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?
