Lloyds TSB autolease has been allocated the funding which will be available to all contract hire and leasing companies, short term rental companies and some manufacturers and converters.
The block grants represent a new initiative by Transport-Action to speed and facilitate the PowerShift subsidy process. These companies will be expected to pass on the full benefit of the grants to their customers.
PowerShift grants subsidise between 40% and 75% of the additional cost of converting a vehicle to run on alternative fuels. Historically, fleets and private individuals have had to order and often pay for a vehicle before applying for a grant, a process that created both cash- flow difficulties and uncertainty over whether the grant will be awarded.
Under the new system a contract hire company can apply for a grant for up to 250 vehicles and pass these on to its customers in the form of reduced lease rentals, said Jonathan Murray, director of TransportAction.
Alternatively, a manufacturer could apply for a block grant to cover vehicles for customers looking to buy cars outright. Buyers would then agree to receive the grant as a discount to the vehicle price.
Lloyds TSB autolease currently forecasts that the residual value of a liquefied petroleum gas powered car will be the same as its petrol equivalent. This means the dual-fuel car will depreciate by the additional cost of the conversion, typically about £1,800, equating to an extra £50 per month in lease rates without a PowerShift grant. But with a 75% grant the differential could fall to £12.50 per month.
'There will still be a small premium for the customer to pay, but an LPG car should be running 40% cheaper because of its lower fuel bills,' said Nigel Stead, managing director of Lloyds TSB autolease.
He added that the new bulk funding arrangements will allow the company to provide immediate authorisation to customers seeking lease quotations for alternatively fuelled vehicles.
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