Employee car ownership scheme loss to impact recruitment and retention

The ending of employee car ownership schemes (ECOS) will negatively impact staff recruitment and retention for almost half (45%) of dealers.

That’s according to May’s Startline Used Car Tracker, which also found that more than a third (38%) think the car schemes are an important benefit for dealer staff.

Employee car ownership schemes, which are also widely used by OEMs, enable dealer employees to buy new cars at highly discounted prices on short term leases with low repayments while attracting no benefit-in-kind or national insurance payments. At the end of each cycle, many vehicles go directly into dealer stock.

The Treasury promised to end what it labelled “contrived” employee car ownership schemes in last year’s Autumn Budget, with new rules due to take effect from April, 2026.

However, six months after the Government made the pledge, the industry is still waiting for a promised consultation and legislation to enact any change. 

Paul Burgess, CEO at Startline Motor Finance, said: “Attracting and keeping good quality staff remains an issue for many dealerships and the ending of ECO schemes by the Chancellor planned for next year is clearly felt to remove a key element of employee benefits packages

“What is perhaps noteworthy is that a large number of dealers – more than four out of 10 – also feel that this is part of a pattern from the Government, that they are just generally making life quite difficult for dealers.

“Perhaps everything from higher employee national insurance to substantially increased levels of minimum wage can be placed under this heading although, on the other side of the balance sheet, we now have sensible revisions to the zero emission vehicle mandate.” 

The Treasury estimates that ending ECOS will be worth an additional £275 million in tax take in its first year (2026/27), £220m in 2027/28, £195m in 2028/29 and £175m in 2029/30.

Interestingly, Startline’s Used Car Tracker showed that more than a third (35%) of dealers agreed with the Government’s assessment, saying ECO schemes were always questionable, while almost a quarter (24%) have already replaced them with another option for staff.

Burgess said: “This finding suggests that around a third of dealers feel ECO schemes are fundamentally problematic and it was perhaps only a matter of time before action to end them was taken by the Treasury.

“However, it’s positive to see that a quarter of dealers have already looked to replace their ECO scheme with a new form of car provision for staff, and these will hopefully help to resolve any employee attraction and retention problems that are arising.”

The Startline Used Car Tracker is compiled monthly for Startline Motor Finance by APD Global Research.