A flurry of demand preceded the abolition of the 3% benefit-in-kind concession on Euro IV diesels. Jamin Robertson finds the impact unlikely to significantly sway demand for diesel
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The abolition of the 3% benefit-in-kind concession on Euro IV diesel cars on 1 January this year led to a rise in demand for company diesel cars.
The cost comparison between petrol and diesel cars has narrowed for employers.
The European Commission has proposed strict emission standards for Euro V models.
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Fleet providers were busy supplying cars as the shutters went down on 2005, to employers keen to take advantage of the 3% benefit-in-kind tax concession on Euro IV diesel vehicles before it was withdrawn in January. For cars already acquired the concession will stay intact until they change hands.
But what now for new company diesel cars?
Overall, industry observers concur that thrifty CO2-friendly diesels remain the choice du jour.
But ask them to consider the ramifications of the abolished concession, and the consensus soon evaporates.
Stewart Whyte, fleet consultant and director of the Association of Car Fleet Operators, believes it is a minor issue. "The reapplication of the 3% fuel supplement is an absolute red herring. The only people that are benefiting from it are a minority of the company car pool. By any stretch of the imagination it’s small beer."
And Colin Tourick, a self-employed fleet management consultant at Colin Tourick and Associates, adds: "The motoring public has poured into diesels for the time being, and there’s no sign that’s going to reduce."
But with that cost gap diminished, Nick Phillips, sales and marketing director at provider Provecta Car Plan, suggests diesel buyers might now reconsider. "Fleet managers will have to be careful they’re not just buying diesel because it’s economical for fuel. They need to factor in the whole life costs. After all, diesel cars do cost more to buy. It’s going to become a very fine line."
Provecta calculated that drivers of the Ford Mondeo need to be clocking up more than 15,000 business miles each year before the 2.0 TDCi diesel becomes more cost effective than its petrol-powered stablemate. And that was before the tax break was abolished.
Gary Killeen, business leader of structured finance at GE Commercial Finance Fleet Services, doubts the four-to-one preference for diesel by his clients will disappear overnight, but admits costs have increased.
"It was easy to say [that] 18 months ago diesels had a lower whole life cost, but it’s starting to close considerably. Residual values for used diesel cars are diminishing, as we supply more of them."
But Whyte says buying patterns are unlikely to be affected. "If you don’t want to pay that much tax, buy a 1700 [cc] instead of an 1800. Buy an L instead of a GL. All this talk of diesel being dead, as a generality, is absolute rubbish."
Of course, there is every chance concessions will reappear to entice buyers when the European Commission brings in strict Euro V standards, due in mid-2008, that propose an 80% reduction in harmful diesel particulate emissions. Tim Hudson, commercial director at Leaseplan UK, doubts any increase would be significant. "Although it will be more expensive to stick the particulate filters on, there’s already a heavy level of discounting going on to fit them."
Andrew Cope, chief executive of Zenith Vehicle Contracts, believes that although diesels will remain popular, there is scope for greater take-up of hybrid fuel cars. Hudson agrees: "There’s a London taxi firm that is using a fleet of Priuses. If it’s good enough for them, that’s got to be the ultimate test."