You’ve been enjoying your electric car through your company’s salary sacrifice scheme – lower costs, zero hassle, and a brand-new vehicle that saves you thousands.
Then, life happens.
You get a new job offer, or you’re made redundant, or circumstances change. One question immediately springs to mind: what happens to my car?
It’s a completely understandable concern. After all, you’ve been driving this vehicle daily, and your monthly payments have been seamlessly deducted from your salary. But unlike a personal lease or car ownership, salary sacrifice schemes are tied to your employment. So, what actually happens when that employment ends?
The Basic Principle
When it comes to salary sacrifice, the lease agreement is between your employer and the leasing company. You’re driving the vehicle as part of your employment benefits package, with your salary reduced to cover the cost.
When your employment ends – for any reason – your access to that employment benefit typically ends too. In most cases, this means you’ll need to return the vehicle.
But, the specifics of what happens, and what it costs you, depend entirely on three things:
- Your employer’s salary sacrifice policy
- The type of early termination protection in place
- The reason you’re leaving.
More information: Is a Salary Sacrifice Car a Company Car?
Early Termination Protection: Your Safety Net
Most reputable salary sacrifice schemes (including EZOO’s) include something called Early Termination Protection (ETP). This is designed to protect both you and your employer from excessive financial penalties if the arrangement ends early.
Once the ETP protection has been active for three months, there is typically no cost to the employee when terminating the lease early, as these costs are covered by the ETP itself. However, employees will still be liable for the full remaining term payments in certain situations, such as loss of driving licence or significant breach of contract terms.
Without ETP, employees must pay the full cost for the remainder of the lease term, with no caps or protections in place.
Different Scenarios, Different Outcomes
Not all departures are created equal. Here’s how different situations typically play out:
Resignation (You’re Leaving Voluntarily)
If you hand in your notice and move to a new job, you’ll need to address your car lease. At EZOO, we will typically explore several options before resorting to early termination:
- First, we’ll attempt to transfer the lease to a colleague at your current company.
- Second, we can work with you to transfer the contract to your new employer (if applicable).
- Finally, we may try to find an employee within your network who would like to take on the remainder of the lease through a contract novation.
If none of these options are viable, you’ll need to return the car and your employer will arrange collection with the leasing company.
Redundancy
If you’re made redundant, the treatment often differs from resignation. Many ETP policies offer additional protection in redundancy situations, sometimes reducing the fee to just one month’s payment, or waiving it entirely after a certain period (often six months into the lease).
Check your specific scheme’s terms, as redundancy protection varies between providers.
Dismissal
If you’re dismissed following disciplinary action, you’ll likely be liable for the early termination charges. These are typically deducted from your final pay where possible.
Maternity, Paternity, or Parental Leave
This varies significantly between schemes. Some allow you to pause payments during unpaid leave periods. Others require the employer to continue paying the lease. The best salary sacrifice schemes have specific provisions that protect employees during family leave without penalty.
Questions to Ask Before You Leave
If you’re considering moving jobs and have a salary sacrifice car, here are the questions to ask your HR department:
- Does our scheme include Early Termination Protection?
- What would my early termination fee be?
- Can I transfer the lease to my new employer?
- Is there an option to take over the lease personally?
- Are there any circumstances where the fee might be waived?
- How is the fee collected?
Getting clarity on these points before you resign gives you time to plan and potentially negotiate with your new employer.
Life Changes and That’s Okay!
Leaving your job doesn’t have to mean financial disaster for your salary sacrifice car. With Early Termination Protection – which most modern schemes include – the costs are manageable, particularly if you’ve had the car for more than a few months.
The worst-case scenario (leaving in the first three months) exposes you to higher costs, but even then, you’re not personally liable for the full remaining lease value. And in many situations – redundancy, long-term sickness, or when your employer absorbs the cost – you might pay nothing at all.
Life changes, jobs change, but with the right scheme and Early Termination Protection in place, your salary sacrifice car doesn’t have to become a burden when you move on.