping them to save money when paying for the car on a monthly basis.
Whether a car leased through salary sacrifice will impact your pension will depend on the type of pension you have. If you have a defined contribution pension scheme, then your pension contribution is calculated before your salary sacrifice has been applied, meaning it's unlikely to have an impact on your pension contribution, and therefore the benefits payable during retirement.
However, the impact on your pension can be bigger if you participate in a defined benefit pension scheme if the salary sacrifice has not been approved by the government. This is because, in a defined pension benefit scheme, your pension contributions are based on your salary after any deductions (such as salary sacrifice).
Whether a salary sacrifice car is better than a company car depends on your circumstances. Salary sacrifice gives employees the opportunity to lease a vehicle of their choice, whilst saving in the process. A company car is usually there to serve a specific purpose, and doesn't give employees the same level of flexibility or choice. In summary, salary sacrifice is a benefit for employees, whilst a company car is a tool to help them complete their job.
A variety of electric and hybrid cars are available through the salary sacrifice car scheme. Not only can you save money on leasing a new vehicle, you can enjoy the benefits that come with electric and hybrid vehicles, such as reduced running costs.