4 ways to support employees from motoring financial shocks
Car ownership is the second largest household expense in the UK after housing and utility bills, says the National Office of Statistics. It’s easy to see why. Purchase price, high insurance premiums, additional breakdown cover, repairs and fuel costs all add to the financial burden.
Financial research specialists, Nimble Fins estimate that households spend around £6,000 per year on car-related costs.
Even with careful budgeting, there can still be financial shocks along the way, not leasthigher-than-expected repair costs.
The Association of British Insurers recently warned that while insurance premiums have been falling, repair costs are being ‘driven up’ by the use of increasingly sophisticated technology in vehicles such as Advanced Driver Assistance Systems (ADAS), Software Defined Vehicle (SDV) Architecture and digital integration. Repairs are therefore more complex to carry out, while parts and materials themselves are more expensive.
RAC research found not only that two-thirds of drivers had been hit with ‘unexpected’ car repairs costs over the last year, 39% would ‘struggle’ to pay a £500 repair bill. So with the average repair bill now reaching £650, this matters, particularly from a financial stress perspective.
There’s been a long-established link between financial worries and mental health and the impact this has on workplace performance. With lower-income groups the hardest hit with rising costs, inclusive financial benefits can be key in providing targeted support.
So what can employers do to help? Here are four ways employers with salary sacrifice EV schemes support their colleagues from financial shocks.
Fixed monthly costs
Salary sacrifice EV schemes go a long way in helping to reduce household financial burdens.
Employees sacrifice a portion of their salary by paying a fixed monthly cost which remains exactly the same during the agreement term, whether it’s one year, two or five. These schemes protect employees from car-related financial surprises, whether repairs, breakdown payouts or increased insurance premiums. It’s therefore an extremely cost-effective way to obtain a fully insured and maintained car, while allowing for fixed budgeting.
It’s tax efficient too. Salary sacrifice reduces gross pay, therefore lowering employee tax and National Insurance contributions.
Protection from high early termination penalties
Redundancy, long-term illness or the need to take parental leave: these types of events are a normal part of life but can add financial burden to individuals. Salary sacrifice EV schemes can protect employees against the unexpected.
Lifestyle protection cover supports key life events and ensures there is no penalty if an employee needs to return their EV before the end of their contract term. This includes resignation, redundancy, parental or adoption leave, TUPE and long-term sickness.
Not all lifestyle protection cover is the same, however, so look for low-risk benefits that support both employer and employee.
Protection from rising repairs costs
EVs are generally cheaper to maintain than petrol or diesel vehicles, but repairs costs, when they do become necessary, are higher.
Tyres on EVs in particular, experience more wear and tear because the vehicle is heavier than petrol or diesel cars so are more costly to replace.
According to Auto Trader, EV tyre replacement can cost up to £250, but for high performance EVs, it can exceed £300. [AM4]
Through a salary sacrifice EV scheme, however, these costs aren’t an issue. Everything is included in the monthly cost, from servicing, maintenance, tyre replacements and so on. This gives employees additional peace of mind – they don’t need to worry about high repair bills.
Shielded from insurance premium volatility
Car insurance rates may have fallen in recent years, but they remain a big cost for households. EVs are also more expensive to insure because repairs - when they happen - are more complex (sophisticated technology, expensive components and the need for specialist technicians to carry out the repairs).
MoneySavingExpert estimates typical EV car insurance rates can vary around the £570 mark, but for high performance models like Tesla, it often exceeds £1,000.
Despite insurance premium volatility, salary sacrifice EV costs are fixed, so employees are shielded from price hikes while they have the car. Breakdown cover is also included, saving employees from so-called ‘loyalty tax’ in auto renewals which often catches consumers out with inflated prices.
Peace of mind on four wheels
A salary sacrifice EV scheme is a financial shock absorber for employees. It’s peace of mind on four wheels. There are no up-front purchasing costs, monthly amounts are fixed, employees are protected from insurance premium volatility and the high cost of repairs plus there are tax and NI savings.
Should unexpected events happen resulting in early return of the vehicle, there are no early penalties (with the right scheme). It’s an affordable way for employees to drive an electric vehicle, making it a valued and in-demand employee benefit.
Supplied by REBA Associate Member, Tusker
Tusker is the UK’s leader in salary sacrifice cars. Part of Lloyds Banking Group, it has more than 15 years’ experience in offering an affordable way for employees to drive a new, fully insured, and maintained car. Its scheme, which is available to over 1.8 million UK employees, offers a range of options, from pure electric cars to hybrids and even traditional petrol and diesel vehicles. It provides a tailored scheme for organisations’ individual needs.
