Company Cars; A Sacrifice worth Making?
By Andrew Leech, Fleet Evolution
The UK fleet market is one of the most established in the world but few are aware of the origins.
Originally the UK fleet market started to grow in the austerity period of the late 70’s when pay rise freezes led to company cars being offered to attract the best quality talent to an organisation, over the last few years there have been many changes but the latest developments in the company car market are more aligned with its origins, employee retention and attraction.
Successive governments have clamped down on ‘polluting’ vehicles with manufacturers always it appears one step ahead with everything from a super mini to large executive saloons now returning over 60mpg whilst emitting less than 100 co2 which will keep drivers in the 15% company car tax bracket for a few years to come.
Additionally many manufacturers are set to raise the bar still further and against this setting coupled with NI rises and an increased squeeze on tax payers and employers we are seeing a new ‘vehicle’ for the company vehicle appear with thousands of new company car drivers taking delivery of their first company car.
Salary sacrifice has long been established as a way of funding everything from child care vouchers to mountain bikes and more recently large employers from pharmaceuticals to NHS trusts have rolled out schemes to their employees. Growth however was hampered by difficult and expensive scheme set up and limited suppliers making it difficult for all employers to offer such benefits. More recently however a number of specialised companies have opened up such schemes to smaller organisations with fantastic success with employer, employee and scheme provider.
We asked our customers what the main benefits of such schemes were, they replied;
- The employee saves approximately 35% compared to sourcing a vehicle retail. Further savings are delivered by more efficient vehicles reducing employees fuel bills
- For cash takers and business users the ‘duty of care’ requirements are met by the scheme administrator
- The employer saves on employers' national insurance payments
- Customers report widening the recruitment pool area by offering such a benefit
- Employees perceive the benefit as a pay increase improving morale
- Productivity is improved as any vehicle issue is handled quickly and expertly by the scheme administrator
- Grey fleet admin is completely removed and we manage any and all policies and communication
- The environmental co2 ‘footprint’ of business activities including the employees commute to work typically falls by a third
- Employers differentiate themselves from their competitors and have a compelling sales message to potential employees and customers
- In many cases the schemes are cost neutral with minimal risk and minimal administration on the part of the employer
So how does the employee save? Well the savings achieved are as a result of the lease companies buying power, the VAT treatment and most significantly the employee making the sacrifice from ‘gross’ salary resulting in a saving in income tax and NI, of course benefit in kind is payable so generally the less polluting the vehicle the larger the saving. In addition the employer saves employers' national insurance although most of our customers tend to pass most of this saving back to the employee.
If we look at some of our most popular vehicles on the schemes, employees are enjoying Citroen C1’s for £100 per month inclusive of all maintenance, recovery, tyres and even the benefit in kind, Ford Fiestas for £140 per month and Audi A1’s for £199 per month.
The low monthly cost coupled with no deposit and better fuel comsumption really are driving up adoption rates and driving down employees motoring costs. In turn it’s another reason for manufacturers to keep the downward pressure on co2 and fuel bills.
With the majority of 25-45 year olds listing company cars as one of the most desireable benefits it’s little wonder that the UK fleet market appears to be moving full circle, with more and more cars provided as a ‘benefit’ to attract and retain the best staff sometimes by companies who cannot justify inflation busting pay increases in the current climate.
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