Blue Poppy

Company car consolidation

Reports of the company car’s death have been greatly exaggerated. But is the sector struggling on with a chronic condition, or on a rapid road to recovery?

The leasing sector is set to grow over the next year or two, but the jury is out on whether any of this growth will come from the company car market.

Some believe that cash allowance opt-outs will continue to shrink demand for company-managed vehicles as over-taxed workers are lured by the freedom and value for money offered by personal contract hire or the dreaded grey fleet.

The uncertainty created by WLTP and the Treasury’s gradual ratcheting up of company car tax has sent the sector into a terminal tailspin.

Others point to a growing number of cash takers that are being lured back by the no-hassle security of a company car. They believe that the impending arrival of a 0% company car tax rate for electric vehicles will be a game-changer. Many of the employees opting out of company cars were low mileage perk drivers. As they begin to look at their next car choice, a low-tax, cheap-to-run electric company car - with all the risk for this new technology borne by their employer - will seem very attractive.

Regardless of what happens, the continued health of the company car market is no longer the fundamental issue that it once was. No-one is relying on the company car market for their future business growth.

The inexorable rise of personal contract hire, digital sales channels and electric products represent the big opportunities for the leasing market. Personal contract hire continues to thrive as consumers become more comfortable with the concept of vehicle usage rather than ownership. New car registrations might be falling, but the leasing share of that pie is growing.

Many of the initial concerns about the administrative burden or profitability of personal contract hire are being addressed. New digital platforms are enabling leasing companies to provide a more automated offering, freeing up employees to spend more time providing the consultancy that their customers are increasingly demanding.

 

KEY 2020 TRENDS

 

  • The transition to electric vehicles will lure grey fleet drivers into low mileage perk company cars

  • Increased certainty on Benefit-in-Kind tax will halt the decline in company car numbers

  • The company car will continue to lose its supremacy within business travel strategies

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