Fleet News

Lex Report predicts company car perk will become even more attractive

DEMAND for company cars will increase over the next few years as staff find a company car becomes even more attractive under new tax legislation.

Low mileage drivers are penalised under the current company car tax system because they pay the full rate of company car tax, while high-mileage drivers receive significant discounts.

But when CO2-based company car tax is introduced, mileage will not be an issue in calculating company car tax, meaning drivers may be tempted back into company cars.

The Lex Vehicle Leasing/Fleet News survey findings will add to the debate over the effect of CO2-based company car tax. The Inland Revenue has backed up the findings of the report, with predictions that there will be an extra 200,000 tax-paying company car drivers in the years following 2002. The view clashes with the opinion of PricewaterhouseCoopers, which predicted that there could be some 130,000 company car drivers moving over to cash-for-car schemes instead.

But the Lex/Fleet News report reveals that the importance placed upon the company car by drivers could see them staying loyal, particularly as it is considered essential to the job by 80% of drivers.

The survey found that more than half of companies offered their drivers no alternative to the company car, while nearly 30% offered a pay increase or a lump sum. Just 3% currently offered personal contract purchase schemes.

The report said: 'Alternatives to the company car are more likely to be offered in larger companies with larger fleets. But while offering alternatives is one thing, employees taking them up is another. Overall, fleet managers say that just 6% of eligible employees take up alternatives to the company car, although it is higher in bigger companies.

'The low take-up reflects the essential nature of a company car to most drivers. When the new tax regime is introduced in 2002, we expect more companies to offer non-essential users company cars as there will no longer be a penalty if they cover low mileages.'

Just 1% of company cars are financed through personal leasing schemes, although 3% of fleet managers offer the option to employees. One in five company car drivers has considered a scheme as an alternative to the company car, but has rejected the idea.

The most common reasons for rejecting the option were because it was deemed 'too expensive', according to 51% of the 328 company car drivers interviewed, while 14% said their employer insisted they have a company car. However, the survey also showed that 44% of drivers would consider a PCP again in the future.

For more detailed data and analysis from the most comprehensive survey of company motoring in the UK, see this week's edition of Fleet News - out on Friday.

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