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Employees still want a company car

 Published 20th June 2020
Company Fleet 

The company car is going nowhere fast - despite repeated rumours that it might be on the ropes.

In fact, the company car remains a favoured benefit of employment, according to a new report from the fleet management company and leasing funder Arval.

In its Arval Mobility Observatory research, it has found that one in five UK businesses (18%) say they believe their company drivers would not give up their vehicle for any of a range of other options, including a mobility budget, car sharing, ride sharing or a mid-term rental arrangement.

Even those drivers persuaded to opt out of the company car were essentially choosing a different form of accessing a car using company money. These included finance schemes such as private leasing or salary sacrifice.

The main reason given as to why employees wanted to stay with the company car was due to the simple ease of motoring it provided since all services were taken care of, followed by not having to finance a vehicle and the regularity of a new car every three to four years.

Shaun Sadlier, head of Arval Mobility Observatory in the UK, said:

"As well as being an efficient and effective means of business transport, a company car is a very easy means of ownership, with everything effectively taken care of for the employee, who can also benefit from more regular access to new technology. This is why it remains such a popular benefit, whether it's an essential component of a job or as an employment perk."

Changes to benefit in kind to accelerate interest in the company car

There is further reason to believe that the company car will remain embedded within the corporate culture of businesses in the UK.

Changes made to company car tax by the government, effective from 06 April 2020, make zero emission and ultra low emission vehicles extremely attractive to company drivers.

"We believe there will be significant interest in battery electric vehicles, as well as plug-in hybrid vehicles, because their taxation basis is so beneficial to the employee,” commented Rob Marshall, operations director at Gateway2Lease.

"For example, a zero emission battery electric car is taxed at 0% this year rising to 1% and then 2% in the two following tax years. Essentially company drivers are getting a company car for nothing or very little. Meanwhile, employers benefit from vastly reduced NIC contributions, too, while pivoting towards a reduced carbon profile."

Example of the company car benefits of an electric car

The easiest way to demonstrate the enormous savings available to company car drivers is to consider the tax position of a driver choosing to lease a Kia e-Niro 64 kWh 3 150kW Auto model over a three year period.

Kia e-Niro 64 kWh 3 150kW Auto

Tax year to 05 April 2020-21 2021-22 2022-23
P11D value £36,795 £36,795 £36,795
Percentage change 0% 1% 2%
Benefit in kind £0 £368 £736
Tax @ 20% £0 £74 £147
Tax @ 40% £0 £147 £294

Source: Comcar

"As you can see, over a three year period an employee at the 20% tax rate will pay just £221 in company car tax," continued Marshall. "With an example like that, it's easy to see why the company car is to remain central to companies and fleet drivers in the future.

"And while ultra low emission PHEV models do not have such headline grabbing benefit in kind, they are still unbelievably competitive."

Arval's Sadlier added:

"The company car is an extremely time-efficient and cost-effective means of transport as well as being a strong employee benefit. Mobility solutions will need to match or exceed these advantages if they are to compete in the market."

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