A latest survey indicating that professionals no longer see company cars as an employment benefit has been refuted by many in the fleet sector as they say interest in business cars is soaring to new highs.

The Wade Macdonald research indicates declining availability of the company car as a benefit and even lower uptake

Specialist HR recruitment firm Wade Macdonald published a report earlier this month suggesting waning demand for company cars.

According to its survey of 850 HR professionals, only 10% of employees on average value company cars as a benefit, falling to 5% at a non-management level. Around one in five (21%) of all employees have access to a company car or allowance.

However, a look at its report reveals that access to a company car for the two upper management levels is significantly higher. Just over 34% of senior managers have access to a company car, rising to 44% at director level and above.

The research indicates that far fewer use the benefit, though, even if they have access to it. Only 9% of senior managers and 8% of directors actually use the company car they are entitled to. A total 5% of management utilise this benefit and only 2.5% of non-management, they say.

The report also suggests the company car benefit no longer comes as standard at certain levels and is now more dependent on employees’ need to have a car to be able to carry out the role.

Chris Goulding, managing director of Wade Macdonald, said changes in working practices, economic uncertainty and employee values may be reasons for an indicated decline in popularity of the company car benefit.

“Remote working has certainly had an impact on organisational management since the Covid-19 pandemic. Our previous research showed that only 10% of people now work in the office full-time. With less of a requirement to travel to and from work every day, it makes sense that people no longer see having a company car as a benefit that will improve their working life.”

Sustainability concerns and rising fuel costs may also be concerns, he added.

Meanwhile, according to Wade Macdonald, recent tax hikes and other economic pressures also mean companies are having to ditch salary sacrifice schemes that have been helping employees purchase electric cars.

The report is in quite marked contrast to latest SMMT figures that show demand by both large and small fleets in July was up 60.0% year on year and accounted for 58.3% of overall new car registrations. In contrast, private registrations rose just 0.3% last month and accounted for 41.7% of the market.

Research not in line with Association of Fleet Professionals’ experiences

Paul Hollick, chair at the Association of Fleet Professionals (AFP), said the research did not align with the experiences of its members – particularly with zero-emission company cars currently gaining from 2% Benefit-in-Kind tax ratings and seeing significant demand.

AFP chair Paul Hollick

“We don’t really recognise the findings in the press release version of the research and we note that the report itself is more positive,” he outlined.

“From the AFP’s experience, the fact is that ultra-low Benefit-in-Kind taxation for electric vehicles means that employee interest in company cars as a benefit is perhaps higher than it has been during the last couple of decades or even longer, whether they are delivered through a traditional scheme or alternative forms of provision such as salary sacrifice.”

Instead, Hollick said the only real brake on growth in the sector was supply – with waiting lists for some of the most popular EVs running to a year or longer.

But supply issues are already receding and the AFP added: “As production problems continue to ease, we very much expect to see a renaissance of the company car as a highly valued, environmentally responsible benefit in a wide variety of sectors.”

His comments are backed up by recently published HMRC figures which show that demand for company cars remained steady in 2021/22 – the latest year for which figures are available – ending several years of declining figures. This has been boosted by the low tax ratings for zero-emission cars, which have proved highly attractive in luring drivers back, supported by a rapid rise in salary sacrifice schemes to enable more drivers to capitalise on low BiK.

BVRLA data shows robust business contract hire and sal-sac uptake

The BVRLA also commented on the Wade Macdonald research. Toby Poston, director of corporate affairs, said the changing face of company car provision meant a company car was now less likely to be provided as a pure benefit when someone didn’t need one to do their job effectively.

Toby Poston, director of corporate affairs at the BVRLA

But he too said the HMRC data showed continued company car demand.

The BVRLA also pointed to the 2022 Autumn Statement, which saw the Government confirm that yearly company car tax increases from 2024/25 will be capped at 1% until 2027/28 to keep rates low – “giving a financial incentive to support the wider desire to ‘go green’,” according to Poston.

“That will continue the trend back into company cars, helping more drivers and companies ditch their older, dirtier vehicles. 24% of the BVRLA’s business car fleet are now battery electric vehicles (BEVs).”

The latest BVRLA Leasing Outlook Report also shows a marked divergence between demand for business and personal contract hire, with the former increasing its volumes year-on-year in Q1 2023, while the latter has suffered a sharp decline.

And the BVRLA actually says salary sacrifice demand is booming, up 41% year-on-year and making it the fastest-growing funding method in the UK.

Fleet Alliance reacts to ‘surprising’ report and underlines fleet and salary sacrifice growth

Glasgow-based leasing and fleet management specialist Fleet Alliance also said it was puzzled by the report and stressed that growth in the UK new car market was unequivocally being led by fleet and business sales.

Fleet Alliance CEO Andy Bruce

“Corporate sales have undoubtedly driven the new car market, especially within the EV sector,” said company CEO, Andy Bruce. “As a result, we’ve been puzzled by the findings of the report which do not reflect our experience in the marketplace at all.”

Bruce said fleet and business sales were being dictated by the sustainability agendas that most businesses now had in place.

“We are seeing growing numbers of our customers add either BEVs or hybrids to their fleets as they move to meet their own Environment, Social and Governance (ESG) timetables. Companies and their employees want to play their part in the climate change agenda,” he said.

Forward orders at Fleet Alliance now comprise 66% BEVs and hybrids as a result, with exponential growth rates for both over the last 18-24 months.

“Company car tax rates for EVs are a fraction of what they are on traditional petrol and diesel models, so it makes running a company car far more attractive than it’s ever been for those employees who are eligible for one,” affirmed Bruce.

“The same tax benefits apply to salary sacrifice schemes and Fleet Alliance is seeing a huge surge in interest from companies who want to offer this benefit to their employees.”

That fact is unsurprising, perhaps, when Fleet Alliance calculates that leasing an EV through salary sacrifice can save up to 50% of the costs compared to a personal contract hire agreement thanks to the low Benefit-in-Kind tax rates.

“On top of the attractive tax rates, the fact that we can competitively tender all salary sacrifice leases across a wide panel of funders means we maximise accessibility to EVs for our customers, further increasing the attractiveness of salary sacrifice,” added Bruce.

Fleet Evolution boss ‘flabbergasted’ by report findings

Andrew Leech, founder and managing director of Tamworth-based Fleet Evolution, which has been operating in the salary sacrifice market for the last 10 years, said he was “flabbergasted” by the report findings.

Fleet Evolution founder and managing director Andrew Leech

“We have seen a 250% growth in the last three years with an average 8-10% employee take-up on our schemes, which doesn’t suggest a market in decline. However, what we have seen is a slowdown recently due to market conditions.

“There have been three major factors at play. The first is the rise in interest rates from 1.75% to 5.25% in the last 12 months as the Bank of England tries to tackle rampant inflation.

“The second is reduced supply coupled with the removal of manufacturer discounts and, as a right-hand drive country, the fact that we are last in the queue for new models. And the third is the increase in the national living wage which has meant some employees have become ineligible for sal-sac schemes due to a fall in their disposable income and have had to drop out.

“So, in a nutshell, we have seen more expensive cars for employees whose spending power has been reduced and that combination has had an impact.

“The good news is that manufacturer discounts are now back, supply constraints have eased, with a raft of new models, especially from the Chinese, coming through, and that brings a wider choice of cheaper models for more people.

“Last year, we reported a record increase in orders for electric cars through our sal-sac schemes and, based on current orders, we look set for another record in 2023.”