How Is My EV Salary Sacrifice Payment Actually Made Up?

Ever wondered how EV Salary Sacrifice works in the backend? You might see a headline figure for a vehicle online, or open a marketing email that presents a price. You might even speak to a colleague who has ordered the exact same car through the same employer. Yet when your quote arrives, the monthly figure is slightly different.

At first glance that can seem confusing. Once you understand how an EV Salary Sacrifice payment is actually constructed, it makes perfect sense.

An EV Salary Sacrifice agreement is not a standard lease with a fixed monthly price. It is a package of costs and tax savings tailored to the individual employee and the employer’s scheme setup. That means multiple factors influence the final monthly payment. Here is how it all comes together.

Your salary plays the biggest role

The starting point for any EV Salary Sacrifice quote is your base salary. In a salary sacrifice arrangement, you agree to reduce your gross salary by an agreed amount each month in exchange for the vehicle package. Because the reduction happens before income tax and National Insurance are applied, you make tax savings on that amount.

However, the level of those savings depends on your salary and tax band. Someone paying higher-rate tax will typically see greater tax efficiency than someone paying basic rate tax, because they are avoiding tax at a higher rate on the sacrificed salary.

There is also an important rule around what counts as salary. Only guaranteed base salary can be used in the calculation. Although we may ask about them in our affordability checks, bonuses, commissions and variable income cannot normally be included because they are not guaranteed income under HMRC guidance. This is why two employees choosing the same car may still receive different monthly figures.

Salary sacrifice pricing typically assumes that an employee has a standard tax code. If your tax code has been adjusted by HMRC, this can slightly affect the overall tax position and therefore the effective monthly cost.

Student loans can actually increase savings

Another factor many people do not initially consider is student loan repayments. As salary sacrifice reduces your gross salary, it also reduces the salary used to calculate student loan repayments. That means some drivers effectively make additional savings through the reduction in their monthly loan repayment.

For employees with a student loan, the overall cost of the car can therefore be slightly lower than someone without one.

Insurance is included, which brings your location into the mix

Unlike many traditional leasing agreements, most EV Salary Sacrifice schemes include fully comprehensive insurance within the package. That insurance cost is not fixed across the country.

Insurers assess risk based on postcode data, typically ranking areas on a risk scale. More densely populated areas tend to carry higher risk simply because there are more vehicles on the road and therefore a greater likelihood of accidents. Cities such as London, Birmingham, Manchester and Liverpool often sit higher on that risk scale due to population density and traffic levels.

As a result, where you live can influence the insurance cost, which in turn affects the overall monthly salary sacrifice payment. Insurance pricing is also affected by the drivers on the policy. For example, the monthly cost may change depending on:

• Additional named drivers

• Younger drivers on the policy

• Previous claims history

• Penalty points on a license

All of these factors feed into the insurer’s risk calculation. You can find out more about insurance through EV Salary Sacrifice by clicking here.

The vehicle you choose

Don’t think there’s any surprises with this one! More expensive vehicles have higher lease costs. They may also come with higher insurance costs due to their value. On top of that, the Benefit-in-Kind tax on electric vehicles still applies, albeit at a very low rate compared to petrol or diesel cars.

One extra cost that can catch people out is the Expensive Car Supplement (often called the “luxury car tax”). This sits within Vehicle Excise Duty (VED) and applies when a car’s list price goes above a set threshold. You can find out more about this in our blog here.

An interesting thing to note is that with P+B EV Salary Sacrifice, we ensure our drivers always make the same payment every month throughout their lease. It never changes. A lot of other EV Salary Sacrifice providers don’t do that.

Considering a home charger?

Good news, our EV Salary Sacrifice package allows you to include a home chargepoint installation within the agreement. If you choose to include one, the cost is simply spread across the monthly salary sacrifice payment, which means you’ll be making tax savings here, too.

However, not every installation is straightforward. If your property requires a non-standard installation, additional costs may apply. Examples might include:

• The parking space being separate from the property

• Long cable runs

• Additional groundwork or electrical work

In some cases this can lead to an additional one-off cost on top of the agreement.

Your chosen mileage and servicing

Mileage is another factor that influences the price. While many of our vehicles are illustrated at around 8,000 miles per year, agreements can typically be structured anywhere between 5,000 and 20,000 miles annually. Higher mileage increases the cost because:

• There is greater wear and tear on the vehicle

• Servicing and tyre replacement costs rise

• Insurance risk increases as the car spends more time on the road

Funders factor these elements into the monthly price.

Are you considering an EV in the near future but feel you do far too many miles to make it work? We recently spoke about this in another blog!

How to get the most accurate pricing though EV Salary Sacrifice

The best way to get an accurate view of pricing is to ensure the information used in the quote reflects your situation. A few simple steps help ensure the most accurate estimate:

• Use your company-specific scheme code when accessing the platform

• Enter your correct base salary

• Provide accurate driving and insurance details

• Select realistic annual mileage

Even then, speaking with an advisor can often reveal options that are not immediately visible online, including special manufacturer offers or funder incentives that change regularly.

EV Salary Sacrifice is designed to deliver significant tax efficiency while giving employees access to a fully bundled electric vehicle package. But that flexibility means it cannot operate like a standard online leasing deal with one fixed price. Instead, every quote is built around the individual.

EV Salary Sacrifice may work differently for everyone, but one thing that’s consistent, is that all of our clients make big savings by making the switch. Had enough reading and want to talk to a human? Speak to one of our Relationship Managers below.