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Price bandings cost companies thousands

Date: 20 September 2006

Companies using list price bandings for driver car grade allocations are losing several thousand pounds on each contract, according to tax experts Deloitte & Touche.

What's more, company car drivers will also be penalised with additional tax, which can reach in excess of £1600.

"In a group of six vehicles in the £22,000-£23,000 price banding, the impact on overall company costs can be significant, even though the list price of the vehicles is roughly similar," commented Nigel Morris, senior manager employer solutions, Deloitte & Touche, at the recent Future of Fleet seminar organised by GE Commercial Finance Fleet Services.

"Over a typical three years/60,000 mile contract, an employer can spend £2319 more than the cheapest in a basket of six cars, while the driver is penalised an additional £1666," continued Morris.

Based on whole-life cost criteria, a Saab 9-3 TiD was £64 per month cheaper than the most expensive, a Ford Mondeo 2.2 TDCi saloon, in the example group of vehicles.

"Fleets need to take control of this area of expenditure, and make more informed choices that can lessen the impact of running costs and taxation charges," said Morris.

Morris said fleets should consider the impact of taxation on their drivers carefully. Over the past 20 years the benefit-in-kind tax charge had increased 15 times. It had risen from £262.50 to £3910 on an £18,000 vehicle, according to Deloitte calculations.

"CO2 remains the dominant factor for taxation at the moment," concluded Morris. "But will the Treasury look at other greenhouse gases in the future?"