Employee / Salary Sacrifice

A conversation with the BVRLA… how salary sacrifice is helping increase electric vehicle uptake

Tusker CEO, Paul Gilshan talks to Thomas McLennan, the BVRLA’s Head of Policy about how salary sacrifice are helping increase electric vehicle uptake.

THOMAS: Salary sacrifice is not always easily understood, so Paul, if you could give a summary of what it is and what its place in the market is?

PAUL: Thanks, Thomas. Well, look… salary sacrifice as a whole has been around from the seventies, it has been a key structural feature for UK employment for many products like pensions, cycle to work schemes, childcare vouchers, and in 2008, company cars were added.  Even at that time it was supported with a benefit in kind regime which drove employees towards lower emission vehicles.

Tusker were the first to launch a scheme with a business that same year in 2008, and we’ve been focused on growing this market ever since, helping more people to enjoy a brand-new car. And it really is as simple as that. We are helping more employees in the UK turn part of their salary into a brand new car.

If I’m chatting to friends, I always explain it is a bit like Netflix for cars. So, for one fixed monthly payment and no upfront deposit, Netflix gives you access to a whole world of entertainment. For one fixed monthly amount and no upfront deposit, and you pay a fixed monthly fee, you get a brand new electric car, and then we sort everything else at no extra cost. That means insurance, MOT, breakdown cover, repair bills and chargepoint installed at your home if you want it and the best part is you get a brand new car and we can work to sort out all the hassles of running that car.

It just happens to be that works through salary, so hence salary sacrifice. But I don’t like that word, so we tend to call it salary saving. Employees swap a bit of their salary for a brand-new car and the services and the insurance and all the things I just mentioned, MOT, breakdown cover, and that portion of the salary is sacrificed before tax and national insurance is deducted, which makes savings. And then with the low benefit-in-kind rates for electrics, they aren’t paying as much benefit-in-kind on the electric vehicle or the hybrids than they would for, say, a diesel or a petrol. So it’s a win-win as far as we are concerned at Tusker.

So let me quickly remind you of those benefit-in-kind rates that the government put in place a few years ago.  So, in 2020, for electric vehicles were put to 0% and then for 2021, 2022, 1%, and currently we’re at 2% benefit-in-kind for electric vehicles up until April 2025. This move to low benefit in kind is doing what the government intended. And we’ve seen a great uplift in the take up of electric vehicles and I really praise them for that move.

But, the benefits of salary saving for drivers is more than just the savings. The number one reason, through all our research at Tusker as to why drivers love the car benefit is due to the bundle, not having to worry about the hassle of running the car, all those features included.

So, it’s such an important part in the marketplace for driving electric vehicle growth, particularly for mass market audiences, and it makes it much more affordable than other products in the marketplace like PCH or PCP or even purchasing an electric vehicle. In fact, for us, it’s a pivotal product to ensure that government hits the 2035 and 2050 net zero targets.

THOMAS: And that’s such a brilliant trajectory. I guess that comes down to… Paul why is it then so important that we make sure the government pays attention to this campaign and gives us the certainty and rates that we need?

PAUL: As I said before, Government made the right call in reducing benefit-in-kind rates for electric vehicles. They’ve always had a lower benefit-in-kind structure for lower emission vehicles, and that is right. And this campaign from the BVRLA is about raising awareness of the brilliant work that Government have done, by lowering benefit in kind for electric vehicles. It’s encouraging people into electric vehicles for the very first time. And that’s why I’m really excited about it but of course, we’re just only out of the starting blocks.

There’s still so much more that we need to do, particularly towards encouragement. And here’s why I think the #seethebenefit campaign is really important. Mass market drivers and those with lower salaries need the opportunity to switch to electric, and lower benefit-in-kind of rates are doing that, but not to the scale that we want them to. So, it’s essential that the low rates continue as they’re making unaffordable electric vehicles affordable for drivers for the first time.

Our research says that drivers would not have opted for a new car or a new electric car without this product.

Salary sacrifice also adds incremental new car sales to the UK car parks so they’re not substitutional. And we know that for two reasons. One, the average age of the cars that the drivers is coming out of is nine years and two, through our research without salary sacrifice, 93% of buyers would choose diesel or petrol. With salary sacrifice, 94% choose fully electric. So, you’re moving mass market drivers from older, dirtier cars to newer, cleaner, greener cars for the first time. And without this product, they would not do that. They can’t do that.

Because there’s one more thing I want to put into the mix, which we’ve talked to the BVRLA a lot about, is that usually a good option to get mass market drivers into new products is the second-hand car market. And what we’re seeing at the moment, (we have seen it for a few years now) is that the second-hand car market is just not viable for many because the prices have been inflated and they’ll be continue to be inflated because the deliveries coming through for new are much lower than we’d anticipated at the start of the year. So that means that an option for getting the mass market into second hand electric vehicles is just not there. The door’s slammed. It’s an option taken off the table. So that makes salary sacrifice even more important.

So, I don’t believe the Government will reach their 2035 and more importantly, their 2050 target without a benefit-in-kind tax structure that supports the uptake of electric vehicles for lower salaries and mass market. So benefit in kind is a key component of the pricing that we put through on salary sacrifice and with the cost of living such a massive concern to so many of our drivers, (well, to everybody), a majority of which as I said, are lower-rate tax payers. The Government needs to continue to help ordinary people make the best choice for their families and the environment by supporting this, what I think is a brilliant campaign by the BVRLA. But remember, this is what Government intended, they wanted to drive people into and into electric cars and hybrids to a certain extent through benefit-in-kind rates, they’ve always done that, and I hope this campaign means that they’ll continue to do that.

To listen to the full podcast, visit https://open.spotify.com/episode/5IVMouROJJazn1uMkhMLfQ

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