Those with the best part of a decade in fleet under their belts may fondly remember employee car ownership schemes (ECOS) before they were killed off by the Optional Remuneration Arrangements (OpRA) changes in 2017. Those working at manufacturers and dealers, where the schemes are now typically found, are probably quite attached to them, because they get a new car – often in a high specification – exempt from benefit-in-kind and replaced perhaps every three or six months.
Employees effectively buy cars through the schemes with a loan guaranteed by the employer at a favourable corporate rate, typically with financial support or guarantees, and schemes may be available to family and friends. In short, it looks like a company car, but the employee is the legal owner, and it is a rather tidy perk. Manufacturers like them, too, because they are handy for staff retention and a useful way of getting pricier cars on the road.
In its 2024 Autumn Budget, the government said ECOS would be subject to BIK from April 2026, but it later pushed back the introduction to 6 October. An HMRC policy paper published in July said around 76,000 employees at 1,900 companies would be affected, and that it expected to earn £275m in the first year, then £220m, £195m and £175m in subsequent years.
Auto Trader thinks the change could affect up to 5% of new car registrations – around 100,000 – while others believe the numbers could be higher still.
“I think it’s closer to 200,000 or 300,000,” says Cox Automotive’s insight director, Philip Nothard, “I know one organisation with 300 employees that turns the cars three times a year. I also know a small dealership that defleets seven cars a month from the scheme. Bearing in mind the OEMs and the dealers use it, that’s a lot when you scale it up.
“It could put additional pressure on the fleet sector to take on the volume. That short-cycle product defleeted from the fleet and rental sector could serve a market that will be otherwise constrained.”
Whatever the numbers, impending tax means ECOS are destined to fall, and current recipients are not going to be able to buy what could be a £50,000-plus car every three months. They also flow readily into the used market, which is where fleets should take note, because there is a question about the ripple effect.
“We won’t have as many of those six-month-old cars going back directly into dealers or into the used car market,” explains Dylan Setterfield, head of forecast strategy at Cap HPI. “It’s not massive volume, but it could potentially have a positive impact on used values, simply because we’re looking at decreased supply, but that happens in two different ways, depending on what the model is.
“If it’s something that’s been out for five years, the two- and three-year-old values might not be impacted at all, and you see an increase in the difference that a one-year-old car, for example, gets over a two-year-old, and a six-month-year-old gets over a one-year-old. If it’s something new on the market – only six months old – then that will move the whole range into a higher position. And, of course, a lot of vehicles are somewhere in between those two positions, so it is a bit of an artificial situation.”
Auto Trader’s head of strategy and insights, Marc Palmer, does not think the move will have much impact on used values, because the number of cars is relatively small when split across manufacturers and retailers.
“We’re probably talking 40-50 brands selling cars in decent volumes… and maybe 35-40 with large networks. It’s very, very split, and it might be a just few cars a month, so at a used market level, it’s not a lot.”
He adds that there will be “lumps” as manufacturers with a significant UK presence use ECOS more liberally. This applies particularly to those with British factories – think BMW/Mini, Ford, JLR, Nissan and Vauxhall – and to the likes of the VW Group and Mercedes-Benz, with sizeable UK offices.
“Some manufacturers do have quite a lot of these ECOS cars,” he explains. “Of the roughly 100,000 that might be registered in a year, you’ve got to think about brands that are headquartered here, brands that have got plants here – big employee representation – but there are also brands that won’t do very many.”
Manufacturers and dealers are expected to look to other channels for staff cars and to bolster their used car supply – salary sacrifice among them.
“Are you going to try and move everybody into more of a salary sacrifice scheme?” says Setterfield. “But they won’t be on six-month contracts anymore or getting new cars as often as they’re used to.
“What we’re seeing at the same time are increasing discounts. And there is potential that, when the discounts get to the stage where you can’t really increase them anymore, then we start getting into a situation where some cars are forced into the market via pre-registrations.”
Dealer pre-registration is already on the rise and has historically been far from good news for used car values. However, nearly new cars have been in short supply for most of this decade and, according to Auto Trader’s August 2025 Monthly Market Intelligence update, year-to-date pre-reg volumes were 43% below 2019 levels, so it is not a worry yet.
A source familiar with manufacturers told Business Car that most of them use the supplier Car Benefit Solutions (CBS) for ECOS: “It seems that the OEMs have said to them ‘you sort this out’. CBS are very good, have a good reputation and most OEMs feel confident that they can find a solution.” We attempted to get in touch with CBS for comment before this article went to press.
There is still around a year before the tax on ECOS kicks in and at least one fiscal statement from the government (the Budget is scheduled for 26 November). If it sticks to its guns, then manufacturers and dealers will begin to move away from the schemes before October 2026, and any impact on the new and used markets could start to reveal itself before then.
Frame them as posh, tax-free cars and, on paper, ECOS seem a reasonable focus for the cash-strapped Treasury, but HMRC’s forecasts about the revenue it stands to earn from the change seem short-sighted. Companies avoid tax-inefficient schemes like the plague, especially when alternatives exist, even if they are lesser perks – see the fleet sector’s ‘abandon ship’ approach to ECOS for details.
As reasonable a target as they may seem, the government cannot crank up tax and simultaneously consider ECOS a credible multi-year source of income. Then there is the question of the revenue from VAT and VED generated by frequently registering high-value new cars, and whether removing ECOS has the potential to be loss-making for HMRC.
Vertu Motors chief executive Robert Forrester wrote to the Treasury in August, imploring it to reconsider the change, which he claimed could cost HMRC £7m purely from the 250 Vertu employees on the schemes.
Details of the letter were shared in the Sunday Times, in which he echoed Auto Trader’s suggestion that ECOS account for around 5% of new car registrations and said: “Aggregate exchequer income is reduced from £32,500 a year to £4,505 for each employee.”
He said the move “will mean current ECOS volumes will not be produced and sold in other channels”, and that it “risks reducing vehicle volumes… and damaging both the new and used car markets”.
Setterfield describes ECOS as: “Not just some kind of moneymaking scheme. It’s an accepted business practice, which has been a perk for people working in the motor trade. You can argue that the family and friends element that some of the manufacturers have been doing is against the spirit of it, but if it’s going to disappear, then those people will just do something else.”
ECOS tax is neither the biggest issue on fleets’ plates nor does it seem diabolical threat to used car prices, but it is one to watch because of its potential to shape the supply and availability of nearly new cars – that, and the demand for salary sacrifice schemes and ex-rental vehicles.
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