New car time - EV PCP deals?

[[TW]Fox]

It's the virtually nil company car tax on electric vehicles which has allowed it, these schemes are available to private sector employers as well.

The system was originally designed so that your income tax was replaced with company car tax, which gave people an incentive to pick more efficient cars but without reducing the overall tax take significantly. If they picked a Range Rover they'd pay absolutely loads of tax, if they picked an efficient car they'd pay similar or perhaps make a small tax saving, pushing them towards a more efficient car.

Then it was decided to have the rate on zero emissions car set to virtually zero. So lets consider the effect of this and imagine you earn £60,000 a year and are deciding between a BMW 430i or a BMW i4 40e. I pick this model because they are basically the same car, only one is full EV and one is petrol.

So, you save tax at 40% and NI on the monthly cost of the lease, and this is replaced by company car tax instead. For the example above, the monthly tax due on each car would be:

BMW i4: £36.58
BMW 430i: £572.66
1 litre Ford Focus: £266

Clearly if you take the i4 then the huge saving in tax and national insurance is not being replaced by any meaningful company car tax. This therefore makes the cost of the i4 exceptionally cheap given its a £55,000 car and also reduces the governments tax take by hundreds of pounds a month. Who is paying for this? If you took the 430i instead - a 2 litre petrol so hardly a V8 Range Rover - the tax bill is so huge that I'd imagine absolutely nobody picks one of these anymore.

So you end up with people thinking its totally normal to drive £55k cars for £500 a month (Whilst not realising or not caring that it also reduces your pensionable pay as well), when it isn't and it surely cannot last for ever.

And where is the lost tax revenue coming from?

 

[Amraam]

Right, quick pause on everything. Just want to say thanks for the help and apologies for my uselessness. I'm really anxious stressy person and I grossly overthink things or fear making the wrong choice. Cais la vie and all that, but it's a flaw of mine I'm working on.

I realise we're going round in circles and probably irritating the **** out of you all, but this stuff confuses me and I just want to make sure I make the right financial choice for the short term and the long term. I keep bouncing between what's best. I'm led to believe my new employer has a 45p per mile travel allowance, but as yet I've not received my contract or details so I want to make sure it's not one of those "minimum 40 mile journey" minimum, otherwise work miles might rack up, pushing up mileage allowances and/or fuel costs. I'm sort of stuck in a catch 22 situation by not knowing these in advance, so I'm finding it particularly difficult to make an educated decision on which route to go. If I buy into a PCP deal now, and job doesn't work out, I'm screwed. If I don't and wait until my job changes, my credit rating might have changed making a PCP or lease etc no longer feasilble.

 

[[TW]Fox]

This is why buying a used car that isn't that expensive is a good idea until you know exactly what your situation is. If you buy a good one you're unlikely to lose much when you sell it on once your circumstances are more certain.

 

[Amraam]

It's the virtually nil company car tax on electric vehicles which has allowed it, these schemes are available to private sector employers as well.

The system was originally designed so that your income tax was replaced with company car tax, which gave people an incentive to pick more efficient cars but without reducing the overall tax take significantly. If they picked a Range Rover they'd pay absolutely loads of tax, if they picked an efficient car they'd pay similar or perhaps make a small tax saving, pushing them towards a more efficient car.

Then it was decided to have the rate on zero emissions car set to virtually zero. So lets consider the effect of this and imagine you earn £60,000 a year and are deciding between a BMW 430i or a BMW i4 40e. I pick this model because they are basically the same car, only one is full EV and one is petrol.

So, you save tax at 40% and NI on the monthly cost of the lease, and this is replaced by company car tax instead. For the example above, the monthly tax due on each car would be:

BMW i4: £36.58
BMW 430i: £572.66
1 litre Ford Focus: £266

Clearly if you take the i4 then the huge saving in tax and national insurance is not being replaced by any meaningful company car tax. This therefore makes the cost of the i4 exceptionally cheap given its a £55,000 car and also reduces the governments tax take by hundreds of pounds a month. Who is paying for this? If you took the 430i instead - a 2 litre petrol so hardly a V8 Range Rover - the tax bill is so huge that I'd imagine absolutely nobody picks one of these anymore.

So you end up with people thinking its totally normal to drive £55k cars for £500 a month (Whilst not realising or not caring that it also reduces your pensionable pay as well), when it isn't and it surely cannot last for ever.

And where is the lost tax revenue coming from?

I assume I'm included in that list, so I'll give my opinion. You're very correct, and I'm well aware of how lucky I got my deal from and understand that it was also reducing my pension. With access to that scheme, why would I not take advantage? We pay crazy amounts of tax on everything, so I'm going to feel guilty for getting a benefit on 0% BIK for a couple of years.

EDITED: tone came across wrong

 

[Kenai]

If I buy into a PCP deal now, and job doesn't work out, I'm screwed. If I don't and wait until my job changes, my credit rating might have changed making a PCP or lease etc no longer feasilble.

Is there a particular reason you'd expect your credit rating to change so drastically that you'd suddenly be completely unable to finance a car?

 

[[TW]Fox]

I assume I'm included in that list, so I'll give my opinion. You're very correct, and I'm well aware of how lucky I got my deal from and understand that it was also reducing my pension. With access to that scheme, why would I not take advantage? We pay crazy amounts of tax on everything, so I'm going to feel guilty for getting a benefit on 0% BIK for a couple of years.

EDITED: tone came across wrong

I think you missed my point a bit - it was about how the system works, not the choices individuals make

 

[SDK^]

I'd be happy paying more for the EV, even if it was just an MG. (Which are actually still quite decent)

 

[Amraam]

Is there a particular reason you'd expect your credit rating to change so drastically that you'd suddenly be completely unable to finance a car?

Simply that a few people have told me that a recent job change can have an effect.

 

[Amraam]

I think you missed my point a bit - it was about how the system works, not the choices individuals make

But you're right; the tax has to be replaced somewhere, but my point is that we're taxed to death as it is, so I'll personally take the rare opportunity to drive a really nice car for relatively little money. Running a car full stop is becoming scary expensive back in the real world that I've come crashing back into

 

[Kenai]

Simply that a few people have told me that a recent job change can have an effect.

If you were lining up for a mortgage maybe, I wouldn't get overly concerned that a new job is going to hamper your ability to PCP a car.

Echoing some comments above though, it is probably prudent to get settled and understand the requirements of the new job before diving into an ongoing financial commitment.

If you were to buy a £10k car now, with a view to moving it on in 6 months, you'd be unlikely to lose fortunes if you buy sensibly and you can go into the process of buying something nicer with more confidence your £300 / £400 per month is going on the right car. Or you might find you're actually happy with your £10k car and save some money in the long run.

 

[Amraam]

If you were lining up for a mortgage maybe, I wouldn't get overly concerned that a new job is going to hamper your ability to PCP a car.

Echoing some comments above though, it is probably prudent to get settled and understand the requirements of the new job before diving into an ongoing financial commitment.

If you were to buy a £10k car now, with a view to moving it on in 6 months, you'd be unlikely to lose fortunes if you buy sensibly and you can go into the process of buying something nicer with more confidence your £300 / £400 per month is going on the right car. Or you might find you're actually happy with your £10k car and save some money in the long run.

The concern with that then is warranty and parts starting to fail.

Even 10k is starting to look like 5-10 year old and 50k miles.

 

[ChrisD.]

The concern with that then is warranty and parts starting to fail.

Even 10k is starting to look like 5-10 year old and 50k miles.

Car's don't just spontaneously fail as they reach 5 years old.

 

[dlockers]

It's the virtually nil company car tax on electric vehicles which has allowed it, these schemes are available to private sector employers as well.

The system was originally designed so that your income tax was replaced with company car tax, which gave people an incentive to pick more efficient cars but without reducing the overall tax take significantly. If they picked a Range Rover they'd pay absolutely loads of tax, if they picked an efficient car they'd pay similar or perhaps make a small tax saving, pushing them towards a more efficient car.

Then it was decided to have the rate on zero emissions car set to virtually zero. So lets consider the effect of this and imagine you earn £60,000 a year and are deciding between a BMW 430i or a BMW i4 40e. I pick this model because they are basically the same car, only one is full EV and one is petrol.

So, you save tax at 40% and NI on the monthly cost of the lease, and this is replaced by company car tax instead. For the example above, the monthly tax due on each car would be:

BMW i4: £36.58
BMW 430i: £572.66
1 litre Ford Focus: £266

Clearly if you take the i4 then the huge saving in tax and national insurance is not being replaced by any meaningful company car tax. This therefore makes the cost of the i4 exceptionally cheap given its a £55,000 car and also reduces the governments tax take by hundreds of pounds a month. Who is paying for this? If you took the 430i instead - a 2 litre petrol so hardly a V8 Range Rover - the tax bill is so huge that I'd imagine absolutely nobody picks one of these anymore.

So you end up with people thinking its totally normal to drive £55k cars for £500 a month (Whilst not realising or not caring that it also reduces your pensionable pay as well), when it isn't and it surely cannot last for ever.

And where is the lost tax revenue coming from?

At £60k salary I think people have missed the point (i.e. you should still be whacking it into your pension). Where it really makes a difference is when you hit low hundreds. For every pound over £100k, you lose 50 pence of your tax-free allowance. The effective tax rate is 60%. Now assume that the chappy/chapess has kids - as soon as you tip over £100k you lose your £2k/30hours free childcare.

It means for the effective cost for some of these EVs is 'nill' as you'd lose so much in perks and tax.

Couple that with leases being nill deposit on salary sacrifice terms and it really is even more of a no brainer.

 

[Amraam]

Car's don't just spontaneously fail as they reach 5 years old.

With my luck and cynicism they will ha.

 

[dlockers]

The concern with that then is warranty and parts starting to fail.

Even 10k is starting to look like 5-10 year old and 50k miles.

I think you need to be clear with what your requirements are. Are you looking to keep your cash in the bank? Are you looking for something fancy/enjoyable/'pride' inducing to drive? Do you need to tow? Large luggage? European trips? Bad back? Driving 'up high'?

People are doing what OCUK always does and suggesting old crap because with no clear requirements, that is the right answer.

 

[Amraam]

At £60k salary I think people have missed the point (i.e. you should still be whacking it into your pension). Where it really makes a difference is when you hit low hundreds. For every pound over £100k, you lose 50 pence of your tax-free allowance. The effective tax rate is 60%. Now assume that the chappy/chapess has kids - as soon as you tip over £100k you lose your £2k/30hours free childcare.

It means for the effective cost for some of these EVs is 'nill' as you'd lose so much in perks and tax.

Couple that with leases being nill deposit on salary sacrifice terms and it really is even more of a no brainer.

For me it was I earn ~£30k, and in my 30s, and I really wanted to drive a Tesla Model 3 if even for just a couple of years. There's no other way I would have ever been able to afford it without serious life changes/sacrifices, so it was 2 years of fun for me.

 

[dlockers]

For me it was I earn ~£30k, and in my 30s, and I really wanted to drive a Tesla Model 3 if even for just a couple of years. There's no other way I would have ever been able to afford it without serious life changes/sacrifices, so it was 2 years of fun for me.

That's great and I'm 100% with you. But that doesn't help you get back down to reality right now

I'd set some priorities on what you don't want:
1. Can't be PCH as you have no control over your mileage
2. ...

Otherwise people will just recommend old Yaris' or Mondeos if you have kids.

 

[dlockers]

Something tasty; GR Yaris:

41 x Monthly Payment	£219
Customer Deposit	£6,117
Term	42 Months
Cash Price	£24,960
APR	1.9% APR Representative*
Amount Of Credit	£18,843
Guaranteed Future Value / Optional Final Payment	£10,845
Total Amount Payable	£25,941
Fixed Rate Of Interest (Per Annum)	1.49%

 

[Wizzkidy]

Hang on, you moved to a new job and lose your salary sacrifice scheme but you took a new job, didn't you get a decent pay rise when moving to a new job? Would this not outweigh the extra required for a reasonable swap of cars? Maybe not a Tesla but even so something?

Can't say I am surprised though with the current prices. I was hoping to PCP a tesla for much less then I did recently!!

 

[Amraam]

I think you need to be clear with what your requirements are. Are you looking to keep your cash in the bank? Are you looking for something fancy/enjoyable/'pride' inducing to drive? Do you need to tow? Large luggage? European trips? Bad back? Driving 'up high'?

People are doing what OCUK always does and suggesting old crap because with no clear requirements, that is the right answer.

Yep, I'm not being very helpful, because I don't really know. I've enjoyed running nice cars, probably as a pride thing as you hinted at. What I need and want are different ha.

Really, I'd like another EV if possible for the ease of home charging, but I've never had to suffer real range anxiety of the use of non tesla chargers. It's a huge plus having the Tesla network. I would like a quick car again, but a petrol option would cost stupid money again, so the only way to do so is another EV. Or, I take the opportunity to go ultra slow and boring and save money.

I don't have a huge amount in savings, but a very good house deposit should I need it (partner owns the house, I pay bills etc.). I'd like to keep most of it in tact for any huge life changes. Marriage and getting on the property ladder are life points I've yet to reach.

Basically, it needs to be reliable, comfy, bigger than a small hatchback (astra, focus etc. at least) for boot space. Towing isn't an requirement and we don't do huge trips. We are going to Cornwall from Newcastle in a month and we'll be going in the partner's Kia Piccanto, which I'm desperate to avoid haha.

Realistically, the new job will be fine, but I'm just anxious of committing (yeah, commitment is a real problem with me) to a large financial deal just as I'm leaving one employer to start another.