7:56 am, August 6, 2024
Salary sacrifice schemes are making EVs more affordable to new car buyers who could not otherwise go green.
That is according to Natalia Peralta Silverstone, head of propositions at Octopus Electric Vehicles.
The firm, which forms part of the wider Octopus Energy Group, currently offers the scheme through a number of businesses and is seeing increased uptake from customers.
Appearing on the latest episode of the Car Dealer Podcast, sponsored by JATO, Silverstone explained that the model offers a viable alternative to government grants.
She told hosts James Baggott and John Reay: ‘The reason salary sacrifice is so compelling is because it’s bringing price parity into the market for people wanting to buy an EV and if they go into the retail market, that’s not quite got there yet.
‘Actually, if we’re talking about used cars, that’s very much the case, but in new, you’re still paying a premium when you get an electric car.
‘Now, that will change over the next few years. What salary sacrifice does is it addresses that and it actually opens up the affordability of these cars to a segment of person who wouldn’t be able to get it if they were just buying it directly out of their net salary in the retail market.
‘This is effectively making EVs more affordable, but that’s the entire intention behind the tax regime that’s in place.
‘It’s literally aimed at getting more people into EVs, and this is a way of doing it versus say, grants or other stuff that you might do in the retail market.’
Explaining how the model works in practice, Silverstone explained: ‘Most of what we do is salary sacrifice.
‘That means that we sell in the scheme to a business, and then it’s offered to employees as an employee benefit. It’s actually a benefit scheme rather than a fleet or leasing scheme.
‘It’s not a traditional company car scheme so that changes who the demographic is. Actually the person taking these cars is like a retail customer – they’re just paying for their car though their salary.
“Normally the people who first take up the scheme are all the people who knew about the scheme so they are all of the HR and procurement and finance people who agreed it!
‘Our top selling cars are MG4, Polestar 2, and Tesla Model Y. We’ve also got new manufacturers coming to market, like BYD is doing really well. There’s really a mix and it’s representative of the retail population.’
Change needed from SMMT
Cars sold via salary sacrifice are currently registered as fleet sales in the monthly SMMT figures.
However, Silverstone believes that they should be re-attributed as retail sales to reflect the customers buying them.
When asked if there was an argument for the SMMT changing how they count sales, she said: ‘There is. Absolutely.
‘These are ultimately consumers, they are just paying for that car differently.
‘I appreciate that for the OEMs and the dealers that might be frustrating because they don’t get counted as retail sales but ultimately these cars are going to retail customers.
‘These are people who, when that lease comes to an end two, three, or four years down the line, are going to renew and get another car. In that sense, they are very much a retail customer.
‘It is hard to report on those figures but yes there is a bit of a tension there [with the SMMT figures]
‘We all know that at the moment, electric cars are predominantly going into businesses, right?
‘People see that term just company cars and fleet, but there is a really quite rapidly growing portion of those cars that are going to salary sacrifice customers, which, yes, could be considered a consumer.’
The Car Dealer Podcast, sponsored by JATO, sees an industry guest join our hosts to discuss the motor trade’s biggest headlines of every week.
A full list of the stories discussed on this week’s episode can be found here.
You can listen to all episodes of the Car Dealer Podcast on Spotify, or wherever you get your podcasts.
