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Company cars are still unbeatable for lower rate tax payers and businesses, regardless of WLTP

posted on 21/08/2018

WLTP has been the word on everybody’s lips this summer. Whether you’re a vehicle manufacturer, fleet decision maker or a company car driver, ‘what should I do about WLTP?’ is the key question.

Some manufacturers are yet to reveal the CO2 and economy figures for large parts of their product range, even though we’re only a week or so away from the 1st September deadline. The implementation of the new testing regime is causing disruption to ordering and vehicle supply with some OEMs – with company car drivers facing uncertainty about their personal tax liability as they simply don’t know what the CO2 value of the vehicle they’ve ordered will be until it arrives. It’s a far from ideal situation for drivers and fleets.

But WLTP is a subject that has been coming down the track for a while and forward thinking businesses and OEMs have been discussing WLTP and its implications for at least the last 12 months. We presented the subject at ACFO’s Autumn Seminar last September and hosted an in-depth session on WLTP with customers at our Alphabet Forum last November.

The general consensus is that the move from NEDC to ‘NEDC 2.0’ (or ‘NEDC Correlated’) by September will see an increase of 5-10% on average for CO2 output for vehicles. Of course, some vehicles will face above average CO2 increases. However, I’ve also heard in some circles a knee jerk reaction that WLTP, along with Benefit-In-Kind (BIK) tax increases, will be a further ‘nail in the coffin’ for the traditional company car scheme. Personally, I think that view is ill-informed and misleading.

From the consultancy work we’ve been doing with our customers over the past few months to help them prepare for WLTP, as well as the research we’ve supported with BVRLA, there are some important points that should be made clear:

The BVRLA have shown that nearly half (44%) of company car drivers are lower rate tax payers – far from the stereotype that all company car drivers are executives and ‘fat cats’.

Alphabet have analysed over 1,500 vehicles in our customers’ fleets which are due to be replaced over the next few months. For a company car costing £20,000, a popular price point with lower rate tax payers, even with CO2 output increasing from 97 g/km under NEDC to 107 g/km with NEDC 2.0, the increase in tax is only £6.67 per month in BIK.

Even factoring in the increases in BIK up to 2021, a lower rate tax payer will be paying less than £100 per month in BIK for a fully insured, fully maintained company vehicle. That is truly an unbeatable deal for a company car driver and one which organisations really need to ensure their employees understand.

Ultimately, expertise can help fleets and drivers navigate this uncertainty and choosing the right vehicle is key to making WLTP work for you. For example, a popular model like the new Ford Focus TDCi Zetec actually reduces its CO2 output in September 2018 from 99g/km to 91g/km. Similarly, with RDE2 diesels in development and expected over the next 12-18 months, choosing these vehicles in future will avoid incurring the 4% diesel surcharge announced in the November 2017 Budget. That’s before we even start talking about increasing the numbers of hybrids and battery electric vehicles on fleet.

From a fleet decision maker perspective, as with any significant change WLTP offers some challenges and opportunities with the right support and expertise. Even for ‘essential role users’, company cars are never just a means of getting from A to B – they are also a way to attract, reward and retain the right people.

All too often I hear that the true value of a company car for an employee – as well as for fleets – is only really understood when they no longer have a company car. Purely from an operational impact and business continuity view, have you put a price on what would happen in a scenario where your employees do not have access to a safe, modern, low CO2, well maintained and insured vehicle?

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