If you read nothing else, read this...
- More than 60 sub-120g/km car models are now available from over 25 manufacturers in nearly 400 variants.
Green fleets no longer mean boring, low-powered cars, says Jennifer Paterson. High-spec, low-emission models are plentiful, as are the incentives to use them
Low-emission cars used to be associated with small and unstylish hatchbacks, but since the tax system swung in their favour, manufacturers have flooded the market with a wide range of high-spec environmentally-friendly models.
The increased demand for sophisticated green cars has also been fuelled by the corporate market, with employers keen to avoid the increased running costs and tax penalties linked with gas-guzzling cars.
Andrew Leech, business manager at Mycompanyfleet, says: "The real change has been the introduction of incredibly high-spec cars below the low-CO2 limit. If you look over the last five years, even on cash-for-car fleets, typical CO2 has reduced from 160g to 130g across the board. This is mainly because suppliers such as Volkswagen, BMW and Mercedes are bringing out products below the 120g limit."
In 2006, an environmentally aware and cost-conscious business could offer its staff only about 20 car models that emitted less than 120g/km of CO2. Now, employers can choose from more than 60 options in almost 400 variants, produced by over 25 manufacturers.
Cars with CO2 emissions under 120g/km now include the BMW 3-Series, Volkswagen Golf Bluemotion, Audi A4, Ford Focus C Max, Volvo V70, Mercedes C220, Peugeot 207, Toyota Auris and the Mini Cooper diesel.
Richard Webb, senior manager of human capital at Ernst and Young, says: "The holy grail is to get the car you want, but find one with a low-emission engine. There are an awful lot of cars in that bracket now."
Lowest benefit-in-kind tax rate
Cars emitting less than 120g/km of CO2 currently attract the lowest rate of benefit-in-kind tax because the way P11D benefit is calculated takes account of how environmentally friendly a car is. The list price of the car is multiplied by a figure based on its CO2 emissions. Also, the level of class 1A national insurance the employer pays on the driver's benefit-in-kind is correspondingly low.
"If an employer makes a car available to staff, they get a P11D benefit and that is based on the original list price of the car, which is currently capped at £80,000," says Webb.
Paul Hollick, general manager of sales development at Alphabet, says it is important for employers to spell out to staff what these tax differentials mean in cash terms. "To many employees, the difference between a 13% and 23% benefit-in-kind rate might not seem significant, but if you show them that choosing the low-CO2 car will put about £2,000 more into their pay packet over three years, the green savings message really hits home."
From April 2011, the £80,000 list price cap will be removed and a lower 5% rate will be applied to cars emitting 75g/km or less CO2. From April 2012, the benefit-in-kind bands will also apply to cars emitting 99g/km or less and there will be new categories for 100g and 120g/km. Drivers whose cars emit just less than 120g/km will see their benefit-in-kind band move upward by four percentage points.
"That will feel like a steep jump in tax for some," says Hollick. "It will add £22 a month to the tax paid on a sub-120g/km car, but its driver will still be £540 a year better off than if they had chosen a higher-emission car, while the employer still saves £170 in national insurance contributions."
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