Prestige is often a major factor for employers when deciding which luxury executive company car to offer employees.
If you read nothing else, read this:
- Tax breaks are encouraging employers to offer low-emission cars in their fleets.
- Luxury car makers are producing models that fulful green requirements.
- It is important for employers to consider a car’s whole-life costs.
- Demand for electric cars remains low, but is expected to rise.
But carbon dioxide (C02) emissions are of increasing importance for many organisations as they seek to boost their corporate social responsibility efforts and reduce their impact on the environment while striving to cut costs.
This is made possible by successive governments introducing tax breaks on fuel and on cars themselves. For example, in his Budget in March this year, chancellor George Osborne announced a new, ultra-low-emission company car tax, which will come into effect in April 2015.
The ultra-low-emission vehicle (ULEV) tax will have two bands, covering cars emitting 0-50g/km and 51-75g/km of CO2.
Under the legislation, the percentage of list price that is subject to tax will be 5% for cars in the 0-50g/km band in 2015-16 and 7% in 2016-17. For cars in the 51-75g/km band, the corresponding figures will be 9% in 2015-16 and 11% in 2016-17.
So, how do luxury cars fare in terms of CO2 emissions?
In years gone by, Ford was a very popular brand for executive company cars in the UK, but now German marques, such as the BMW 5 and 3 series, have won favour with many fleet managers because of a world-class reputation built on low C02 emissions (thanks to a long-lasting two-litre diesel engine), good reliability and enviable performance.
Peter Crabtree, director of sales and customer service at SG Fleet, says: “As more employees have had choice over brand, more people have voted towards the German brands during the past five years. It’s really gained momentum.”
Last year, BMW sold 44,521 3 Series and 21,566 5 Series models in the UK. Prices for the 3 Series start at £23,185 and for the 5 Series at £29,830.
Employers could also consider British-made Jaguar, which offers the XF with the low-emission 2.2 TDi4 163 version, which is in the same price bracket as the BMW 5 series at £29,945.
The Audi A6 range offers an attractive alternative to BMW. The Audi A6 Avant 2.0 TDI 177 SE, for example, emits 132g/km of CO2 and is listed at £33,100.
A Mercedes-Benz C-Class is another executive car candidate. The C220 CDI BlueEfficiency Executive version emits 109g/km of CO2 and is in the B tax band, which costs drivers just £20 a year in road tax.
A car’s tax band is an important factor for employers to consider when calculating its whole-life cost. This cost takes into account: the price of a car; its depreciation over the period an employee has it; the cost of funding; the resultant tax cost to a business for providing the car; an employer’s class 1 national insurance contributions; the car’s fuel economy; and the overall cost of servicing, maintenance and repairs, plus insurance costs.
Julie Summerall, managing director of TR Fleet, says: “The CO2 and benefit-in-kind positioning is just one factor: we look at the whole-life costs of a car, including insurance and fuel.
“Fuel is quite interesting because there’s a debate about how accurate the miles-per-gallon figures published by the manufacturers are. Generally, we reduce that figure by about 20% to get a more accurate in-life cost.”
Take-up of low-emission executive cars (below 95g/km), including electric cars, by employers remains low, despite the tax breaks.
However, as employers look to boost their green credentials and more pressure is put on the government to further reduce the UK’s CO2 emissions, the number of employers that seek to make electric vehicles their executive company car of choice could well rise.