From April 1 2009, the new Expensive Car Leasing Disallowance will make leasing company cars with a CO2 output of 160g/km and below much more attractive.
Increases in new car prices and uncertainty in the used car market are putting upward pressure on company car lease rates — but the new rules for claiming tax relief on lease payments provide an opportunity to offset these and make substantial savings.
From April 1 2009, the current Expensive Car Leasing Disallowance (ECLD), which applies to all cars costing more than £12,000, will be replaced by carbon dioxide based tax relief. All cars with CO2 emissions of 160g/km and below will be entitled to full tax relief, with those vehicles above this threshold attracting a disallowance of 15%.
For a car costing £20,000, GE Capital Solutions, Fleet Services says that the net after tax cost of leasing reduces by typically £300 per year; and for a car costing £25,000 this rise to £500 per year for cars with CO2 emissions of 160g/km or lower.
Gary Killeen, Commercial Leader, explained: “There is considerable upward pressure on company car running costs at the moment and fleets are open to ideas on how to make efficiencies. Building a car choice policy around the new tax rules is perhaps the biggest single move they can make.
“By restricting car choice to sub-161g/km, companies will be able to make considerable savings on every vehicle, every year. It is an excellent opportunity to offset increases in lease rates that are inevitably starting to come into effect almost across the board.
“Research that we have just carried out shows that general economic conditions and cost concerns are the two biggest worries facing fleet decision makers in 2009, and simple changes in car choice will play a large part in addressing these concerns.”
Killeen added that limiting car choice to sub-161g/km models involved very little compromise, with models available in most classes that would prove attractive to employees.
He said: “Most mainstream model ranges provide a selection of models that fall easily into this category but there are executive cars, MPVs and even 4x4s and sports cars that qualify.
“Of course, this is not just also a means to make your fleet cheaper to lease but also cheaper to run through lower fuel costs and also much greener. Drivers also potentially benefit through lower CO2-based benefit in kind taxation. It is a situation in which everyone wins.”
Killeen said that GE Fleet Services had been involved in redrawing the car choice policies of several customers through its Key Solutions fleet consultancy team, and also offers a range of online tools that made operating these policies easy for both managers and their drivers.
He added: “Choosing which vehicles you allow onto your fleet is the decision at the heart of every fleet policy. With the right advice and effective online tools, we can help you put a car choice policy in place quickly and easily that satisfies all your requirements.”
The new tax rules in summary
• New tax relief rules apply from1 April 2009 for all new leased company cars — existing vehicles continue to operate under the old regime.
• Sub-161g/km vehicles which are leased can have 100% of their rental cost written off against corporation tax bills per year
• Cars of 161g/km and over can only have 85% of their rental cost written off
Source: GE Capital, headquartered in Norwalk, CT, is a global provider of financial products and services to businesses, retailers and consumers.
GE (NYSE: GE) is a diversified global infrastructure, finance and media company that is built to meet essential world needs. From energy, water, transportation and health to access to money and information, GE serves customers in more than 100 countries and employs more than 300,000 people worldwide. For more information, visit the company's Web site at www.ge.com. GE is Imagination at Work.
GE Capital Solutions provides finance solutions such as leasing, lending, distribution finance and related services, as well as car fleet management to help business customers in Europe grow. In Europe, it has around $20 billion in assets and serves customers in 15 countries, with around 3500 employees and has its European headquarters in London, UK. For more information about GE Capital Solutions Europe, access www.gecapitalsolutions.eu