Why company cars still make sense

Running a company car is all about having the right car for the right purpose. Unfortunately changes in tax legislation and the demonisation of diesel is making this harder than it should be.

James Dower, Head of Business Development, ADESA UK explains more…

Until recently the only fuel option for high mileage essential users was diesel. It made economical sense for the driver and employer and was kinder to the environment in terms of CO2 emissions.

However, diesel is no longer the automatic choice for some drivers. The raising of the benefit-in-kind surcharge from 3% to 4%, after the sector was led to believe it would be removed altogether, and diesel’s bad press has seen new registrations fall 30% this year, with fleet taking the brunt*.

I have concerns these factors are pushing some employees into making ill-informed decisions to use cash allowances to fund private vehicles through Personal Contract Hire (PCH) and Personal Contract Purchase (PCP) schemes but using them for business.

While this is perfectly legitimate, many of these ‘company car’ drivers will be in the wrong vehicle, may not insure themselves appropriately for business usage and face the extra financial burden of servicing and maintenance costs and of paying for wear and tear items.

There’s also the matter of excess mileage charges. I know of one cash allowance driver presented with a bill for £3,500 because they had under-estimated their annual mileage. This scenario is not untypical.

Petrol is rarely an appropriate substitute for diesel, especially in larger cars and SUVs. Likewise petrol-hybrids boasting low fuel consumption figures are rarely achievable in the real world and impossible for drivers clocking up high mileages.

Also, many employees taking cash allowances do not necessarily factor in unplanned changes to their employment. If they are made redundant they simply hand back the keys to their car but if they are using an allowance to fund a car on PCP or PCH then they are locked in financially until termination.

PCPs and PCHs are both excellent products but whole life cost considerations need to be factored in by company car drivers before opting out of their vehicles.

Whilst I understand that a company car can be seen as a perk, for many it is a necessity which is why it is important to have the comfort of one provided by an employer and using the fuel option best suited to actual usage.

*YTD registrations figure from the Society of Motor Manufacturers and Traders: https://www.smmt.co.uk/vehicle-data/car-registrations/