Octopus 'Electric Dreams' salary sacrifice scheme

msim

Well-known Member
Anybody done this scheme? Its a salary sacrifice scheme (a bit like cycle to work) in which your lease an electric car with payments deducted from gross salary (Salary Sacrifice | Octopus Electric Vehicles). My workplace is signing up to it but I thought it might be worthwhile seeing of anyone else has signed up for opinions/advantages/disadvantages. Reviews I have seen online all look pretty positive but I was always unsure of leasing as opposed to actually owning a car myself. The example shown had a Tesla 3 SR+ for around £400 a month on a 48 month plan which includes all insurance, servicing, tyres, breakdown and installation of a home charger but only 8k miles which wouldn't be enough for me and the ~15k I do annually. I'll get an access code next week to get proper tailored quotes anyway I think.

A bit annoying I just bought an ex-demo 2020 Volvo V60CC D4 earlier on in the year on before this was announced but I might be lucky and be able to sell that back for around (or above maybe) what I bought it for given the state of the used car market right now.
 

CLH

Well-known Member
There aren't any downsides compared to a standalone lease. For me the clincher was just how all inclusive it was. Fro example, I was getting through a set of good tyres every year (front at least).

In terms of the mileage, just do the maths. If it's £20 a month more for that, great. I think it's 7p a mile, so that's about £1960 over 4 years. The break even is about £40 a month.

In terms of selling your car, you're up there. You will almost certainly get more than you pay for it. If you OWN it, brilliant, money in the bank.

Bear in mind your saving is, this:

Assume £500pcm for the Tesla (NET)

Fuel cost PA Volvo about £1500 (61mpg on 15k, though probably more)
Fuel Cost Tesla (assume 10p rate) at 3.8KWH/mile about £400 PA

Then car tax, insurance, servicing etc

Salary Sacrifice £0
Volvo assume £400 insurance, £150 tax, £300 tyres, £300 servicing. £1150 PA
 
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CLH

Well-known Member
Also, to add:

1. You get a free charger
2. I've put 10p kwh above, Octopus is actually 5p from 12.30-4.30 so if you just TOP up every day, that's mega cheap
3. The Tesla supercharger network is still cheaper than the other non Tesla superchargers
4. IF you own the Volvo, that's money in the bank.
 

msim

Well-known Member
Excellent reply - thanks!

As I say we should get the code for the website in the next few days to get a true idea what the costs would be.

The Volvo is 'owned' by me in the sense that I paid 50% the price cash deposit and financed the balance at 0% HP over three years through the dealer, which is about £450 a month. I'm not sure what the terms would be for selling the car and paying off the finance agreement though. In terms of MPG the economy is nowhere near what is quoted - its averaging about 45mpg on the journey logging app I have. Its a beautiful car and is essentially top of the range with everything added aside but when its costing £80 a month in diesel, insurance is about what you said at £400pa and then the tax is hit by LVT so that is over £400 a year too without maintainence costs it really does start to make some sense to consider getting rid and going for the all in one package to save monthly costs. Work also has a number of free charging points too so aside from the charging on longer trips I could be looking at minimal charging costs too.
 

CLH

Well-known Member
There you go, the saving is in the £450 month you're paying as HP.

Now, obviously, you're not going to own the car but, I think with salary sacrifice schemes, that's less important than purchase v lease.

I'd imagine the dealer will be falling over themselves to have that car back. Alternatively, just sell it and pay off the finance.

I'm assuming it's worth about £30k or so? Perhaps £35k? So that's money in the bank and you're NO worse off in terms of outgoings as you're already doing that.

So, assuming your current HP cost v new lease cost is equal you have money in the bank and are saving on all the items that are included. No brainer IMO
 

oneman

Well-known Member
I'd imagine the dealer will be falling over themselves to have that car back. Alternatively, just sell it and pay off the finance.
Obviously check with the dealer but its unlikely you can just 'sell it' if it has finance secured on it. The Tesla dealer will possibly take it in as PX. Also depending on the contract there may be some penalty for early repayment.
 

CLH

Well-known Member
There is unlikely to be a penalty on 0% APR but, yes, there needs to be a way of paying off the finance slightly before the sale. A dealer etc will arrange this for you.

There is no PX in this case as he's not PX'ing for a lease.
 

msim

Well-known Member
Absolutely will need to see what the terms of the loan are that was arranged by Volvo with Santander. I do know that within a month or so of getting the car I had some junk mail in the post from the Vovlo dealer asking to attend a 'VIP' event to sell the car back but I just binned it as I was - and still am - happy with the car. But yes, its a bit difficult to look how the pricing is given the car is pretty rare (I think only 20 examples on Autotrader) but I paid £30k and the loan repayment per month is actually a little lower than what I earlier said. Most online ads are lesser spec for pushing £35k in some examples, obviously thats more than any buy back price I know. A quick valuation on Carwow last night though had it at £34-35k.
 

CLH

Well-known Member
Also bear in mind the wait for the Tesla MAY be long, may be quick. They do vary!

So you need to think about the timing too.
 

outoftheknow

Moderator
There is unlikely to be a penalty on 0% APR but, yes, there needs to be a way of paying off the finance slightly before the sale. A dealer etc will arrange this for you.

There is no PX in this case as he's not PX'ing for a lease.
I use a novated lease over here for every car. Novated simply means my employer leases the car and allows me to sign for the lease to pay it etc. I am the owner as in responsible for the payments to the lease company my employer uses etc and my name and home address is on all the paperwork. The dealer gives the lease company the fleet rate the lease company attracts.as the purchase price excluding GST (VAT). and that amount is what is borrowed to buy the car.

Anyway the leases all work by charging a monthly amount for the loan part of the lease. The loan is 100% with no deposit (ours is tied to the tax rules so actually a deposit is limited to I think 10% if you really want to pay one). That amount is a simple balloon loan with the value of the car after the lease period stated at the start. That amount excludes GST (VAT as well). Again ours have some daft tax rules about what the value can be after X years so it may or may not be realistic for the chosen make and model.

Then they allow so much per year for insurance, fuel, servicing and maintenance. Our novated leases then allow salary sacrifice for the running costs part and that is all GST free as it counts as a "company car", plus after tax for the loan (near enough). The costs are all charged at the lease company fleet rates so usually cheaper. For example I had a Holden (Vauxhall) Captiva with tyres that retailed here at $620 per tyre fitted. The bill (that I don't see until the amount appears in my lease account) was $420 per tyre. There is a tax man charge (like your BIK) for assumed 20% private usage of a "company car" which is added on to the numbers so it is "invisible" and always there for every car. For virtually all mileages driven here this still makes the novated lease cheaper.

The fund builds and wanes as you get things done, buy fuel on the cards etc. If I build up too much I change the kms (over the lease period) to less and the amounts per pay change. Then costs exceed payments and the excess is used up. As an example here are my numbers for an MY21 Outlander PHEV - obviously slightly different lease setup and very different currency/costs.

Fuel$1,094.00
Maintenance$1,588.66
Tyres$564.34
Registration$950.00
Insurance$1,972.93
LeaseGuard$507.60
Autocredit Protection$0.00
Management Fee$204.00
Annual Finance Payment$11,178.36
Before Tax Contribution$6,365.87
After Tax Contribution (inc. GST)$12,863.42

That is for 5 years at 30,000km a year./ When I want to change the car I can ask the lease company how much they will give me for it, make a private sale, or trade it in. Or pay-out the amount left on the loan if before the 5 years or the residual value if at the 5 years and own the car outright. The private sale is the trickiest since you need to pay the amount left on the loan before the ownership legally changes from you to the buyer. I always trade-in though. Since the next car is always another novated lease I negotiate an amount that at least exceeds the amount left on the loan. The dealer still invoices the full cost of the new car to the lease company and pays the amount left on the loan. I get any excess left in cash from the dealer. When the new car is ready to pick up I drive the old one in, walk to the new one and drive away.

There is most certainly PX allowed even if the dealer pays you all of it.

The lease scheme there looks like a normal company lease scheme without the novation of the lease to the employee. All employee costs are pre-tax and the employer is the "owner" with the lease company paying all costs as though it is a company car. The lease company doesn't give you the details we get here - it is just all lumped together as a cost to you. The amounts will be very different but the principle is the same. The employee pays the costs plus a fee to the lease company. That fee is the "profit" and it is generally small - their large profits come from being large and operating hundreds or thousands of leases. without the detailed breakdown and actual costs being provide against a fund like mine are, there may be additional profit factored in to the monthly amount. It won't be too much looking at the example though....

I'm a big fan of these all-in company leases - the novation over here is better still for me as it is my car. We used to have reverse novated leases which the tax-man banned. That one the employee was the owner but the company remained the "owner" for all costs so all was GST free. Most employers then chose not to charge the employee the GST so savings were even more.....

Bottom line is the lease will be hassle-free whether you are named as the "owner" or not. The insurance should be "yours" and count toward NCB (I would check that as it is the main difference for many insurance companies between a car that is "yours" and a company car. You can see mine is huge per year but that is any driver with a licence - including L and P (provisional) - with under 21 and then under 25 paying an additional excess for a claim. My choice as I lend my car to "anybody" and don't care about scrimping for named driver only) and the benefit of paying each payday before you get the money in the bank becomes easy as....

With the other things thrown in they are simply including those at cost/small profit margin in their price per month. The only downside would usually be the tax-man jacking up the BIK - I suspect the contract includes clauses that allows the amount per month to change for that occurrence.
 

msim

Well-known Member
Having now been able to generate a quote I'm afraid I could not justify the purchase on anything other than evangelical environmental reasons. I think it sounds a great scheme but for me it simply would not be cost effective. For me to be greener in the short term I'd prefer to make sure my home is better insulated, use 100% renewable energy etc.

It would be £570 a month for 4yrs for a Tesla 3 LR or a Polestar 2 AWD on 12k miles a year. Some pretty detailed predictive cost comparisons of owning, running and depreciation of my V60CC against the four years of leasing means I predict I'd be several thousands out of pocket with the lease. I think for the lease to become worthwhile in purely cash terms over four years the Volvo would need to be worth only about 30% of its original value in 2026, have had a huge amount spent on maintenance, or diesel shooting up to seriously astronomical levels per litre, none of which I think is realistic. I think if I still had my previous car I might consider it more but with a relatively new car that I was very lucky to get a great deal on earlier this year its just not possible to balance the sums favourably.

Anyway, if anyone interested in asking their employer to sign up to the scheme and has a car in mind I don't mind having a quick look for you to see a rough guide price.
 

outoftheknow

Moderator
I think for the lease to become worthwhile in purely cash terms over four years the Volvo would need to be worth only about 30% of its original value in 2026, have had a huge amount spent on maintenance, or diesel shooting up to seriously astronomical levels per litre, none of which I think is realistic. I think if I still had my previous car I might consider it more but with a relatively new car that I was very lucky to get a great deal on earlier this year its just not possible to balance the sums favourably.
I believe this merely points to what is preventing many moving to EVs regardless of how they purchase them - cost.

Even if you modelled a new one of the car you just bought, the fact they lose thousands as soon as you drive off means a new car in the first few years can never look attractive if you (quite rightly) include depreciation.

Regardless of how you buy them if greater cost means you won’t buy an EV, or it is the major hurdle you are considering, you won’t buy one I reckon.

If you ignore the things you considered and merely look at operating costs over the ownership period, EVs would be the car of choice every time. Then we look at other factors, some real and some maybe no more than anxieties, and we can’t get over the higher cost of purchase.

I’ve dipped my toe in the water changing my salary sacrificed Skoda Superb after 2 years for an almost identically priced on the road Mitsubishi Outlander PHEV. Costs other than fuel are at play and the lease actually costs me a bit more than the Skoda over here. I lose some of the higher end features but for my local journeys it costs between a quarter and a half for “fuel” depending if I can use solar during the day (working from home) or need to charge from the grid every night.

Only the fact I consider all that to be worth another small move to reduce my carbon footprint means I changed the best car I have ever owned. I fully understand why many people currently don’t think anything with a battery is better for them than the ICE they have. I also don’t expect any plummeting in cost of batteries - but that is probably for another thread
 

The Dreamer

Distinguished Member
Anyway, if anyone interested in asking their employer to sign up to the scheme and has a car in mind I don't mind having a quick look for you to see a rough guide price.
It sounds like Octopus are doing a similar thing to Tusker, our employer’s choice of lease provider.

Raising a standard lease price so they are the ones benefiting from the salary sacrifice rather than the employee.

Almost every deal I looked at through them, they were a couple of hundred pounds a month more expensive than a regular lease - which, after tax, would save a few quid - but the savings should have been far greater.

I am still going ahead with the cheapest of leases though, just to dip our toes into the world of EV’s, with a Nissan Leaf - at £250pm net, it’s cheap motoring (that’s based on 2 years, 10,000 miles).

The Tesla’s started at nearly double that, and headed North (and that was for 4 year leases)!
 

outoftheknow

Moderator
a couple of hundred pounds a month more expensive than a regular lease
The regular leases including fuel, insurance and maintenance for the identical car? Sounds like something to report to the appropriate oversight body if they are telling you their way of leasing is cheaper......
 

The Dreamer

Distinguished Member
The regular leases including fuel, insurance and maintenance for the identical car? Sounds like something to report to the appropriate oversight body if they are telling you their way of leasing is cheaper......
Leases over here don’t include fuel, but yes, identical packages get inflated if going via salary sacrifice. The schemes are supposed to benefit the employee, and they do, a little - but the savings should be massively more, if the gross leasing costs were the same.

AFAIK, there’s nothing illegal about it - but while an employer only uses one company to provide the leases, there’s no incentive to lower the price to what it should be, as there’s no competition.
 

outoftheknow

Moderator
AFAIK, there’s nothing illegal about it - but while an employer only uses one company to provide the leases, there’s no incentive to lower the price to what it should be, as there’s no competition.
Yeh I suppose that is more what I meant than "illegal". I did say it is all about how they market them and clearly the impression is more than given they are of "substantial" financial advantage and maybe aren't. A bit like mis-selling insurance etc. But yes this sector of the financial "loan" market rides close to the wind that's for sure :)
 

CLH

Well-known Member
Not sure that Octopus/Tasker are routinely hiking the price mind.

Mine is £471 gross inc maintenance, insurance, tyres and courtesy. Net is £270 or so.

Nationwide for the same car, maintained but not including insurance, tyres or courtesy is £452 "gross." And, that's with the minimum one month payment deposit (so £452/36 on top).

So might be worse for some cars, but not all.
 

CLH

Well-known Member
Also worth saying that, comparing the Volvo for the lease is correct in principle. But much depends on what you do next. So, if, in 3 years, you pay it off, keep it, it's going to running it as the only outgoing and, a depreciating asset. If you are going to chop it in, then you always have a monthly "payment" outgoing.
 

Mark F

Active Member
Can I just check the £570 per month is after the saving in income tax? If so, and assuming you're a 40% tax payer, that implies a gross cost of £950 per month which is staggeringly expensive.
 

tonycommander

Well-known Member
our newly released scheme for the following cars, 8k miles, insured, maintained over 3 years would cost me as a 40% tax payer for

Polestar 2 5 Door Electric 402hp 78kWh Long Range Dual Motor £395

Tesla Model 3 Saloon long Range Auto AWD - £482

 

Delvey

Distinguished Member
Can I just check the £570 per month is after the saving in income tax? If so, and assuming you're a 40% tax payer, that implies a gross cost of £950 per month which is staggeringly expensive.
Depends if any deposit is paid I suppose, which the OP hasn't mentioned.
 

CLH

Well-known Member
Same here, and zero credit check etc. Also, there is a slight £ bump to take care of loan car and also the fact that resignation (and some other things) do allow you to give the car back at no penalty (so they have to get that back somewhere).

Most lease companies do 1 month advance rentals now. But you do need to factor that across the (eg) 36 months too, even if it's only say £20 a month or so.
 

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