Whole life costs are critical basis for company car selection

Vehicle whole life costs should be the critical basis on which businesses select which company cars to operate, yet evidence suggests as few as one-in-five organisations use that strategy.

Vehicle whole life costs are critical because they highlight that cars which may cost the same in terms of list price or monthly lease rental actually do not in terms of cost per mile to operate.

The cost difference can build up over the lifecycle of a car. The principle of basing choice lists on whole life costs can help both employers and employees. For employers it can save money, and for employees, even if the whole life cost figures on two models are identical a different CO2 emissions figure will influence the level of benefit-in-kind tax due.

GE’s Company Car Trends report has tracked fleet industry developments for almost a decade via quarterly research among fleet decision-makers, and revealed that many organisations ignore whole life costs in drawing up vehicle choice lists.

Asked to highlight criteria used in setting company car choice lists, only 20% of respondents used whole life costs in 2013 compared with 29% three years ago. That compared with 70% who said they used a CO2 emissions limit, while others factors influencing choice list compilation included fitness for purpose, vehicle lease rates and safety features.

However, there is sometime confusion as to what data to include when using whole life costs to compare the fleet operational viability of individual cars.

One figure that is frequently not included is employers’ Class 1A National Insurance contributions paid on the value of benefits-in-kind such as company cars.

If you would like impartial advice on whole-life costs of vehicles, please contact our knowledgeable team. We can also provide you with our handy whole-life cost calculator tool which does all the calculations for you.

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