How the Company Car Market currently stands

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There are still many companies that need their staff to be able to travel during the working day and therefore need commercial vehicles for them to be able to use. There are different ways that companies can finance these vehicles through company car schemes, salary sacrifice or vehicle hire.

Many companies decide that letting their employees have a company car is the best option. This is not only because many employees are motivated by the idea of having a company car but that it can be very efficient and economic for businesses to offer this as well. Rosedale Leasing, who are car business leasing specialists have analysed how this specific market is doing at the moment.

Company Car Statistics

They start by looking at 2014 when the company car market was doing really well. Half of the UK’s new car market was actually company cars and that added up to over 1.2 million new cars being sold as company cars, according to the Society of Motor Manufacturers and Traders.

In 2016 there was a growth on this with 51% of new cars being for company fleets and business use added on a further 3.9%. This was actually over 1,3 million cars in total which was more than the 1.2 million which were registered for private use. Interestingly the most popular model of car expanded across both the private ownerships and business ownership of cars with Ford Fiestas being the most popular followed by Vauxhall Astra, Ford Focus and then Nissan Qashqai.

This growth was across the UK, but it was also mirrored across Europe with over 60% of the new car market being company cars in Germany and Sweden.

Arval put out their Corporate Vehicle Observatory report in 2017 and reported that 39% of people who responded to them asking, offered their employees a vehicle option. 14% of employers offer a company car or an allowance offer to all drivers that work for them and 21% offer it to some of their drivers. Only 3% of companies offered only a cash allowance to drivers, which just shows how popular company cars are and how companies prefer to offer them.

In the UK governments Autumn Statement in 2016 it was reported that company benefits, from employer to staff will be limited when offered through a salary sacrifice scheme. This is to re-evaluate benefits for tax purposes. This could mean that there will be some drastic changes to company cars in 2020/21. Companies were asked as part of the  Corporate Vehicle Observatory report as to whether this statement would change their viewpoint towards company cars. 39% said that they would only offer company vehicles, 29% said they would change to offering both options to drivers and very few said that they would give up company car schemes and replace with alternative methods such as car sharing.

Tax on Company Cars

In the UK there is a company car tax, which goes along with a company car. It is often called Benefit in Kind tax and is put on all company benefits that are not cash. In the case of a company car, the company will pay for the car and you will pay the tax on it.

In 2014/15 the total of company car tax as a percentage of total Benefit in Kind tax was 52% so just over half. The amount of tax paid is determined by the CO2 emissions and price of the vehicle. The HMRC has reported that for the 2015/16 financial year there were 960,000 employees that paid this tax which was a 1% increase in the previous financial year. Also 9% of this tax was paid in car fuel with about 180,000 employees paying for this. Altogether 60% of the Benefit in Kind tax was paid against company cars and fuel.

Future Predictions

It is thought that as the government has plans to clean up the air quality the petrol and diesel car market now has an uncertain future. It may be that businesses will need to start buying electric vehicles and this is something that many fleet managers are also predicting and planning for. An electric car is not only likely to attract less Benefit in Kind tax but there may also be some corporation tax relief due and lower National Insurance contributions.