Lease vs Salary Sacrifice: Which Saves More?

For an electric car, salary sacrifice usually costs less than a personal lease at the same monthly price, because you pay from gross salary and save income tax and National Insurance, while the company car tax is low. For petrol and diesel cars above 75 g/km, the tax rules remove most of the advantage. Salary sacrifice is only available if your employer runs a scheme.

Side-by-side comparison

Personal lease compared with a salary sacrifice car, 2026/27 rules
FeaturePersonal leaseSalary sacrifice
How you payFrom take-home pay, after income tax and National InsuranceFrom gross salary, before income tax and National Insurance
Tax on the carNoneCompany car tax on the car's benefit (4% of list price for a fully electric car in 2026/27)
Cars above 75 g/kmNo differenceTaxed on at least the salary you give up, so the saving is National Insurance at most
Usually includedThe car and vehicle tax; insurance is separateOften insurance, maintenance and breakdown cover as well
AvailabilityAnyone who passes the lender's checksOnly if your employer runs a scheme
Effect on your salaryNoneLower salary, which can reduce pension contributions, statutory pay and borrowing limits
If you leave your jobThe agreement continues as normalDepends on the scheme's exit terms

Who each option suits

Personal lease

Best forDrivers without access to a scheme, choosing a petrol or diesel car, or who want a contract that does not depend on their job.

Salary sacrifice

Best forEmployees with access to a scheme choosing an electric car, especially higher-rate taxpayers.

Key takeaways

  • For an electric car, salary sacrifice usually costs less than a personal lease at the same monthly price.
  • Higher-rate taxpayers save more income tax, but only 2% National Insurance above £4,189 a month.
  • Above 75 g/km the advantage falls to the National Insurance saving at most.
  • Compare like with like, because salary sacrifice packages often include insurance and maintenance.

Worked examples

Each example compares £500 a month (£6,000 a year) through salary sacrifice with a £500-a-month personal lease, for an employee in England, using 2026/27 rates. These are the Salary Sacrifice calculator's figures, checked by hand.

Higher-rate taxpayer (£60,000), fully electric car, £40,000 list price

  • Income tax saved: £2,400. National Insurance saved: £120.
  • Company car tax: £40,000 × 4% = £1,600 × 40% = £640.
  • Net cost: £6,000 − £2,400 − £120 + £640 = £4,120.
  • Saving against the lease: £1,880 a year.

Basic-rate taxpayer (£35,000), same car

  • Income tax saved: £1,200. National Insurance saved: £480.
  • Company car tax: £1,600 × 20% = £320.
  • Net cost: £4,640.
  • Saving against the lease: £1,360 a year.

Higher-rate taxpayer (£60,000), petrol car at 120 g/km, £15,000 list price

  • The car benefit is £15,000 × 30% = £4,500, but because the car is above 75 g/km you are taxed on the £6,000 you gave up instead.
  • Income tax saved: £2,400. National Insurance saved: £120. Tax on the car: £6,000 × 40% = £2,400.
  • Net cost: £5,880.
  • Saving against the lease: £120 a year, the National Insurance only.

Comparing packages fairly

Salary sacrifice packages often include insurance, servicing and breakdown cover. If your personal lease quote does not, add what you would pay for those to the lease side before comparing.

What is salary sacrifice for a car? covers the checks to make before joining a scheme.

FAQs

Is salary sacrifice cheaper than leasing?
For an electric car at the same monthly price, usually yes. In the examples on this page, a higher-rate taxpayer saves £1,880 a year and a basic-rate taxpayer £1,360. For a petrol car above 75 g/km, the saving can be as little as the National Insurance.
Can I salary sacrifice a petrol car?
Some schemes allow it, but for cars above 75 g/km you are taxed on at least the salary you give up, which removes the income tax saving.

Examples use 2026/27 rates for an employee in England whose salary is their only income, with the same monthly price for both options. Scheme terms, pension arrangements and what each package includes change the result. This comparison is general guidance, not tax or financial advice.

Sources and review

Related comparisons and guides