Company Cars: A Sacrifice Worth Making?

The UK fleet market is one of the most established in the world, but few are aware of the origins. Originally, the UK fleet market started to grow in the austerity period of the late ’70s. A time when pay rise freezes led to company cars being offered to attract the best quality talent to an organisation. Over the last few years, there have been many changes. The latest developments in the company car market are more aligned with its origins, employee retention and attraction.

Governments have and continue to clamp down on polluting vehicles. However, manufacturers always seem to be one step ahead, like the 2030 ban of ICE vehicle sales. Another example, the slashing of the Plug-In grant. Manufacturers have slashed their own prices to give to allow their customers add-ons to their vehicle whilst keeping costs below the cap! Additionally, many manufacturers are set to raise the bar more. Against this setting, coupled with NI rises and an increased squeeze on taxpayers and employers, we are seeing a new ‘vehicle’ for the company. Appearing with thousands of new company car drivers taking delivery of their first company car.

Salary sacrifice has long been established as a way of funding everything from childcare vouchers to mountain bikes. More recently, large employers from pharmaceuticals to NHS trusts have rolled out schemes to their employees. Growth, however, was hindered by a difficult and expensive scheme setup. Limited suppliers were making it difficult for all employers to offer such benefits. More recently however a number of specialized companies have opened up such schemes to smaller organisations. These schemes came with fantastic success with an employer, employee and scheme provider.

We asked our customers the main benefits of company cars schemes:

  1. The employee saves approximately 35% compared to sourcing vehicle retail. Further savings are delivered by more efficient vehicles reducing employees fuel bills.
  2. For cash takers and business users, the ‘duty of care’ requirements is met by the scheme administrator.
  3. The employer saves on employer’s national insurance payments.
  4. Widens the recruitment pool by offering such a benefit.
  5. Employees perceive the benefit as a pay increase in improving morale.
  6. Productivity is improved as any vehicle issue is handled quickly and expertly by the scheme administrator.
  7. Grey fleet admin is completely removed, and we manage any and all policies and communication.
  8. The environmental carbon footprint of business activities, including the employee’s commute to work, typically falls by a third.
  9. Customers differentiate themselves from their competitors and have a compelling sales message to potential employees and customers.
  10. In many cases, the scheme is cost neutral with minimal risk and minimal administration on part of the customer.

So why does the employee save?

The savings achieved are a result of the lease companies buying power. As well as the VAT treatment, most significantly, the employee making the sacrifice from ‘gross’ salary. All of this results in saving on income tax and NI. Benefit in kind is payable, so generally, the less polluting the vehicle, the larger the saving. In addition, the employer saves employers national insurance. Although, most of our customers tend to pass most of this saving back to the employee.

If we look at some of our most popular vehicles on the schemes, employees are enjoying the Citroen C1? And how could they not? For only £100 per month, with maintenance, recovery, tyres and even benefit in kind included in the package. Our customers also favour the Ford Fiesta, for £120 per month, and Audi A1’s for £199 per month. The low monthly cost with no deposit and better fuel consumption really is driving up adoption rates. WHILST driving down employees’ motoring costs! In turn, it’s another reason for manufacturers to keep the downward pressure on CO2 and fuel bills.

The majority of 25-45-year olds listing company cars as one of the most desirable benefits, it’s little wonder that the UK fleet market appears to be moving full-circle. Especially with more and more cars being provided as a benefit. This benefit attracts and retains the best staff for companies who cannot justify inflation-busting pay increases in the current climate.

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