If you think the savings from switching to an electric car are only really significant on smaller cars, think again.
In fact, the further you move up the car market, the more interesting the numbers can become.
Take two large premium SUVs as an example and compare leasing a three-year-old Tesla Model Y via Salary Sacrifice and buying a three-year-old Audi Q8. They are not identical cars, as the Audi is slightly larger and sits further up the luxury scale, but they do a remarkably similar job for most owners. Both are large, comfortable family SUVs with plenty of luggage space, strong performance, and more than enough capability for the school run, motorway journeys, holidays, and everyday family life.
The big difference is what they could cost you over the next five years.
Today, a three-year-old 2023 Audi Q8 will cost you around £40,000–£45,000 depending on specification and mileage. So, let’s use £44,000 for our comparison.
Keep it for another five years, and you’ll own an eight-year-old luxury SUV worth around £18,000, so you have lost £26,000 of your hard-earned cash in depreciation alone.
But depreciation is only the start.
A large 3.0-litre petrol Q8 will cost you a fortune in fuel. Assuming 10,000 miles a year and a realistic fuel cost of about 25p per mile, that’s an additional £12,500 over five years.
Then allow around £5,000 for insurance and another £5,000 for servicing, tyres, MOTs and the increasingly expensive repairs that can come with running a premium SUV as it gets older, and add approximately £2,000 for road tax over the period, and the five-year cost of owning and operating the Audi could be around:
• Depreciation: £26,000
• Fuel: £12,500
• Insurance: £5,000
• Servicing, tyres and repairs: £5,000
• Road tax: £2,000
Total: approximately £50,500
And that assumes you bought the Audi for cash. Finance £44,000 and the interest could push the real cost considerably higher.
Now look at leasing a Tesla Model Y via Salary Sacrifice.
The collapse in used EV values has been painful for the people who bought them new, but it has created an extraordinary opportunity for the next owner. Three-year-old 2023 Model Ys now cost around £20,000–£26,000.
That makes them potentially ideal cars for the emerging second-hand EV Salary Sacrifice market.
CheapEV can supply a complete Model Y Salary Sacrifice package for around £500 per month before tax, including the car, insurance, servicing, maintenance, tyres, breakdown cover and road tax.
For a higher-rate taxpayer achieving an overall Salary Sacrifice saving approaching 50%, the effective cost could be somewhere around £250–£275 per month, after allowing for the relatively small EV Benefit-in-Kind charge.
At £270 per month, the five-year cost is about £16,200.
But then comes the biggest cost saving of all: the cost of driving it per mile.
Charge the Model Y overnight at home on a cheap EV tariff, and electricity can cost around 7–9p per kWh. That means the car can be driven for a ridiculously cheap 2p per mile.
At 10,000 miles a year, that’s only around £200 a year, or £1,000 over five years in fuel cost.
Even if we add £1,000 to install a home charger, our indicative five-year Tesla cost becomes approximately:
• Salary Sacrifice: £16,200
• Home charging: £1,000
• Home charger: £1,000
Total: approximately £18,200
Compare that with our estimated £50,500 cost of buying and running the Audi Q8.
The difference is an extraordinary £32,300 over five years, and even if the assumptions move by several thousand pounds either way, the underlying point remains.
When people compare cars, they tend to compare the monthly finance payment or purchase price. That’s the wrong comparison.
You need to compare the total cost of having the car sitting on your drive for five years.
Depreciation. Fuel. Insurance. Servicing. Repairs. Tyres. Road tax. Finance interest. And, critically, the tax advantage available when an electric car is provided through Salary Sacrifice.
This is why I think three-year-old EVs represent one of the biggest opportunities in the UK car market.
Somebody else has already taken the huge initial depreciation hit. You then take the used EV through Salary Sacrifice, wrap the major running costs into one monthly payment and charge it overnight at home for around 2p a mile.
The cars don’t even have to be identical for the economics to become compelling.
You could have a three-year-old Tesla Model Y sitting on your drive doing broadly the same job as a large premium petrol SUV, while potentially keeping £30,000 or more in your pocket over the next five years.
Now that’s a comparison worth doing.