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I'm a fairly simple soul when it comes to money. Only buy what you can afford from the money you have and don't borrow for anything unless it is likely to increase in value faster than any interest payments. Probably explains why I never got rich 😀 But it means that when it comes to cars I've always just bought what I could afford with what I had in the bank. Originally that was bangers and more recently it's been new or nearly new cars, but the principle has always been the same. Buy what you can afford at the time and run it until it's worthless.
But my wife's car is ready to be replaced and she now has access to a salary sacrifice scheme (Zenith) through her employer (NHS). As a higher rate tax payer I thought this was going to be a no-brainer. I mean, saving 40% on the payments has to make things a lot cheaper. But having got a quote I'm finding it much less clear than I expected.
Looking at an R5 in iconic trim (as the HK audio is high up the list of priorities) with 20k miles a year (which is about average for "her car") and it looks as though it would cost around £20k (after tax) over 4 years.
For comparison, I could just buy a nearly new (less than 1K miles) example off autotrader for £25k. OK, I need to add in the cost of insurance and servicing (which they insist on bundling in) but I'd usually expect to keep a car for at least 7 years (140k miles). Assuming it would be worthless at the end of that period (which it won't of course) that's basically £3.5k a year or £14k over 4 years, which is a fair chunk less than the £20k the lease company want.
The quote doesn't tell me how much I would need to pay at the end to keep the car. It seems that this is a number they will only give you at the end (when they will presumably want to sell you a new lease instead) which makes it basically impossible to work out the true cost of purchasing the car.
There is also presumably an impact on pension contributions but the quote doesn't tell me how much we would have to pay in order to make up for this (even though they have the numbers to calculate this). No point saving a bit now (when we are earning) only to lose it later (when we are not).
I suspect that, once I finally work out all the costs, it may still be a bit cheaper to go with the lease deal but it's much closer than I would have expected given the headline 40% saving and makes me wonder where the money goes. The treasury is losing a fair bit of tax but it seems that the benefit to me is marginal at best.
I know this is not how it works in reality, but if the government is offering employees the chance to purchase a car from their pre-tax salary, why can't we just buy a £30k car for £18k and have done with it?
If you really want to do a direct comparison, you probably need to do a deeper dive into the costs.
Our Octopus scheme includes insurance, servicing & breakdown cover.
At a guess, that's what......£500 insurance, £200 servicing (no idea what the service interval is on a R5) and £80 breakdown cover per year? So that's an extra £800 annually you need to add on - over £3k for the 4 years you reference.
The Octopus scheme also has options for charger installation or a certain amount of charging credit factored in to sweeten the deal.
And getting a new one, you obviously get that new car feel (which I've never really understood - would rather have the savings) and the full warranty of the car whatever that is worth to you.
I don't really understand the comments about the impact on pension contributions, unfortunately.
Wouldn't affect pension i Wouldn't have thought, mine doesn't. What's killing the deal here though is high mileage, you're paying a significant premium to cover the additional depreciation. Also I think the Renault 5 is well overpriced as they know it's got the nostalgia (personal opinion).
Also re: purchase at the end I bet it wouldn't look too favourable given you've paid to lease over the preceeding 3 years. Leasing is just a way of keeping a new car on the drive for a fixed cost, If you're going to buy, buy.
There is also presumably an impact on pension contributions but the quote doesn't tell me how much we would have to pay in order to make up for this (even though they have the numbers to calculate this)
Working for NHS she'll no doubt be on a defined benefit pension scheme based these days on average earnings. So if she is doing a salary sacrifice of £5k per year her average salary will be £5k less per year over the years she is in the scheme too. Same for B2W. As her salary is effectively £5k a year less she'll also be paying her employee contribution on £5k less also. As a high rate tax payer she'll probably be paying roughly 11-13% employee contribution Id imagine so I guess there is that saving.
I don't think there is anyway to make up for it directly. If she is still able to make AVCs that could do it, maybe, in a roundabout way.
My wife has just started a local government job with a salary sacrifice car scheme - probably need to look at it at some point but like you cars have always been something I bought out of money I'd saved and new car smell has never been a draw.
I'm going through similar at the moment, got a car on order through NHS Fleet Solutions.
Looking at the costs, cars are just a massive money pit anyway. A lease car is just like renting - loads of money which you'll never get any return on but it's also relatively simple in as much as all insurance, tax, servicing etc is included and you'll never be faced with an unexpected bill of thousands due to a breakdown or something. You'll also never end up buying anything dodgy or with hidden problems.
For my options (again noting the amount of money cars cost new, S/H, leased etc, a lease via salary sacrifice was the most sensible option. My last car I bought outright (S/H) and ran it until it fell to bits but by then it was costing a thousand pounds a year in servicing and repairs.
There is also presumably an impact on pension contributions
My pension contribution is unaffected by the EV lease. The % I contribute and my employer contributes, is based on my true gross salary. Can't comment on how the NHS does it though
Thanks folks. With regards to the effect on pension; this may just be an NHS thing, but this is what it says in the information sent round when the scheme was announced:
"Yes. Salary sacrifice schemes for ultra-low emissions vehicles are treated as non-pensionable, i.e., pension contributions should not be paid on the sacrificed salary and contributions should be deducted from salary after the amount sacrificed has been taken off. This means that your pensionable pay, on which your pension benefits are based on, will be reduced for the period of time you have salary sacrifice scheme deductions. It is advised that you seek independent financial advice if this is a concern to fully understand your individual position."
Or, basically what @convert said 😀 The problem (as they also said) is that there doesn't seem to be any way to directly make up for this i.e. there isn't any way to pay £x to get you back to the same benefit as it's a defined benefit scheme. You could make an AVC (if they are still allowed) or make some other investment to make up the shortfall, but since you don't know what return you will get you don't know exactly what it would cost.
The effects will be pretty small of course and if the benefits of purchasing the car this way were anything like the 40% suggested I wouldn't worry about it. But the cost to us (after tax) doesn't seem to be that far off the depreciation over four years, especially if you can live with a car that's a few months old rather than brand new, which leaves me wondering who is really benefiting from all this lost revenue to the treasury.
There is also another wrinkle, which is that my wife might want to retire before the end of the lease and I guess we'd then be on the hook for the pre-tax cost of the lease.
It does seem to me that lease deals in general work best if you really want to have a new car sitting on your driveway and you don't drive it much. Maybe not so good if you drive a lot but really don't care that much about cars (as long as they are reliable, comfortable and have a decent audio system) 😀
As an aside, as I assume you still have your Kia, if your wife is going to be doing 20,000 miles per year in her R5 how are you going to manage the home charging with that many miles done?
And a 2nd aside - the Renault 5 still look like a bit of a winner for a small EV - does it still not have heated seats as standard? Not sure I could handle an EV without heated seats up here in the 'fresher' north.
Isn't it only for electric vehicles? I know one person who got the R5 on the scheme as he does virtually no miles (800 last year) , doesn't use the car for work, and just uses it as a driveway ornament. Not sure on the residuals if the scheme is being heavily promoted now.
The pension effect does apply to a number of schemes - I know it does to our LGPS and TPS schemes (University).
The company I work for use Zenith. I wanted to buy my last car from them at the end of the 3 year lease but they wanted silly money for it.
Zenith have also recently introduced a scheme to lease ex-lease vehicles so are now very reluctant to sell. I would check if they would sell you the car at the end of the lease before entering in to a contract.
The company I work for use Zenith. I wanted to buy my last car from them at the end of the 3 year lease but they wanted silly money for it.
The previous car I bought was ex-lease from my workplace (at the time).
They'd got it, brand new, on a 2yr lease, I actually drove it a fair bit as the company car. When my car was written off on the motorway, I asked work about buying the pool car when its lease expired so they spoke to the leasing company who were only too glad to be rid of it - it saved them taking it back, valeting it, putting it up for auction etc so they sold it to me for a really good price. I got a 2yr old car which I knew the full history of for about 2/3rds the price I'd have had to pay buying through a car dealer.
As an aside, as I assume you still have your Kia, if your wife is going to be doing 20,000 miles per year in her R5 how are you going to manage the home charging with that many miles done?
It's tight (and not sure it strictly complies with Octopus' rules) but I reckon we'd get away with plugging each car in every other night. The EV3 does a few more miles than that (around 25k per year) and I reckon I could still cope with plugging it in every other night. Partly because some of those miles will be on longer trips with public charging anyway.
And a 2nd aside - the Renault 5 still look like a bit of a winner for a small EV - does it still not have heated seats as standard? Not sure I could handle an EV without heated seats up here in the 'fresher' north.
Excellent point. Heated seats (and now we've experienced one, a heated steering wheel too) would be pretty much essential. Having said that, she doesn't have heated seats in her current car and seems more keen on the heated steering wheel than anything else. I'd have to check that (with her and with the specs) though. So it could be back to the drawing board anyway.
The other absolute must (for her) is a single button to disable the ADAS features she finds most annoying, which is a big tick for the R5 I think. If it wasn't for the annoying bongs we'd probably be looking at the Inster
The company I work for use Zenith. I wanted to buy my last car from them at the end of the 3 year lease but they wanted silly money for it.
That's the big worry I think. Obviously, if they want more than the market rate to keep it there is the option to hand it back and just buy another one of the same age/mileage. But then you don't know the history and of course there will always be the temptation to spend a bit more on something newer instead. Where I tend to win (financially) on cars is that I can't be bothered to change them until they start to let me down. When I do change I find it as hard as anyone else to resist spending more than I really need to. So, buying something outright and then not having to think about it until it dies is quite attractive.
Isn't it only for electric vehicles?
Not sure to be honest, but I wouldn't buy anything else having driven one for a year and 25k miles now.
This is a lease not a hire purchase agreement. Option to purchase at the end of the payments is not a term of the agreement (and strictly speaking shouldn't be offered). It's expensive because a 4yo R5 with 80K miles won't be worth much. Also, be aware of the early termination terms.
If your £20K in payments over 4 years is accurate then a decent discount from a broker will get you similar (probably better) terms with a PCP (HP+balloon) on a new car. The PCP will give greater flexibility.
Take your point about it being a lease but the information provided about the scheme does say:
"At the end of the contract period you will be offered the option to purchase the car."
Just doesn't say how much for.
You are right that there may well be other options (including just buying a nearly new car outright) that work out just as cheap though and that's what surprises me. Surely a scheme that allows you to "purchase" a car with your pre-tax income should work out a lot cheaper than anything you can find privately. The treasury is missing out on a fair amount of tax, so where does all that money go? Seems as though the scheme is designed so that I only see a tiny bit of that saving and the lease company make a nice big profit, which everyone has to pay for from lost taxes.
To be honest, I'm not too comfortable with the idea of the general taxpayer subsidising middle class people to buy cars at all really. But I get that you might want to offer incentives to encourage people to make decisions that you think are beneficial overall (cycle to work, buy an EV rather than ICE etc). If all it's doing is providing a nice big profit to a lease company though I'm not sure I see the point.
I have a salary sacrifice car through work via Zenith. The cheapest cars are always the ones listed as in stock or arriving soon as I assume they are bulk purchases by the dealer that they can discount? If you spec your own every extra gets charged to you at full price and over your term so can get expensive. It's certainly not cheap but I found it difficult to find better via pcp, hp, or others.
For comparison, I could just buy a nearly new (less than 1K miles) example off autotrader for £25k. OK, I need to add in the cost of insurance and servicing
Without knowing your personal circumstances, how much would a loan for £25k cost over the time period. If you're putting down a chunky downpayment, how much are you losing in interest for putting that money into a car Vs having it in savings?
My personal position was I borrowed £13k to buy a 4 year old FSH diesel Mazda CX5. Loan repayments were £310 a month. In the couple of years I owned it I splurged out £1,200 for 4 new injectors, a few hundred each time for a service, a few hundred for insurance every year, a looming failure of the DPF/EGR was also looming.
When I sat down and did the sums I could get a brand new EV leased via work for £330 a month impact on my net pay and that covered the car, insurance, servicing and any tires that may be needed over the lease period. The cherry on top was I get to claim mileage for visiting the office, which is a 420 mile round trip. One visit to the office a month means the car costs me about £100 a month. 2 trips and I'm actually profiting each month...
Does your wife do any overtime or bank shifts? If so have you factored these in to the benefit of the SS?
<So, buying something outright and then not having to think about it until it dies is quite attractive.
We ummed and arred about a lease on the Zoe then decided to buy it outright on the basis that after 7 years it would cost about the same as a lease per month. It's six and a half now. If we'd taken the lease we'd now be on the third lease/car with each lease costing more. Even if you take into account the opportunity cost of not having the money invested the car now owes us next to nothing and is still running just fine with 700e of non-routine maintenance to date - *touches wood and crosses fingers*. The previous car (Dacia) we bought outright is now 13 years old on routine maintenance only apart from a rear wiper motor replaced under guarantee.
I might try a nearly new next, the models I'm interested in, E-tech Megane or Scenic, seem to depreciate faster than Dacia/Zoe. Tempting to just sit on what I've got though.
Like edukator even with the so called savings I've never found it better value over the life of the car.
Exception would be if I was doing 20k miles a year for business. At which point id be looking for a company car.
FFS now tried twice to respond to this thread in detail
Dont do it if thinking of retiring. General advice is don’t do salary sacrifice if retiring within 3 years of completion of a SS.
The NHS Trust can invoice you for the remaining lease costs in 1 payment.
Leases are not good value on such high mileage. You will not be getting a good deal on 20k miles. It would possibly be cheaper to ask for the excess mileage charge and pay that.
Why is she doing 20k miles per year, that’s nuts
It will effect her pension, how much depends on whichNHS scheme she’s in.
Have you compared total cost of ownership against personal contract lease ? Zenith are not ‘cheap’ compared to say NHS Fleet Solutions. (Different trusts use different companies)
I’ve bought 1 NHS SS car at the end of lease. It was a great deal and I sold the car 2 years later for the same money I bought it from the lease company. The following lease car they wanted way more than I thought it was worth
20k miles per year is a lot, is that just personal mileage or is a chunk of it business? Assuming the latter, you need to take the mileage reimbursement into account for both options for your lifetime running costs.
FFS now tried twice to respond to this thread in detail
Thanks for persevering.
Dont do it if thinking of retiring. General advice is don’t do salary sacrifice if retiring within 3 years of completion of a SS.
That's interest6ing. I'd not heard that before. Why does it matter what you plan to do years after the end of the lease? Surely you've either purchased the car or returned it by then so it doesn't matter. Or is it just a case of "if you plan to retire within three years of the end of the lease then your plans might change and you might retire during the lease"
Have you compared total cost of ownership against personal contract lease ? Zenith are not ‘cheap’ compared to say NHS Fleet Solutions. (Different trusts use different companies)
I tried to make this clear at the top of my post, but obviously failed 😀 I'd never buy any car for more than I had sitting in the bank. If I can't afford to buy it then I can't afford to lease it or take out a loan to buy it either. I realise that's very much a minority view at the moment, but it means I don't have to worry about the cost of loans/PCP etc as the alternative to the lease would just be to buy the car with cash. Total cost of ownership is very much what I'm focussed on i.e. what will it cost me over (say) 7 years and 140k miles, which is basically how long we've kept cars recently. The earlier ones were bangers that didn't last that long 😀 What surprises me is that salary sacrifice isn't obviously the cheapest option, which you'd think it would be if you are saving 40% on the payments.
Part of the issue may be that the price doesn't seem to include the £3,750 discount that you'd get if you bought the car privately. I've seen a few places offering a brand new R5 iconic five+ in yellow for £25k yet the value quoted on the lease was a little over £30k. Then they add in what is probably over-priced insurance, breakdown cover, service packages that may include more "inspections" than the manufacturer requires (I know Kia do that with their service packages), a generous amount o cover new tyres etc and suddenly you aren't saving much at all.
Why is she doing 20k miles per year, that’s nuts
I see @tthew made a similar comment but I guess it depends what you are used to. We've always driven that sort of mileage (and none of it is for business) so it seems normal to us. In fact, I'm always a bit shocked when I see that the average miles driven is below 8K or something. I mean, why would you spend so much on a car if you hardly drive the thing? 😀
It's probably just a consequence of our decision to live in a nice rural part of Aberdeenshire. We each have a commute of around 50 miles round trip, both like heading into the mountains (often separately) when we get a chance, have friends/family down south (so a few thousand-mile round trips to visit them each year) and haven't taken a flight or a foreign holiday in I can't remember how long as we usually prefer to head for the islands or a remote part of the countryside with the kids/dogs instead. It all adds up I guess.
It all adds up I guess.
Blimey, doesn't it just!
If you're averaging 30mph, which I guess isn't too un-generous in rural areas with small roads, that's 28 days per year driving. The whole of February sat in a car!
Worth having a nice car then 😀
If rural see if the used car rural transport grant is open again this year.
Head and shoulders the cheapest way I saw to buy a car. 1 year old used EV is costing me less per month to buy and fuel than just fueling the previous diesel car - and we own what's left of it after it's paid off
