Fleet News

Fleet funding: spotlight on employee car ownership schemes

CAR ownership schemes can be implemented into a fleet policy in a seamless manner, providing financial protection for both the employer and employee. However, a lack of awareness is preventing fleets from embracing this alternative form of funding, according to Mike Lancey, a consultant at 2003 Fleet News Award-winning Whitechapel.

Lancey says employee car ownership schemes can mitigate the worst effects of last year's changes to benefit-in-kind (BIK) taxation, protecting drivers from the CO2 emission-based taxes, but a lack of understanding means the uptake remains slow.

He said: 'The uptake of car ownership is still held back by complicated explanations and an intrinsic lack of understanding, leaving a number of important questions and issues unresolved.

'A common misunderstanding is that employees will find it difficult to comprehend exactly what they are entitled to and how to effectively use their new cash allowance. 'In fact, an increasing number of employees involved in car ownership schemes are finding quite the opposite.

'Drivers may already have a ratebook provided by the company to help with this, but they also have alternative resources available through the internet.

'Online information, from industry bodies and specialist service providers, presents employees with quick and easy access to details on otherwise complicated grey areas such as tax, legislation and allowances.'

The prospect of dealing with an administrative burden also deters some companies from implementing a car ownership scheme, but Lancey claims that the administration involved is minimal.

He said: 'There is no need for the employee to be inconvenienced or swamped with paperwork as the car ownership provider and its consultants ensure the necessary infrastructure and processes are developed and are in place to minimise disruption for both drivers and the business.

'Companies and employees believe these schemes are difficult to implement and are administrative and time-intensive. In reality, the mitigation of BIK taxes provided by car ownership can actually reduce much of the heavy administration burden traditionally associated with company car tax compliance.

'Administration and time is reduced further as car ownership means companies no longer have to maintain complicated databases and submit details of each of its vehicles' CO2 emissions.'

The role of the fleet manager is also equally as important when operating car ownership schemes, according to Lancey.

He added: 'The simple switch is often resisted by fleet managers who believe the implementation of a car ownership scheme will leave them without an effective role in the future or, at worst, made redundant. Clearly, such fears may well cloud their judgement when considering car ownership as a funding arrangement.

'The size of the fleet and how the car ownership scheme is implemented determines the degree of ongoing involvement from HR and purchasing departments and, subsequently, the role of the fleet manager.

'Where car ownership schemes are in place, there is a clear role for the fleet manager as a key point of contact, taking responsibility for a wide range of factors including the scheme in its entirety, determining and maintaining the value and structure of the cash allowances, negotiating fleet services and manufacturer support, reviewing insurance premiums and being proactive in risk management policies,' he said.

If a fleet decision-maker implements and develops a car ownership scheme alongside its current company car scheme, the process can be introduced without difficulty.

Lancey said: 'A stepped process can be adopted so a scheme can be rolled out over a period of time alongside an existing scheme, while outstanding contracts run their course.

'This allows for a smoother implementation and gradual change for both the employee and the employer. Car ownership employees can also continue to benefit from some of the hidden extras of the company car, such as corporate insurance discounts.

'Employers are often unaware that these features, normally taken for granted with company car provision, can still be made available. A properly structured scheme can easily integrate cash allowances, business mileage and employee tax savings in such a way as to ensure costs are reduced when compared with previous expenditure,' he added.

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