Changes in EU legislation in relation to emissions targets have paved a way for change amongst manufacturers. For company drivers, the increasing pressures relating to company car tax (benefit in kind) and CO2 means that emissions are now also important for the individual driver.
Traditionally, fleets were run based on seniority or banding, so that junior staff might receive a certain engine size e.g. 1.6 litres whereas senior staff and directors would receive larger engines e.g. 2.0 litres plus. Because of the changes, drivers are more and more aware of their tax exposure and so these traditional approaches do not necessarily hold good for all fleet managers and drivers.
Why are Company Fleets Changing?
First and foremost, tax. A driver using a company vehicle creates a benefit-in-kind situation which is taxable by HMRC. The calculation is based upon a) the P11d value of the vehicle; and b) the CO2 of that vehicle. The lower CO2 emitting cars therefore attract a lower level of tax. While the company may be able to supply the car of dreams, a driver has to seriously consider their exposure to tax, as it might simply be unaffordable.
Fleets are now using the Whole Life Cost method to procure and manage their vehicles. This looks at all direct costs of the vehicle, not just the actual monthly rental for example fuel, maintenance and National Insurance contributions. These allow companies to select a number of vehicles which meet budgetary requirements.
Due to the ever rising cost of fuel, company car drivers and their fleet managers are revisiting car choices. If a company is paying for a driver’s fuel, they are likely to be more conscious to what vehicle is being driven. This is not to say all fleets are turning towards Hybrid or electric vehicles but perhaps more efficient vehicles which offer competitive MPG statistics.
Finally, it is fair to say that environmental awareness has altered sensitivity towards vehicles. Some organisations have a dedicated corporate responsibility approach and this can influence vehicle choice. The wider public too are now more considerate to the environment and this will influence the car they choose.
What are manufacturers doing?
Over the last 3-4 years, manufacturers have been investing into technology in order to increase driver satisfaction but also to meet the requirements of the European Union i.e. addition of turbo chargers or hybridisation. This has essentially allowed engine sizes to be reduced, while increasing the output of the vehicle.
Take for instance a Volkswagen Golf, once a 1.9 TDI emitting 132g/KM and achieving 56.5 MPG on a power output of 105bhp. This was radically changed to a 1.6 TDI variation emitting 119g/KM and achieving 62.8 MPG on a power output of 105bhp. Very recently, this same engine was improved so that the vehicle emits just 99g/KM of CO2, achieves 74.3 MPG but keeping the power output of 105bhp. All this in just a 3-4 year timescale.
How are fleets changing?
In a recent study by Lex Autolease, it was found that over the last 7 years, the average engine size of fleet vehicles has been decreasing. In particular, the last couple of years has seen a sharp decline in engine size. The actual statistics show the average engine size has now fallen below the 2 litre mark.
The future of Fleets
The commitment of both the EU and the UK government to emissions means that fleets will continue to change. Thankfully, manufacturers are more savvy to the changes and are furtively producing cleaner and sharper products which allow the company car driver to avoid harsh taxation without having to sacrifice comfort and performance.