Salary Sacrifice scheme (cars)

[D6]

My work offer a salary sacrifice scheme, enabling you to esentially buy a company car.

As one of ours is beginning to tire I thought I'd look into it, but I really can't see the benefit.

I thought I'd look into buying a nice estate or small 4x4 that could pull the caravan. So looked at things like Skoda estates, volvo's, Ford etc.

It works out about £400 per month depending on what car. Over 3 years that's £14,400 spent with nothing to show at the end.

I can't see the point.

Instead I could buy a nearly new car (that has already had a deppreciation hit) and own it after 3 years for that.

Ok, the scheme are esssentially just add fuel, but that also means you lose any NCB's you may have affecting trying to insure a car privately in the future.

Also you are limited on mileage.

And only you can drive the car. No-one else is allowed even if they have their own insurance. (although you can add up to 3 drivers for a yearly sum)

I thought their would be at least something to make it worth considering, but all I can see is a massive outlay of money for no ownership. It's like renting a house instead of buying.

[bb41]

I've heard of some such schemes as well. It works if you live on your own and only do minimal mileage .

One scheme really did hit you hard after a certain amount of miles , I'd rather have a rust bucket that belongs to me than a nice vehicle that doesn't .

Seems quite a lot of money to me

[Monty]

Is the 400 quid taken out of your salary before tax?

[D6]

It is, so it gives some tax savigns. However you then pay another tax (BIK) which offsets some of this, and it also means your salary is technically less for calculating things like pensions, mortgages, payrises % etc

[Monty]

Ah so it's then taxed as a company car.

[Blade]

I agree and like you have never seen the reason for such schemes popularity but they are so I guess people just like the simpleness of the scheme in that one payment covers everything. Personally like you I have always seen them as shockingly bad value.

I'm old school and save up for things I want and then buy them with my own money so I'm not adding 10% interest on evetything I buy. People might say they can't afford my strategy but of course they can. If you can afford £400 a month car loan repayments you can afford to save £400 its just you have to be patient at the beginning and save up some money to start the process with. When me and the missus were young we didn't have two pence to rub together so we had no choice but to be keen savers as our money needed to go a long way. Off subject slightly but IMO to many people want stuff in a hurry these days and think the never never is a quick and easy solution, it isn't its an expensive one IMO.

[kiwikrasher]

Off subject slightly but IMO to many people want stuff in a hurry these days and think the never never is a quick and easy solution, it isn't it’s an expensive one IMO.

I totally agree Blade. Last break home we upgraded our TV, old one was an 8 yr old cheap brand SD plasma that the screen finally went on, and as income is a bit better these days we splashed a little, cash as always & haggled a few hundred off. I was horrified when a young bogan* couple walked in, picked a TV three times the cost of mine, plus a Blu-ray, all to go on Hire Purchase, no interest or payments for three years (a trap of an offer that is popular over here) then the young guy goes "what else can we get?", his girl says, "no, no we've spent too much already" to which he replies "it hasn't cost us a thing yet, we'll worry about it in 3 years!"

*Bogan is the Aussie equivalent to Chav from my best guess...

[kiwikrasher]

My work offer a salary sacrifice scheme, enabling you to esentially buy a company car.

As one of ours is beginning to tire I thought I'd look into it, but I really can't see the benefit.

I thought I'd look into buying a nice estate or small 4x4 that could pull the caravan. So looked at things like Skoda estates, volvo's, Ford etc.

It works out about £400 per month depending on what car. Over 3 years that's £14,400 spent with nothing to show at the end.

I can't see the point.

Instead I could buy a nearly new car (that has already had a deppreciation hit) and own it after 3 years for that.

Ok, the scheme are esssentially just add fuel, but that also means you lose any NCB's you may have affecting trying to insure a car privately in the future.

Also you are limited on mileage.

And only you can drive the car. No-one else is allowed even if they have their own insurance. (although you can add up to 3 drivers for a yearly sum)

I thought their would be at least something to make it worth considering, but all I can see is a massive outlay of money for no ownership. It's like renting a house instead of buying.

We have similar schemes here D6, undoubtedly there are major differences but the advantages are that payment wraps in deprecation, servicing and maintenance (incl. tyres normally). You are then paying pre-tax, so all those costs you would bear from your net income normally on a car you own, are discounted by your nominal tax rate, but then as you say you cop a bit of fringe benefit tax. over here after 3 years you can 'buy back' the car at a very reduced price, which is calculated on company rates of asset deprecation. In the case of a few mates I've seen do this, its been a bargain to buy back.

I've done some pretty extensive research into this recently and found if you were to buy a brand new or near new car on finance, it was worthwhile. Since that goes against every fibre in my tight arse kiwi nature, I just waited till I had the cash, haggled for 3 hours and bought a new one outright.

[Kwacky]

My work offers a similar scheme but it's crap. I do more miles going to and from work than they allow.

[duke63]

These type of schemes are quite often a way to get vehicles off the surplus stock book and earning money for the manufacturer.

[C00kiemonster]

I agree and like you have never seen the reason for such schemes popularity but they are so I guess people just like the simpleness of the scheme in that one payment covers everything. Personally like you I have always seen them as shockingly bad value.

I'm old school and save up for things I want and then buy them with my own money so I'm not adding 10% interest on evetything I buy. People might say they can't afford my strategy but of course they can. If you can afford £400 a month car loan repayments you can afford to save £400 its just you have to be patient at the beginning and save up some money to start the process with. When me and the missus were young we didn't have two pence to rub together so we had no choice but to be keen savers as our money needed to go a long way. Off subject slightly but IMO to many people want stuff in a hurry these days and think the never never is a quick and easy solution, it isn't its an expensive one IMO.

Much wisdom there. The only loan I've ever had was a mortgage. I save for everything and owe nothing. I'm way better off because of it.

Credit has a lot to answer to and is still too readily available IMO. Too easy to get what you want and then not be able to afford things that are essential. And no an iPhone or TV isn't essential.

[duke63]

If there was no credit though we would have none of the technology we have now as no one would ever be able to buy it quick enough to justify any company spending on R&D. We would still be driving around in Austin Allegros.

I wouldn't disagree that credit had become too easily available though and i am finding it very difficult to supply banks and building societies with client's figures they find acceptable to justify any mortgage. Mortgages will soon only be available to the well off.

[Kwacky]

I think mortgages will go back to the old system, where you had an interview with someone at the bank and you need a decent deposit.

I should ask my work about a scheme for motorbikes.