Are We About To See The End Of Company Cars?
Monday, 10. September 2018
For those concerned about the environment, the new Worldwide harmonised Light vehicle Test Procedures (WLTP) were considered to be well overdue when you consider how easy it was to fiddle the emissions test under the old regime known as NEDC. It wasn’t just VW fitting equipment that could be switched over during the emissions tests to give a false reading.
Others fitted undersized wheels and stuck tape around doors, bonnets and boots in order to avoid any drag. So now we have the cars being properly tested we see emissions levels increasing. The cars are the same but the emissions levels have increased due to more accurate testing. Which is fine unless you happen to be a company car driver.
As an interim measure and so as not to sting company car drivers for driving the same car the revenue has applied a conversion equation to bring the CO2 emissions back to where they were under the old tests. However, the CO2 levels are still around 10% higher than previous thereby increasing the BIK tax on cars that drivers may have been driving for the past 2 years and the new cars are generally 20% higher so replacing a like for like car could increase your benefit in kind tax substantially.
Whilst the fleet industry has called on the Government to amend the BIK tax tables so as not to penalise drivers of company cars, as usual, they’ve done naff all. This has led to a move towards car allowances allowing drivers to select their own car, firstly to save the BIK tax but also allow them to potentially drive better cars. As I’ve reported before let’s say that a company negotiates preferential terms with a dealer to take 200 Ford Mondeos a year.
As a result, they receive 25% discount on all cars that is fed into their contract hire rate. Normally the best a consumer would receive is a discount of 15% built into the contract hire rate but if a new model is coming out the dealer and the manufacturer may allow a discount and bonus of 35% to be built into the contract hire rates.
This means that a consumer could achieve a lower rate than some of the biggest fleets in the country. Or maybe a Vauxhall Insignia or Mazda 6 works out cheaper because for the same reasons the rates are incredibly low. So for employees, the time may have come when they hand back their company cars and take a car allowance then talk to me to get them into a low rate car. By Graham Hill
