The growth in electric vehicle (EV) leasing has contributed to an increase in total EV registrations of 157% so far this year, as combustion car sales slump by an average of 52%, according to Octopus Electric Vehicles.
It is reporting huge interest in its own EV salary sacrifice scheme, with more than 100 businesses having already signed up.
Workplace salary sacrifice schemes - the same system employees use for tax-free pension contributions, cycle to work schemes and childcare vouchers - enable employees to pay for vehicles from their gross salary, saving on both national insurance and income tax.
Octopus Electric Vehicles says that by combining salary sacrifice and the new zero percentage benefit-in-kind (BIK) rate for pure electric vehicles typically cuts monthly leasing payments by 30-40% – up to an average of £2,589 per year in some cases – and eliminates all upfront costs.
For those earning between £100,000-120,000, savings can rise to up to 60%, it says, equivalent to an average of £3,711 per year in some cases.
BIK tax for EVs will increase to 1% in April 2021, and 2% in 2022.
A higher rate taxpayer can currently lease a Tesla Model 3 Standard Range Plus for 48 months for an average of £342 a month with zero upfront cost, including insurance, all servicing and maintenance, and tyre replacement, says Octopus Electric Vehicles.
A similar combustion vehicle - an Audi A4 TFSI for example - would cost around £394.86 per month on a personal lease for the vehicle alone.
Alternatively, a lower rate taxpayer could lease a 245-mile range Renault Zoe for an average of £218 a month, compared to £311 before using salary sacrifice and taking advantage of 0% BIK tax.
“The Impact of the last six months has been staggering,” said Fiona Howarth, CEO of Octopus Electric Vehicles. “Changes to benefit-in-kind tax have been a financial game changer for EV leasing. Add this to brilliant electric cars hitting the market and huge savings on running costs versus petrol cars, and EV’s are a total no brainer. It’s no wonder then that we are seeing a huge boom, with the number of companies ordering EVs via our salary sacrifice scheme growing five-fold since April.”
Poppy Welch, head of Go Ultra Low, the joint Government and industry campaign promoting EVs, says that there has never been a better time to drive electric.
“0% Benefit in Kind is just the latest in a host of benefits available to EV drivers. Not only does it complement the £3,000 Government plug-in car grant, the £350 Government home charging scheme, the exemption from Vehicle Excise Duty and London Congestion Charge, but it’s also enhanced by significant fuel, tax and maintenance savings,” explained Welch.
Howarth concluded: “We’re in the midst of a climate crisis and with transport making up a third of all UK emissions, it’s no surprise drivers are looking to switch to greener ways to get around.
“We don’t pretend that EVs are a silver bullet and we should all aim to walk and cycle wherever we can. But if you’re going to drive, make it electric – it makes financial and environmental sense.”
Octopus Electric Vehicles, part of the Octopus Energy Group, was launched in 2018 to offer a dedicated EV leasing service to grow the market share of electric vehicles and accelerate the UK’s transition to zero emission mobility. The company says it offers every EV available with a range of at least 100 miles.