Trying to choose between a salary sacrifice car scheme and a traditional company car? You're not alone.

Whether you're an employee weighing up your options or an HR leader comparing schemes for your team, the internet is full of conflicting advice. Some say company cars are tried and tested. Others swear by salary sacrifice. So which one actually saves you money?

Here's the thing: we run an EV salary sacrifice scheme, so yes, we have a view. But it's backed by real data. For most people in 2026, salary sacrifice offers better savings, more flexibility, and way less admin than a traditional company car. And there's a reason more companies are making the switch.

Let's break down how the two options actually compare.

Salary sacrifice vs company car: What's the difference?

At their core, both schemes let you access a car through your employer. But how they work, who pays, and what you end up saving are completely different.

Company car schemes are traditional. Your employer buys or leases the car, puts it on the company fleet, and provides it to you as part of your employment package. The employer owns the car, covers all costs, and you pay tax on it as a benefit in kind.

Salary sacrifice schemes work differently. You agree to exchange part of your gross salary for a car lease. The lease payments come out before tax and National Insurance, which is where the savings happen. You choose the car, and the employer facilitates the arrangement through a provider like loveelectric.

Tax and cost: does a salary sacrifice or company car scheme save you more?

If you're choosing between salary sacrifice and a company car, the answer usually comes down to one thing: how much tax you'll pay. For most people, especially with an EV, salary sacrifice wins by a significant margin.

How the tax works

Salary sacrifice
When you sacrifice salary for a car, you're paying for the lease before income tax and National Insurance are calculated. That means you're reducing your taxable income, which cuts both your income tax and NI contributions. You still pay Benefit-in-Kind (BiK) tax on the car, but for EVs, that's just 2% of the car's list price. The combination of lower taxable income and minimal BiK makes salary sacrifice incredibly tax-efficient.

Company cars
With a company car, your employer covers all the costs. You don't pay for the car directly, but you do pay BiK tax based on the car's list price and CO2 emissions. For petrol and diesel cars, BiK rates can be as high as 37%. Even hybrids sit around 8-14%. That's a hefty tax bill, especially if your company car is worth £40,000 or more.

The higher the emissions, the more tax you pay. That's why EVs are increasingly becoming the default choice for company car fleets.

Real-world example

Let's compare two scenarios using an employee earning £50,000 a year who wants a mid-range EV like a Volkswagen ID.4 (list price around £45,000).

Scenario 1: Salary sacrifice EV through loveelectric

• Monthly lease cost (pre-tax): £500
• Tax savings (40% bracket): ~£200/month
• BiK tax (4% for EV from April 2026): ~£60/month
• Net monthly cost to employee: ~£360

Scenario 2: Traditional company car (petrol, e.g., BMW 3 Series)

• Monthly cost to employee: £0 (employer pays)
• BiK tax (25% rate on £45,000 for typical petrol car): ~£375/month
• Net monthly cost to employee: ~£375

Even though the company car is "free," the employee actually pays more in tax than they would through salary sacrifice. That's before factoring in the 30-60% savings salary sacrifice offers compared to personal leasing.

For higher earners in the next tax bracket, the salary sacrifice savings are even more dramatic.

The employer view

From an employer's perspective, the numbers look very different too.

Salary sacrifice schemes can be cost-neutral for employers. With providers like loveelectric, an employee's salary reduction covers the lease cost, and loveelectric's fee is offset by the employer's National Insurance savings on the sacrificed amount. That means businesses can offer a high-value employee benefit without it costing them anything. Plus, there's minimal admin because loveelectric handles everything: sourcing, servicing, insurance, and breakdown cover.

Company cars, on the other hand, require significant investment. The employer pays for the vehicle outright or through fleet leasing, covers running costs, handles maintenance and insurance, and deals with depreciation when it's time to replace the car. There's also ongoing admin around fleet management and compliance.

For businesses looking to offer a valuable benefit without adding to the balance sheet, salary sacrifice is the clear winner. It delivers what employees want (a new car with big savings) at virtually no cost to the company.

Sustainability and impact: which scheme supports a greener future?

If your company has sustainability goals (and most do these days), the type of car scheme you offer matters. A lot.

The environmental difference

Traditional company car fleets are still catching up. While business contract hire has seen EVs reach 54% of new orders, many company cars on UK roads remain petrol and diesel vehicles. The transition is happening, but it's gradual.

Salary sacrifice schemes are moving much faster. Nearly 90% of vehicles provided through salary sacrifice schemes in 2024 were battery electric. That's not a coincidence. The tax incentives make EVs the obvious choice, and employees are actively choosing zero-emission vehicles when given the option.

By offering EV salary sacrifice, companies directly accelerate EV adoption and make measurable progress toward net-zero goals. The difference in adoption rates speaks for itself: salary sacrifice is one of the most effective ways to get EVs on the road quickly.

Corporate sustainability and ESG

For HR leaders and finance teams, EV salary sacrifice isn't just a nice-to-have. It's a strategic tool for strengthening ESG (Environmental, Social, and Governance) reporting.

Here's why it works:

Measurable impact on Scope 3 emissions
Employee commuting falls under Scope 3, Category 7 emissions. For many service-based companies, commuting can represent 20-40% of total emissions. Switching staff from petrol cars to EVs through salary sacrifice creates an immediate, quantifiable reduction in your company's carbon footprint. One study found that daily commutes accounted for more than 98% of employees' work-related carbon footprint.

Stronger CSR storytelling
Offering an EV salary sacrifice scheme shows employees, customers, and stakeholders that your sustainability commitments aren't just words on a webpage. It's a tangible action they can see and participate in.

Alignment with certified impact providers
At loveelectric, we're a certified B Corp. That means we're legally required to balance profit with purpose, and our transparent pricing reflects that commitment. When you partner with us, you're not just offering a benefit. You're working with a company that shares your values.

Employee perception

Let's be honest: sustainability matters to talent. Especially younger employees.

Research shows that companies with strong sustainability programs have a 25% higher likelihood of attracting top talent. According to Deloitte's research, 40% of millennials and Gen Z workers prefer to work for companies that have strong sustainability commitments.

Offering an EV through salary sacrifice is one of the most tangible ways to demonstrate that commitment. It's not abstract. It's not greenwashing. It's a real benefit that helps employees reduce their personal carbon footprint while saving money.

The perception matters internally too. When employees see their company making it easier and more affordable to go electric, it builds trust. It shows you're serious about sustainability in the workplace, not just talking about it in annual reports.

In a competitive talent market, that's the kind of differentiation that makes a difference.

Employer branding and retention: which benefit makes the bigger impact?

Attracting and keeping great people isn't just about salary anymore. Benefits matter.

A modern benefit that employees actually value

Salary sacrifice isn't just popular with employers. It's one of the benefits employees actually want. EVs align with lifestyle aspirations and sustainability values in a way that traditional company cars simply don't. They're modern, they're forward-thinking, and for many employees, driving electric is something they genuinely want to do. Salary sacrifice makes it financially possible.

Employees increasingly expect their employers to support their sustainability goals. Companies with strong sustainability programs have a 25% higher likelihood of attracting top talent. Offering an EV through salary sacrifice is one of the most tangible ways to deliver on that expectation.

Compare that to traditional company cars, which are typically reserved for senior staff or specific roles. They're exclusive by design, which means many employees don't benefit at all.

Cost-neutral way to boost morale and retention

Here's where the economics make sense.

Company cars are expensive. The employer covers the purchase or lease, running costs, maintenance, insurance, and depreciation. It's a significant line item on the balance sheet. Plus, because company cars are usually limited to certain roles or seniority levels, they're not a universal perk. That creates a two-tier system where some employees get access and others don't.

Salary sacrifice through loveelectric is cost-neutral for employers. The employee's salary reduction covers the lease cost, and loveelectric's fee is offset by the employer's National Insurance savings on the sacrificed amount. That means businesses can offer a high-value employee benefit without it costing them anything.

Unlike company cars, salary sacrifice can be offered to all employees who meet the eligibility criteria. That makes it a truly universal benefit, not a perk for the few.

According to research by LCP and CIPD, salary sacrifice schemes are offered by 85% of very large employers, 61% of large companies, and 41% of SMEs.

The takeaway? If you're trying to attract and retain talent in a competitive market, salary sacrifice gives you a way to offer real value without increasing costs. Company cars, on the other hand, require significant investment and only benefit a small portion of your workforce.

Flexibility and risk: which option gives more freedom and peace of mind?

When it comes to car schemes, flexibility matters. Both for employees who want choice and control, and for employers who want simple, low-risk administration.

For employees

With salary sacrifice, you're in the driver's seat (literally). You choose the car you want from loveelectric's full range of EVs, whether that's a brand-new model or one of our Reloved® pre-owned vehicles. Want a family SUV? Done. Prefer a compact city car? Done. The choice is yours.

What if you change jobs? Your car can come with you. loveelectric offers portability options, so if your new employer also works with us or is willing to join the scheme, you can transfer your lease. That's a huge difference from company cars, which stay with your employer when you leave.

Life changes too. Maybe you need to end your lease early because of redundancy, relocation, or a change in circumstances. loveelectric's Early Returns Service gives you options, offering flexibility that traditional company car schemes simply don't provide.

With a company car, you get what you're given. Your employer chooses the make, model, and spec based on what's available in the fleet or what fits their budget. If you leave your job, the car stays behind. It's a fixed asset tied to your employment, with no portability and limited personal choice.

For employees who value autonomy and want a car that actually fits their lifestyle, salary sacrifice wins hands down.

For employers

Setting up salary sacrifice through loveelectric is fast. We're talking as little as seven days to get your scheme live. There's minimal paperwork, and we handle the heavy lifting: sourcing vehicles, managing contracts, coordinating with your payroll team, and providing automated reporting.

And the risk? Zero. loveelectric's Zero Risk Guarantee means if an employee leaves or becomes ineligible, we manage the transition. You're not left holding the keys to a car nobody's driving or dealing with complicated exit clauses.

Payroll integration is straightforward too. We provide automated deduction reports that slot directly into your existing payroll system. No manual calculations. No compliance headaches.

Compare that to running a company car fleet. You're responsible for procurement, insurance, maintenance schedules, servicing, MOTs, breakdown cover, and eventually disposal or resale. You need dedicated fleet managers or outsource to a fleet management company, which adds cost. When an employee leaves, you need to retrieve the vehicle, reassign it, or sell it at a loss due to depreciation.

It's not just admin-heavy. It's expensive, ongoing, and comes with real financial risk.

Salary sacrifice flips that model entirely. You get all the employee engagement benefits of offering cars, without any of the operational burden or financial exposure. For HR and finance teams stretched thin, that's a game-changer.

When to choose a salary sacrifice car scheme

Salary sacrifice isn't for everyone, but for most employees and employers in 2026, it's the smarter choice. Here's when it makes the most sense.

Choose salary sacrifice when:

• You want to save 30–60% on an EV compared to personal leasing through tax and NI savings
• You value predictable monthly costs that include insurance, maintenance, servicing, and breakdown cover
• You're looking for a cost-neutral, low-admin benefit that doesn't add to your company's balance sheet
• You want to make your benefits package greener without spending more
• Your team includes employees who drive mostly for personal use rather than business mileage

Best for:

• Companies looking to modernise their benefits package with a sustainability edge that actually attracts and retains talent
• Employees who want a new or used EV but don't want the upfront cost or long-term commitment of buying outright

What makes loveelectric different:

With loveelectric, you're not just offering a car scheme. You're offering a benefit that takes 15 minutes of admin per month, stays cost-neutral for your business, and comes with our Zero Risk Guarantee. If an employee leaves or becomes ineligible, we handle it. No complicated handovers. No financial exposure.

It's designed to be effortless for employers and valuable for employees. That's the whole point.

We broke down the pros, cons, and real-world considerations in our guide on whether salary sacrifice is worth it.

When to choose company cars

Let's be clear: company cars aren't obsolete. There are still situations where they make sense, and it's worth knowing when that's the case.

A company car may still make sense when:

• Employees regularly drive for business and need a company-managed vehicle with full oversight and control
• The business covers all fuel and running costs for work-related driving, making it easier to manage expenses centrally
• Vehicles need to carry special equipment, tools, or company branding that wouldn't suit a personal lease arrangement
• You're locked into legacy fleet contracts or agreements that haven't expired yet, and switching would incur penalties

If any of these apply, sticking with a traditional company car scheme might be the pragmatic choice, at least in the short term.

That said, even businesses with company car fleets are starting to introduce salary sacrifice alongside them. It's not an either/or decision. You can offer both and let employees choose what works best for their circumstances.

For roles that genuinely need a company-owned vehicle, keep the company car. For everyone else, salary sacrifice gives you a way to extend the benefit without extending the cost or admin burden.

The modern approach? Keep company cars if they're essential, but offer salary sacrifice as the default for everyone else.

Our verdict: Salary sacrifice is the smarter choice

If you've read this far, the answer is probably clear. For most employees and most employers in 2026, salary sacrifice is the better option.

For employees, it means bigger savings, more choice, and the flexibility to drive an EV without the upfront cost or long-term commitment of buying. You're not locked into a car your employer picked. You choose what fits your life.

For employers, it's a cost-neutral benefit that strengthens your employer brand, supports your sustainability goals, and requires minimal admin. No fleet management. No financial risk. Just a modern, high-value perk that employees actually want.

Company cars still have their place in specific scenarios, but for the vast majority of businesses, salary sacrifice is the future-ready, financially smarter choice.

Why loveelectric?

We've made EV salary sacrifice as simple as possible:

• Widest EV range: Choose from new models or our Reloved® used EVs
• Cost-neutral setup: No cost to your business, and we're live in as little as seven days
• Zero Risk Guarantee: We make sure you don’t have to worry about any financial penalties incurred by employees terminating a lease early
• Expert support: Real people, real answers, whenever you need us

Ready to see how much you could save? Check your eligibility or explore our cars to get started.

Salary sacrifice vs company car FAQs

What is a salary sacrifice car?

A salary sacrifice car scheme lets you lease a vehicle by exchanging part of your gross salary before tax and National Insurance are calculated. That's where the savings happen.

Because payments come out pre-tax, you reduce your taxable income and cut both income tax and NI contributions. For EVs, you also pay just 2% Benefit-in-Kind tax, making it significantly cheaper than personal leasing or buying.

The car is leased, not owned, and the monthly cost includes insurance, servicing, maintenance, and breakdown cover. No unexpected bills.

For employers, it's cost-neutral and low-admin. loveelectric handles everything. Learn more about how salary sacrifice works.

What is a company car?

A company car is a vehicle your employer provides for both business and personal use. The employer owns or leases it and covers all running costs.

You don't pay for the car directly, but you do pay Benefit-in-Kind (BiK) tax based on the car's list price and CO2 emissions. Higher emissions mean higher tax.

Company cars are typically petrol, diesel, or hybrid, and often reserved for senior staff or specific roles.

Is a salary sacrifice car or company car cheaper?

For most employees, salary sacrifice is cheaper, especially with an EV.

With salary sacrifice, you save on income tax and National Insurance, plus EVs attract just 4% BiK tax (2026/27). That makes your net monthly cost lower than the BiK tax on a higher-emission company car.

Quick example from earlier:

• Salary sacrifice EV: ~£330/month net cost
• Company car (petrol): ~£338/month just on the BiK tax

For higher earners, the salary sacrifice savings are even bigger. The exception is if your employer covers everything and provides a low-emission company car, but in most cases, salary sacrifice wins.

Can an employer offer both salary sacrifice and company cars?

Yes. Many employers do exactly that.

You can run company cars for roles that need them (field engineers, sales teams, executives) and offer salary sacrifice to everyone else. It's a hybrid approach that gives you flexibility without added cost.

If you're already running a company car scheme, adding salary sacrifice is straightforward. loveelectric can set you up in seven days.

Enquire about setting up a scheme or refer your company if you're not a decision maker at your company.