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A certain narrative has arisen around company cars in recent years; specifically, that while the age of the company car is far from ‘over’, the numbers of such vehicles are at least in a sustained decline.
For evidence of that, one would only need to look at recent headlines from Fleet News, which reported in July 2021 that there had been a substantial fall in the numbers of people forking out for company car tax.
More specifically, the latest benefit-in-kind (BIK) data from HM Revenue & Customs (HMRC) indicated that there were some 800,000 drivers of company cars in 2019/20, which was quite a hefty drop from the 870,000 recorded for the previous year.
What’s Caused the Supposed Fall of the Company Car?
Some of the reasons for the apparent fading of the company car seem more obvious than others. Over the last two years, of course, we have all had to deal with the heavy disruption caused by the coronavirus pandemic, with many professionals choosing (or being forced) to work from home much more frequently than they might have done prior to the emergence of COVID-19.
But it’s also true that the trend of the alleged slide in company-car usage was observable long before the coronavirus crisis. After all, back in 2015/16, there were reported to be about 960,000 employees receiving the benefit of a company car, which equates to an overall decrease of 160,000 over the past half-decade.
In any case, it will take a little while for data to filter through indicating the full impact the COVID-19 pandemic has had on the numbers of company cars on UK roads today. We must, therefore, consider other factors potentially driving down the figures – HMRC, for instance, having claimed that the reduction is at least partially attributable to employers shifting from submitting P11D returns to collecting tax on company cars through payroll.
It is also thought that many professionals may have become more confident in recent years to not depend quite so much on company cars, due to such factors as the widespread availability of highly affordable personal contract purchase (PCP) deals, and the greater reliability of cars in general. If this describes your situation, you may have decided to simply buy your workaday car privately, especially as private fuel is also no longer a perk for a lot of employees.
How EVs Could Be Powering a Revival for Company Cars
However, arguably the biggest factor of all in the recent sharp decline of the company car, is the ever-heightening BIK taxation of both petrol and diesel vehicles. This brings us neatly onto the subject of the electric vehicle (EV), with company car drivers opting for a pure EV not having been required to pay any BIK tax in 2020/21.
The tax treatment of these different categories of car has made for quite the contrast so far. While petrol and diesel cars have been hit by drastic rises in the associated company car tax over the last five years – partly due to the yearly increase in the ‘scale charge’ based on CO2 emissions – the charge for a full EV during 2021/22 has been just 1%, albeit increasing to 2% from next April.
Furthermore, the UK Government’s 2035 delivery plan for the transition to zero-emission cars and vans has reaffirmed a commitment to maintain a low company car tax scale charge for full EVs until April 2025. It’s no wonder, then, that so many company car drivers are being attracted to the opportunity to keep their bills tiny by plumping for an EV, to such an extent that fleet vehicle providers have been suggesting company car numbers are on the way up again.
Is Your Firm Seeking out Affordable Company Car Finance?
There are still some factors that should make us cautious about declaring the company car is undergoing a revival as an essential business perk.
As well as the aforementioned COVID-19-related uncertainty as to future working arrangements and trends, the pandemic has exerted a slowdown effect on car registrations, and the EV market in general still isn’t as developed as it surely will be in years to come. Still, the above will make for significant food for thought as we await the release of further BIK numbers from HMRC over the next few years.
If you’re a business owner looking to make company cars more affordable, there are many companies, like Car Finance Genie, offering car finance options for businesses.