The impacts of the new 0% EV tax rates for fleet leasing businesses

David Bushnell, Principal Consultant, Alphabet GB, discusses the new 0% tax rates for electric vehicles (EVs) and their impact upon fleet leasing businesses

With carbon emissions a key global issue and the UK continuing on the Road to Zero, fleet managers are in the midst of a significant industry shift. Expected new Benefit-In-Kind (BIK) tax rates and increased demand for electric vehicles and plug-in hybrids, makes now the perfect time to move towards an electrified fleet.

Whole life cost savings

There are several initiatives to encourage businesses to move away from traditional petrol and diesel and convert fleets to electric vehicles, but one consideration that is often overlooked is the whole life cost (WLC) of a vehicle. When comparing WLC of a combustion engine with electric vehicles, the cost saving is substantial when choosing electric. This is because the whole life cost looks at the entire life cycle of your fleet vehicle and not just the upfront purchase cost, which may be higher for EVs.

WLC takes into consideration depreciation, fuel costs, vehicle tax, servicing, maintenance and repair costs, so when comparing WLC of diesel vs electric, we also need to consider the Lease Rate Rental disallowance charge that is incurred by businesses for vehicles above 110g/km, as well as the significantly lower National Insurance tax cost of EVs and the lower business mileage reimbursement costs.

Overall, while the vehicle rental cost of a diesel hatchback might be £384 per month compared to an electric hatchback at £407 per month, the employer saving of the WLC of an electric vehicle could be as much as £1,500, making WLC one of the most important factors for fleet managers to consider when making purchasing decisions.

New company car tax

One of the key elements for calculating WLC is the tax costs for the business. With a clear Benefit-In-Kind tax incentive now outlined by the Government to help its drive towards the Road to Zero, businesses should be taking full advantage of the cost savings available and seriously considering the move to EVs. Plugin Hybrid-electric cars also attract considerably lower tax costs compared with traditional vehicles, providing another great option for fleet managers.

As local councils in big cities begin to take steps to drive the adoption of EVs, this makes it a more important time than ever for fleets operating in these areas to consider their fleet purchasing choice. London’s Ultra Low Emission Zone (ULEZ) aimed at improving air quality now operates a 24/7 charging vehicles and Cities such as Bristol are proposing to take an even bigger step, becoming the first UK city to completely ban diesel cars from its roads.

Increasing demand

Since the change to the Benefit-In-Kind tax on electric vehicles, demand for EVs and hybrids has quickly risen, showing the appetite and change in mindset already happening in the industry. At Alphabet, we’ve already seen 165% rise in orders on plug-in hybrids and electric vehicles and expect this to continue rising throughout 2020, as an understanding of the benefits of EVs grows.

Infrastructure to support the EV movement in the UK is also moving in the right direction. Nissan recently revealed drivers now have more public places to charge electric cars than they do petrol or diesel pumps – In December Zap-Map stated there are now 10,400* electric vehicle charging locations across the country in comparison to 8,400 fuel stations-down from 18,000 in 1992. While there’s still more work to be done on the charging infrastructure in the UK, ensuring these are readily available in more locations, these are positive steps in the right direction, reflecting the demand for EVs in the country.

With the UK’s Road to Zero strategy, increased charging infrastructure and the cost savings on whole life costs for electric vehicles, there are increasing benefits for businesses electrifying their fleets, meaning now is the time for organisations to make the move to electric.

Source https://www.zap-map.com/statistics/

Alphabet also hosted a webinar with Fleet News this week on the topic of WLTP: https://register.gotowebinar.com/register/2324734122933740291?source=FN+righthand+column