Buyer’s guide to company car manufacturers

The environmental agenda may be influencing company car makers, but fleet managers and buyers are just as likely to be swayed by tax and legislative changes, says Sarah Coles

Ford may well still be the most popular brand among company car drivers, but the market couldn’t look more different from the early days, when back in 1913 the Model T was the only affordable choice, and came, as Henry Ford said, in ‘any colour as long as it’s black’. Now drivers want vehicles that match their needs at work, their lifestyle, their budget, and their green agenda, so company car manufacturers have been pushed to develop more choice than ever.

David Yates, marketing director for ALD Automotive, explains: “Manufacturers are offering a much wider range of options. It’s not just the saloon, hatchback or estate any more; [there are also] mini multi-purpose vehicles (MPV), crossover vehicles, sports cars and 4x4s. People see the choice in the retail market and they want it in their company car too.”

Company car lists are therefore more diverse than ever, but drivers are making some interesting selections from them – many of which they may have previously considered substandard – including opting for smaller models, and diesel-powered cars.

These trends are, in part, being driven by legislation, with the introduction of benefit-in-kind tax rules that reward owners of lower CO2-emitting cars. As smaller cars tend to emit less CO2, they are therefore often more appealing.

This may become more significant in the future if other areas follow London’s move to base its congestion charge on vehicle emissions. From 27 October, for example, models emitting over 225g/km will be charged £25 per day to enter the zone, while cars which emit 120g/km or less will qualify for free entry as long as they meet Euro4 emissions standards.

The introduction of lower tax rates on greener vehicles is also driving the choice of diesel cars, which tend to have low CO2 emissions. Around 40% of all new cars sold are diesels, says Yates.

The move towards greener cars is likely to be given a further boost with the introduction of the Euro5 Diesel Standard in 2009, which is aimed at reducing diesel particulate emissions. According to provider Masterlease, the government is likely to lift the current 3% tax penalty for diesels if cars meet the standard, for a period, in order to boost take-up.

But drivers aren’t likely to make a move into a vehicle that they consider to be substandard, so another impetus for change has been developments in smaller cars and diesels to make them more appealing. “Smaller cars have got bigger. Yesterday’s Vauxhall Vectra is the same size as today’s Vauxhall Astra, so people can trade down without losing space. There’s a natural trend towards the smaller models. Plus today’s engines have developed, so you can get more power out of a smaller engine,” says Yates.

In addition, employers are still getting a number of extras with the smaller vehicles. Features like air conditioning and side impact safety systems, for example, are increasingly becoming available as standard on smaller cars.

Hybrid vehicles
Diesels have also changed. “If you are driving a modern diesel engine it’s not a very different driving experience from the petrol version,” adds Yates.

For drivers who are unwilling to trade down in size or switch to diesel, manufacturers have also been working to produce greener vehicles, partly to meet demand from the UK corporate market, but also to address broader environmental concerns.

In some instances this has led to the development of hybrid cars. “There are five hybrids available in the UK: the Toyota Prius, the Honda Civic, and three hybrids in the Lexus range. In terms of market share, they’re not making up much of sales, around 16,000 a year,” says Yates.

Although they represent just a small portion of the company car market overall, the growth in their popularity is sizeable. UK fleet sales on the Prius increased 76% last year and, a spokesman for Toyota says: “It isn’t a large number of cars but the increase is significant.”

Other manufacturers are also working on hybrid vehicles, and even Porsche revealed at the Detroit Motor Show in January that it has a hybrid in the works.

Other manufacturers have focused on making all their petrol cars greener. “The rest of the market is improving its technology, making engines more fuel-efficient,” says Yates.

These improvements are industry-wide, and no one single manufacturer has stolen a march on the others. However, Yates highlights BMW’s Efficient Dynamics programme which has resulted in start-stop technology being fitted to some of its vehicles. He adds that CitroŒn has more low-emission cars than any other manufacturer and that there are now VW Polo and Seat Ibiza models on the market producing under 100g/km of CO2, making them among the lowest-emitting cars in the UK. “There isn’t a single manufacturer without a green focus nowadays,” explains Yates.

Alternative fuels
As a result, fleets are becoming more eco friendly. Figures from the British Vehicle Rental and Leasing Association show that the average CO2 emissions from company cars fell from 171.8 g/km in 2003 to 157.4 g/km in 2007. Robert Kingdom, head of marketing and business development at Masterlease, says: “Our fleet of 80,000 vehicles has seen a drop of 3g/km a year for the last three or four years.”

This trend is likely to continue, as the green agenda dominates, and legislation keeps the pressure on employers and manufacturers up. Kingdom points out that the new 10% tax rate for cars under 120g/km, introduced next month, will have a dramatic effect, partly because manufacturers have been developing their range at this level of emissions. “Two years ago, it would have had to be a hybrid [car], which doesn’t have universal appeal. Now drivers can choose an Audi A3, Mini, or a BMW 1 Series at that level. And the EU is talking about mandatory targets for manufacturers,” which is likely to have considerable impact,” he says.

The next few years are likely to see the development of more alternative fuels, including bio diesel. More hybrid cars will continue to flood onto the market, and even the humble petrol car is likely to get more out of the tank. Consequently, company car manufacturers have little time to rest on their laurels.

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Focus on facts

What are company car makers?
These are all mainstream car manufacturers which actively sell to the corporate market.

What are the origins of company car makers?
The company car has been around since the 1960s, but didn’t really take off until the 1970s, when statutory controls on wage inflation were implemented and, as a result, cars were offered in lieu of a pay rise.

The manufacturers themselves have been been in existence for around 50 years longer, with the UK’s most popular company car manufacturer, Ford, starting production of the Model T in 1908.

Where can employers get more information on company car makers?
The Society of Motor Manufacturers and Traders can supply information on providers, as well as industry news and advice. Visit or call 0870 751 8270.

There is also data on Euro NCAP crash tests, used car values, reviews and advice available on the Automobile Association’s website at, while safety information is published at

Nuts and bolts

What are the costs involved?
Corporate buyers will generally pay less for each model than the list price, however, it all depends on the deal that is brokered. Large buyers tend to receive standard discounts of between 4% and 8%. Very large buyers, meanwhile, which limit themselves to one or two badges, may well obtain a 30% reduction. However, they may pay the price in terms of the attractiveness of the benefit if choice is too limited.†

What are the legal implications?
Health and safety legislation considers the car to be an extension of the workplace, so organisations are responsible for the safety of their employees behind the wheel. Under the terms of the Corporate Manslaughter and Corporate Homicide Act 2007, due to be introduced next month, employers could also be held liable if their gross corporate negligence results in the death of an individual.

Employers must also ensure that employees comply with the smoking ban, introduced last year, which covers cars that carry more than one person.

What are the tax issues?
The tax on company cars depends on vehicles’ CO2 emissions. The tax is calculated by multiplying the list price by a percentage, which is determined by how low the emissions are. So, for example, a car with emissions below 135g/km would be charged at 15%. From April, the lowest rate reduces to 10% for cars under 120g/km.

There is a 3% supplement for diesels, as although these have lower CO2 emissions, they emit more of other noxious fumes such as nitrogen dioxide and sulphur dioxide.

In practice

What is the annual spend on company car manufacturers?
According to the Society of Motor Manufacturers and Traders (SMMT), just over 2.4 million new cars were sold in the UK in 2007. Around 55% of the market is company cars, which accounts for roughly 1.32 million vehicles. The British Vehicle Rental and Leasing Association estimates an average price of around £12,000, so approximately £15.84 billion is spent on new company cars every year.

Which company car makers have the biggest market share?
According to figures from Masterlease, Ford and Vauxhall have topped the manufacturer’s list for from than ten years. The next most popular brands are Volkswagen, Peugeot, Renault, BMW and Toyota.

Which company car makers increased their share the most over the past year?
According to the SMMT, Audi, Honda, Mini and Vauxhall showed some of the most improved performances of the year in terms of market share.

Toyota has also experienced significant growth. Sales of the Prius rose 76%, and although the actual numbers of such cars remain small, more fleet managers are now looking at Toyota’s range.

Relative newcomers to the market also continue to experience an increase in their share. Mazda has come from a standing start ten years ago, to a point where a third of its sales are to corporate clients.