User-chooser car schemes pay off

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  • User-chooser fleet arrangements are designed to ensure the most cost- and tax-efficient funding method is used for each employee.
  • It is important for employer and employee to consider the whole-life costs of the arrangement to decide which route is best.
  • Savings available through user-chooser fleet arrangements will depend on the size of an organisation.
  • Salary sacrifice company car schemes are gaining popularity and, in some cases, are replacing user-chooser arrangements.

User-chooser car schemes can drive the best deal for employers and staff, says Jennifer Paterson

User-chooser arrangements for company cars enable employers to offer a mix of cash allowances, company cars or employee car ownership arrangements, in order to offer staff the most economical car for their driving needs.

This mixed-fleet approach can save money for employers while offering choice for staff. Each arrangement is designed to ensure the most tax- and cost-efficient funding route for each driver, rather than offering everyone the same general company car scheme.

Jon Mackney, head of consultancy at Arval, says: “In industries where there is a need to attract and retain technically qualified staff, the company car scheme is viewed as an important tool. The focus is largely on making sure the scheme is very attractive, so they should have a user-chooser fleet.”

To offer employees choice, user-chooser fleets are typically offered in partnership with more than one fleet management supplier and with several car manufacturers.

Calculate likely savings

To calculate the likely savings from such a scheme, the employer must calculate the whole-life cost of its fleet. This will also enable it to decide the right options for its staff within a user-chooser arrangement. Whole-life costs include depreciation values, maintenance and tyres, financing, national insurance and tax liabilities, impact of the lease rate restriction, non-recoverable VAT (if the car has been leased), fuel and insurance. Clive Buhagiar, relationship manager – public sector at ING Car Lease, says: “If an organisation has a policy that controls all of these and sets maximum limits on them, then essentially it has controlled its cost.”

Focusing on the whole-life cost of a car is also beneficial for employees because certain cars may be more expensive on a monthly contract-hire rate and cheaper in whole-life costs. It also depends on the size of the fleet.

“If a company is going to buy more than 20 cars a year from a particular manufacturer, it would normally be able to negotiate additional support or discount terms,” says Buhagiar. “Under a user-chooser policy, it is more difficult to guarantee the whole fleet will be the same car, so it is a lot more difficult to get an additional discount.”

But because there is no one-size-fits-all solution for company car schemes, user-chooser plans can add value. Ben Creswick, head of business development at Zenith Provecta, says: “If employee car ownership is the most competitive funding method for employees, they should use it. If an organisation wants to open it up and make it more flexible or desirable, they should use salary sacrifice.”

Cost-effective option

Salary sacrifice car schemes are gaining popularity as a cost-effective way to offer company cars and, in some cases, are replacing user-chooser arrangements. “Depending on how it is structured, it might add a lot more flexibility,” says Creswick.

Salary sacrifice car schemes can be offered on a cost-neutral basis, due to the available tax and national insurance savings, says Mark Sinclair, UK director at fleet management provider Alphabet. “There is no cost to the employer, but a tangible benefit to the employee,” he says. “I am talking about savings of £100 to £month, maybe more, based on the same car bought from a dealer on a typical retail purchase arrangement.”

Overall, a user-chooser car scheme can be a tax-and cost-efficient way of enhancing an employer’s benefits package. Roddy Graham, chair of the Institute of Car Fleet Management and commercial director at Leasedrive Velo Group, adds: “A car is an extremely visible and highly emotive benefit.”


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