Factors that make funding more complicated 

Changes in legislation and planned incentives mean fleets should be consulting their leasing company to plan the best way forward

The funding landscape is changing. The decision by the UK to leave the EU, along with some key legislation changes announced in recent years, mean choosing the cheapest option for funding fleets is no longer as simple as picking the cars with the lowest CO2 emissions.

We are still trying to predict what Brexit will mean for our industry. Prime Minister Theresa May recently announced the proposed strategy includes plans to leave the single market. This has cast further uncertainty around what this will mean for UK trading.

Today fleets are acting as both a valuable business tool and an integral part of a company’s total reward package. This dynamic set-up needs careful management of costs so it is integral that fleets understand the impacts on funding costs.

Although we don’t know for certain, we can anticipate seeing factors relating to: manufacturer price stability, cost and availability of funding, taxation and legislation changes, and accounting treatment changes over the next few years.

What immediate changes can we expect to see to the funding landscape?

The Government is utilising policy to further its green agenda as demonstrated by the decision in the Autumn Statement 2016 to exempt ultra-low emission vehicles (ULEVs) from the changes to salary sacrifice schemes.

Incorporating ULEVs on-fleet is further incentivised by the changes to company car tax coming in from 2020. We are seeing fleets struggle to understand the best way to position ULEVs within policies in order to realise the cost benefits.

With this in mind, now is a good time to sit down with your leasing company to take a look at the different options to ensure you are ready when the incentives are in place.

With some manufacturers already positioning themselves for the trade impacts of Brexit, we are also seeing some instability in vehicle pricing.

We advise customers to regularly review their fleet manufacturer make-up to maximise opportunities to enhance support terms and avoid future price increases.

There are also a number of legislation changes arriving over the next few years, starting with VED rates in April 2017. Some cars will see greater VED increases than others, among them lower CO2 emitting cars and those with a list price in excess of £40,000 (who will pay a supplement of £310 on the standard rate). Typical impacts are £10 per month and £20-£25 for cars priced at over £40,000. Therefore it is important to understand the costs of cars on policy whereby they may tip over the £40,000 bracket.

What are the long-term funding implications?

Over the next couple of years, further funding considerations will be centred around changes to the capital allowances regime, as the cap is lowered from 130 g/km to 110 g/km for standard rate writing down allowances.

In addition, we await the announcement, due to be published in the spring Budget, on how taxation will be aligned to lease accounting standards that will see contract hire brought onto balance sheets from January 2019.

As you can see, most of the factors touched on will impact all funding options.

With so many variables in the UK economic environment at present, fleets need to make sure that policy and vehicle choice decisions are reviewed regularly with leasing providers to ensure funding costs are appropriately controlled. We know that no two fleets are the same and through this Fleets Informed programme we hope to help you find the best solution for yours.

For more information about Zenith go to zenith.co.uk, email fleet@zenith.co.uk or call 0344 848 9327