TWO-thirds of company car drivers are opting for diesel models in a bid to lower their tax bills, new research from one of the UK's top contract hire and leasing companies has shown.

HSBC Vehicle Finance's current order book shows that diesel cars account for 66% of all orders as company car drivers switch to diesel in order to maximise the benefit-in-kind tax savings. Petrol-fuelled cars now account for one-third of orders.

HSBC said diesel orders had been rising following the introduction of the current emissions-based benefit-in-kind company car taxation system.

Peter Hollinshead, head of purchasing and vehicle management at HSBC Vehicle Finance, said: 'Since March 2002, one month before the new legislation came into effect, more diesel cars have been ordered than petrol. Prior to that there was a period of confusion, suggesting uncertainty about the new tax. But once drivers saw their April pay slips, the growth has been diesel all the way.

'The benefits have been lower tax bills for drivers and reduced fuel costs for businesses.'

According to data from the Society of Motor Manufacturers and Traders, greater use of diesel is contributing to a drop in CO2 emissions.

Last year, the average new car emitted 174.2g/km, 8.2% down on the 1997 baseline and 1.9% below 2001 figures. Advances in engine efficiency and design also mean it would now take 50 of today's cars to produce the same amount of exhaust pipe emissions as just one car from the 1970s.

Hollinshead predicted that diesel cars were likely to make further headway in the future.

He said: 'As cleaner diesels hit the market, conforming to stricter Euro IV exhaust emissions, we expect a further gain in popularity because these vehicles are exempt from the 3% diesel surcharge.'

HSBC's most popular diesel cars
1. Volkswagen Passat
2. Volkswagen Golf
3. Ford Mondeo
4. Vauxhall Astra
5. Ford Focus
6. Renault Laguna