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OK, lets do this by way of example. Hopefully I can organise my thoughts sufficiently to be clear......lets see :-)
In my case, I had a £36,055 car ordered which I negotiated a bit of a discount on. I paid £1000 deposit and the BMW lease was about £690 a month.
With the salary sacrifice scheme, lets say the the price from your suppliers is £655 a month.
That £655 comes out of your gross pay, so someone in the 40% tax bracket, you are reducing your taxable income by £655 a month. That is the equivalent of saving you £262 a month.
So far, so fantastic. You're now paying just £393 of your net pay.
But of course the government recognises that as a benefit in kind so they slap a tax on you. For my car they assess this benefit to be worth the equivalent income of £8653 per annum, or £721 a month.
So now you have to pay tax on that figure. At 40% this is £288 a month.
So the sum monthly total is net payment + benefit-in-kind tax = £681.
So in that example it's all cost neutral really, other than your company pays your road fund licence, all repair bills not covered by warranty, arrange the servicing and have the car collected and a replacement delivered, pay for the breakdown cover and pay for the insurance. All that adds up a decent cash saving.
On top of that you've zero risk in the residual value of the car. You just walk away.
If you lose your job, no worries, you aren't lumbered with a car you cant afford the payments for.
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