Salary sacrifice 4s vs Turbo

[AlexR]

We all have different priorities at different stages. If I was young, free and single then I probably would (and did!) spend too much money on cars. Heck, I still do when you consider mortgage, two private schools, LIFE. Could I save more and ultimately build more long term capital? For sure. Probably shouldn't spend £20k on a family holiday as that could be invested and grown to £100k in X years. But well, fck it, life is about experience and only you know what will make you happy.

My only caveat is this will make a solid dent in any mortgage affordability criteria given those metrics. Say a 1% rate rise would wipe-out your income.

Live long and prosper.

Sponsored

 

[mutanthands]

We are entering a time of massive economic uncertainty and recession. I would prioritise my savings incase of job loss for the next few years.
Plan for the worse, hope for the best.

 

[AlexG]

I agree with the not spending all your cash on a car.

But I think lease via salary sacrifice makes more sense than you guys are suggesting to the OP above. If you do not have your own company with sufficient profits, or at the other end of the spectrum have a sophisticated and complex business with many stakeholders, or take a negative view on Taycan prices in three years, or do not have £120k sitting around, or can invest that £120k for better return in your business or elsewhere, or many other reasons besides, it may not be possible / make sense to have your company buy the car.

What still might make sense is to spend the same money via salary sacrifice on a car worth twice as much. Ordinarily, you would pay for your car out of net salary, or gross but end up in the same place with a very high BIK.

With an EV via salary sacrifice, you could pay roughly 50% less after the VAT, income tax and national insurance savings (or you can pay the same but get a car worth twice as much).

If someone has decided to and can afford to spend £1000 per month (different question!), they are obviously better off getting a £120k car versus a £60k for that money.

 

[Mattyh]

If someone has decided to and can afford to spend £1000 per month (different question!), they are obviously better off getting a £120k car versus a £60k for that money.

that’s a good point. My car now is costing me £700 all in with fuel insurance etc for a 540i worth about 27k. £400 a month note for a taycan woth 4 times the amount.
Been running the bmw for the last 2 years when I was half the salary in im now so the man maths adds up lol

 

[mutanthands]

With an EV via salary sacrifice, you could pay roughly 50% less after the VAT, income tax and national insurance savings (or you can pay the same but get a car worth twice as much).

Leasing a car though salary sacrifice is still a lease, and therefore dead money. At the end of the contract, you have to give the car back, and you'll be £35k+ poorer.

 

[AlexR]

I agree with the above but it is only because of recent supply squeezes that residuals have remained strong enough to not wipe-out equity. I have handed back BMWs previously at the end of PCPs but it seems this time that the equity will be preserved.

Extend the argument further, some people will say if you cannot afford £120k in cash then you should not finance it. Life is about balance but I 100% agree about economic uncertainty and the need to hedge at the moment.

 

[TaycanHero]

Someone else mentioned being young enough to get a sports car now, where most peoples wealth doesn't arrive until much later in life. By then, even getting in and out of the car could become a problem.

I agree with that statement, but to an extent.

You can have a LOT of fun in any number of cars that are a fraction of the cost of a Taycan.

No one cares you have a Taycan or a Renault Clio. All that matters is that you spend sensibly, have fun and live life to the full.

You don't need to be obscenely wealthy to do that, and the vanity part of that equation - like "I have a Porsche" (leasing is not owning) - are completely meaningless and won't add any more joy to your life...

Especially when it comes to the insurance premium and potential costs if you ding or scratch it.

 

[Gavgolf]

Salary sacrifice is a great thing - I don’t understand the illogical points being made about spending 30k and not owning the car. It is equivalent to depreciation. If you spent your pound notes and bought a £120k car it would cost you circa £60k irrespective of ownership. With a salsac it costs you £30k (but with no tyres / maintenance/ insurance costs).
I completely agree that it’s not the cheapest motoring possible as that would be buying a £1000 banger and then another one next year!! However I’m pretty sure very few people on here would do that!!!

 

[David Bennett]

Salary sacrifice is a great thing - I don’t understand the illogical points being made about spending 30k and not owning the car.

Agreed. Most people are replacing their ICE company car when going electric on salary sacrifice it seems. The company car tax savings are enormous when you choose electric let alone the salary sacrifice benefits. For my previous ICE car the tax bill would have actually been more that the PCP payments, so I went a different way. It's not like you are suddenly paying for a new lease, you are just transferring your expenditure from tax into lease costs. I ended up better off when moving out of an M4CS and into a 4S with £27K of options.

 

[AlexG]

Leasing a car though salary sacrifice is still a lease, and therefore dead money. At the end of the contract, you have to give the car back, and you'll be £35k+ poorer.

I am not so sure. You might be right today given supply chain issues and lead times, but you’re making a big bet that you’re right in 12, 24, 36 months’ time. Recession is coming and consumer durables will be hit first. People don’t replace their cars in recessions.

As we all know, in a normal market, paying 10% per annum for a car is cheap. Depreciation might be as much if not more than that. You might end up taking a 20% haircut on trade in in 12 months from the OPC, making those leasing looking like the smart guys having paid half as much.

Appreciate this does not take into account corporation tax benefits but those are not relevant to most.

 

[TaycanHero]

I am not so sure. You might be right today given supply chain issues and lead times, but you’re making a big bet that you’re right in 12, 24, 36 months’ time. Recession is coming and consumer durables will be hit first. People don’t replace their cars in recessions.

As we all know, in a normal market, paying 10% per annum for a car is cheap. Depreciation might be as much if not more than that. You might end up taking a 20% haircut on trade in in 12 months from the OPC, making those leasing looking like the smart guys having paid half as much.

Appreciate this does not take into account corporation tax benefits but those are not relevant to most.

True, but then those in the market for a second hand Porsche are in the least likely cohort to be hurt by recession.

The value of fiat is hurtling lower with QE to infinity post-pandemic, providing the mirage that everything is increasing in price even more than inflationary pressure. For those with cash, they will continue to buy things with it.

Your scenario would also assume lending stops or gets prohibitively expensive. Borrowing has inflated the price of everything, and sustains it. That will be true of car values.

They will continue lending, even if it means 5 year agreements become standard for lower borrowing rates.

It is all a gamble, but I can't see Taycan's depreciating more than 10% a year in the first three years - and inflation is going higher than 10%.

Had you paid cash rather than financed a Taycan since 2020, it would have cost you less. That won't last, but I can't see it changing any time soon with the world economy as it is.

 

[mutanthands]

I am not so sure. You might be right today given supply chain issues and lead times, but you’re making a big bet that you’re right in 12, 24, 36 months’ time. Recession is coming and consumer durables will be hit first. People don’t replace their cars in recessions.

As we all know, in a normal market, paying 10% per annum for a car is cheap. Depreciation might be as much if not more than that. You might end up taking a 20% haircut on trade in in 12 months from the OPC, making those leasing looking like the smart guys having paid half as much.

Appreciate this does not take into account corporation tax benefits but those are not relevant to most.

True, but that's not my point. OP isn't weighing up the cost of lease vs PCP or buying, so it's a bit of a moot point in this scenario.

They are effectively renting the car for however long the contract is, therefore it's dead money and not very fiscally responsible given their income and a looming recession.

A smart person would just buy a cheap run around, pocket a small fortune per month, and live the good life. However, that won't flex on the socials, and it's not why we're on this forum

 

[Mattyh]

True, but that's not my point. OP isn't weighing up the cost of lease vs PCP or buying, so it's a bit of a moot point in this scenario.

They are effectively renting the car for however long the contract is, therefore it's dead money and not very fiscally responsible given their income and a looming recession.

A smart person would just buy a cheap run around, pocket a small fortune per month, and live the good life. However, that won't flex on the socials, and it's not why we're on this forum

Paying a loan for a cheaper car, plus £300 a month on petrol, tax and not is pretty much dead money too. Also with SS if I was to get made redundant or leave the company you just hand the car back with no fees.

I can still live a good life even with the taycan. I don’t often spend more than 800 a month anyway let alone 1600

 

[mutanthands]

A cheap run around = a car you can buy outright and not worry. A couple of grand or so.
Yes the petrol / tax.etc would also be dead money, but *substantially* less.
Anyway, that's at the extreme opposite end of your spectrum.

Sounds like you're trying to man-math yourself into the Taycan, no matter what the reality / financial situation. Hope it goes well, and you don't screw yourself over. ?

 

[TaycanHero]

Paying a loan for a cheaper car, plus £300 a month on petrol, tax and not is pretty much dead money too. Also with SS if I was to get made redundant or leave the company you just hand the car back with no fees.

I can still live a good life even with the taycan. I don’t often spend more than 800 a month anyway let alone 1600

I like your attitude and positivity, but consider ONTO then and pocket the rest as income.

All your insurance and maintenance is included. Best of all, so is charging at Shell, BP and Instavolt. They deliver and pickup the car from your doorstep.

Yes, they don't have Taycan's, but spending a large % of your disposable cash on objects I see as a waste of your young life.

Like me, you have no big life commitments. Make the most of it while it lasts, because it won't. I live in the UK for 6 months yearly - the rest of it I work remote and that doubles as a six month holiday. I meet a lot of interesting people, make lots of new friends, and do a lot of cool things.

You have £1600 to spend on other things once your mortgage, bills and car is paid for. That really isn't much if you are also not investing it on the stock market or paying into a pension. It also means less money for opportunities - from house renovation to business ideas - to unexpected emergencies.

Ultimately your call, but if I was in your situation, I would be investing and otherwise spending that money on memories and not liabilities. The former are priceless, the latter always lose value.

I am only buying a Porsche (through my business and in cash) because I have the money and cannot use it on anything else that makes financial sense. If I do want to loan money for another venture, or need emergency funds, that I can do very comfortably even after paying off my £125k GTS.

If your situation was my company accounts, even financing the Porsche would be flying close to the sun. I wouldn't even consider it.

Sponsored