Future of company cars secure despite WLTP, according to Alphabet
05 September 2018
Author: Sean Keywood
The leasing company says new tests for vehicle emissions will not put off drivers. Sean Keywood reports.
Claims that new vehicle emissions tests will be another 'nail in the coffin' for the traditional company car have been dismissed by leasing company Alphabet.
From the beginning of this month, official figures for car fuel economy and emissions switched from being derived from the old NEDC testing regime, to correlated figures taken from the new WLTP tests.
Although these new figures are designed to resemble the old figures - effectively a halfway house until the new, more real-world-relevant WLTP figures are adopted in full in 2020 - they have still seen an average increase in CO2 emissions, on which company cars are taxed, of around 5-10%.
However, Alphabet chief commercial officer Simon Carr stated that the potential effect of the change had been overstated.
He said, "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."
Carr said that consultancy work Alphabet had carried out with customers to help them prepare for WLTP, along with research it had supported with the British Vehicle Rental and Leasing Association (BVRLA), had revealed evidence to support his argument.
He said the BVRLA had shown that, far from a stereotype that company car drivers were all highly paid executives, 44% of them are lower-rate tax payers.
He said that analysis by Alphabet of customer fleets had found that for a company car costing £20,000, a popular price point with lower-rate tax payers, even with a CO2 output increasing from 97g/km to 107g/km with the new regime, the increase in tax would only be £6.67 per month
Carr added that even factoring in scheduled BIK increases up to 2021, a lower-rate tax payer would be paying less than £100 per month in BIK for a fully insured, fully maintained company vehicle.
He said, "That is truly an unbeatable deal for a company car driver and one which organisations really need to ensure their employees understand."
Carr said that choosing the right vehicles would be key for fleets in making the change work for them, citing the example of a Ford Focus TDCi Zetec , which he said would have a reduced CO2 figure.
Also, he said new diesel cars able to meet Real Driving Emissions 2 standards - which would avoid the 4% BIK surcharge incurred by the fuel - were expected on the market within the next 12 to 18 months.
"That's before we even start talking about increasing the numbers of hybrids and battery electric vehicles on fleet," he added.
From a fleet decision-maker perspective, Carr said that as with any significant change in the industry, WLTP would offer some challenges, but also opportunities with the right support and expertise, and would not diminish the overall benefits of company cars.
He said, "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?"