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The great diesel dilemma

Date: 21 August 2007

filling up

As petrol and diesel prices near parity business car managers must follow our example and do their maths before committing to one fuel or the other, writes John Mahoney

There you are, smug in the knowledge your drivers are pounding the nation's highways and byways in the most efficient cars your business can afford, when the fuel bill lands.

It's a big one, but that's ok you tell yourself - fuel's expensive nowadays and surely things would be a lot worse running a fleet of thirsty petrols?'

Then, a couple of months back, BusinessCar lands on your desk carrying the startling headline 'Going diesel only pays off for 1 in 5'.

Fuel card specialist Arval has conducted some sobering research. Of more than 400 businesses quizzed one-third had admitted to tying themselves to the black pump but of those only 21% had reduced their fuel bill. Most had expected savings of 15%. The poor number of those making fuel savings had been blamed on diesel's higher fuel and vehicle cost, and a firm's failure to calculate the true cost of the fuel over three years.

Despite the results, according to Arval the demand for diesel actually continues to rise, with the number of diesels on fleets growing from 73% to 79% in 2007.

And as Arval's figures suggest, diesel can, of course, work. Unfortunately for businesses, the calculations are not as simple as they are for retail buyers, where the only real considerations are the initial cost of the car and the total cost of the fuel used. In business, there are other important, additional factors. These include: benefit-in-kind tax, the difference between service, maintenance and repair costs, and the difference in depreciation costs between the two fuels.

To find out which fuel was best we took three drivers in differing but typical circumstances and compared whether they would be better off with petrol or diesel version.

The SMR and fuel cost, normally calculated over three years and 60,000 miles, were adjusted accordingly for our three drivers. We used the latest Arval petrol price of 97.1p against 97.6p for diesel.