Have you ever looked jealously at your work colleagues driving their company-provided car – and thought, ‘why not me’?

But your job role doesn’t qualify you for a company car. So it’s back to public transport or funding a car out of your own post-tax salary. And we know how the cost of living crisis is squeezing salaries.

But it doesn’t have to be like that; the haves and the have nots can be the haves and the haves-as-well. This is thanks to salary sacrifice, where you ‘sacrifice’ a part of your gross salary before tax for the benefit of a car.

It’s a highly effective way to get into a new car thanks to a variety of tax breaks that are designed to promote the uptake of greener cars.

Salary sacrifice for cars works best, and is most cost effective, for electric cars (EVs) but can equally work for a hybrid or plug-in hybrid car.

The provision of salary sacrifice is certainly growing as more companies assess and then act on the benefits. According to HR Magazine, 45% of employees surveyed believed it was a benefit that attracted and retained employees, while nearly one in five employees said they would consider switching jobs to an employer that offered salary sacrifice.

If salary sacrifice for cars is not on your list of employee benefits, then it is worth contacting your HR department to find out if it can be added. Because the advantages are many.

How does salary sacrifice for cars work?

Your company leases a car – chosen by you – on your behalf. It is fully insured (so no worries about the spiralling cost of car insurance) and it is fully maintained (this means servicing and tyre repairs are all covered, so there are no expensive financial hits to your pocket from running the car). What’s more, because the car is leased by your company, there is no impact on your own personal credit line.

The mechanics of the system are quite easy to understand:

• You pay for the car out of your gross salary – so before income tax and National Insurance
• By doing so, it reduces the amount of your gross salary so you pay less tax and National Insurance
• Because the car is considered a benefit – in the same way that a company car is treated – there is some benefit-in-kind tax to be paid by you. But, particularly in the case of an electric car, the amount is insignificant – a MINI Cooper Electric costs from as little as £10 per month, while a hybrid car such as the Hyundai Tucson SUV would cost from £177 a month; it’s one of the reasons we would encourage you to choose an electric car.

Salary sacrifice is cheaper than leasing the same car yourself

Another advantage of salary sacrifice for cars is it’s so much more cost-effective than leasing a car yourself out of your post tax income. In many ways you wonder why more people aren’t taking advantage of the savings.

Here’s two examples:

Volvo C40

• The stylish and oh-so-cool Volvo C40 would cost you £639 of monthly net salary on a salary sacrifice programme
• If you were to lease the same car personally – with all the insurance and maintenance included – then the cost would be £1,107 a month from your taxed income.
• The cost saving to you by choosing salary sacrifice on the Volvo is £468 a month
• Example based on a 40% tax payer on a 3+33 payment profile at 5,000 miles a year.

Fiat 500

• The brilliantly retro Fiat 500 is a popular electric car choice and would cost you £471 of monthly net salary on a salary sacrifice programme
• If you were to lease the same car personally – with all the insurance and maintenance included – then the cost would be £690 a month from your taxed income.
• The cost saving to you by choosing salary sacrifice on the Fiat is £222 a month
• Example based on a 20% tax payer on a 3+33 payment profile at 5,000 miles a year.

Make salary sacrifice a benefit for everyone

If your employer is not offering a salary sacrifice car programme, then ask them to investigate how it could be implemented so it can benefit all staff.

Not only do employees have the opportunity to drive a car at a significantly lower cost than leasing personally, but with an electric car salary sacrifice scheme your company can demonstrate it is really engaged in its Environmental, Social and Governance programme.

And should you need to drive your car on company business at any stage, then the car is fully insured for this activity, demonstrating how seriously your employer is taking Duty of Care.

With an electric car salary scheme on offer, there’s no more looking at your company car driving colleagues and wondering “if only I had the same…” Because with salary sacrifice, you can have the same benefit as your colleagues. And become one of the ‘haves-as-well’.