Impact of low emission Company Cars
Firstly, welcome to the first of our knowledge blogs. We hope to be able to offer you some useful, impartial advice using our many years of motor industry experience (dating back to 1919!).
To open our account, we wanted to talk a little about the impact low emission cars can have on businesses of all sizes. There is a clear perception in the public eye that low emissions cars are expensive and quirky, which looking back at the early editions maybe true. But in the modern market most manufacturers have their own twist on low emissions cars, which the untrained eye would in most cases be hard pushed to pick out of a line-up.
However, there is much more to these cars than low emissions and MPG figures. Some of the hidden costs are actually larger than what nowadays is often challenged as the stated MPG figures.
One of these costs is the National Insurance contribution businesses make based on their staff company cars. The known costs are the purchase/lease costs and also the costs of keeping the vehicle on the road such as insurance, fuel, servicing, tyres etc…. But have you ever actually calculated how much National Insurance you are paying on these cars and how much you could save just by looking at other options.
We all have the perception that Diesel engines are the best, that Diesel is the answer regardless of the question….. We must have diesel because of “XYZ”, but have we ever really challenged, why?
So, let’s for a moment disregard the list price, finance offers, contract hire specials, stated MPG figures and look at some hypothetical figures. Naming no brands of cars, the following figures are realistic numbers to show just how much your business could be paying in Class1a National Insurance. This expense is a set calculation of 13.8% of on the P11D value, and BIK classification of the car.
Efficient 1.6 Diesel Engine - P11D Value £22,705 - CO2 Emissions 99 g/Km - 14% BIK - Company Class1a Contribution (13.8%) £438.66 per year
Full Hybrid Option - P11D Value £20,340 - CO2 Emissions 84g/km - 10% BIK - Company Class 1a Contribution (13.88%) £280.69 per year
1.0 Petrol Engine - P11D Value £17,540 - CO2 Emissions 109g/km - 13% BIK - Company Class 1a Contribution (13.88%) £314.66 per year
This very quick example shows a selection of some of the C Segment 5DR Hatchbacks in the market, which company car drivers may consider and as you can see, the sums are simple but the outcome all shows a range of over £150 per year. If you run 2, 5, or 10 cars, these figures can start to add up to a sum of considerable value, on an expense that many businesses do not even consider when offering company cars to staff.
As we also know, the classifications for company car drivers changes year on year. So if we roll this calculation forward to tax year 2015/2016, using exactly the same sums the following results apply and the difference between the top and bottom end increases.
Efficient 1.6 Diesel Engine - 17% BIK - Company Class1a Contribution (13.8%) £532.66 per year
Full Hybrid Option - 13% BIK - Company Class1a Contribution (13.8%) £364.90 per year
1.0 Petrol Engine - 16% BIK - Company Class1a Contribution (13.8%) £387.28 per year
So, these figures which are so often unaccounted for over a 3 year period (which many business users would class as a normal life cycle) can run into hundreds of pounds on National Insurance alone.
The sums are very simple and apply to all of those companies who provide a company funded car. So why wouldn’t you look at all the options before making a long term financial commitment for your business?