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PCH growth may be a bubble that bursts

The growth of personal leasing may just be a short-term trend that will see drivers returning to conventional company cars.

Peter Golding, managing director, FleetCheck

Peter Golding, managing director, FleetCheck

So says FleetCheck as it warns that the rising use of such schemes as an alternative to traditional company cars is creating a range of potential issues for employers.

The fleet software specialist says that the move, especially to personal contract hire, has been prompted by a number of current problems, the biggest being how continuing uncertainty over WLTP and Benefit-in-Kind taxation will impact on drivers.

Although the Government recently held a review into whether revisions to Company Car Tax and Vehicle Excise Duty are required as a result of the shift to WLTP – with possible changes expected to be overviewed in next week’s Spring Statement – the fleet industry has expressed concerns that the impact of the higher CO2 figures from the new testing cycle on company car tax and vehicle tax from April 2020 will not be mitigated.

Current uncertainty of the cost to fleets/drivers from the WLTP increases is being exacerbated by a lack of information for BIK rates after 2021; both are said to have been leading fleets to hold onto vehicles for longer due to lack of clarity on how new cars will be taxed in the future, or actually pushing drivers to opt out and into PCH.

Last month saw Ogilvie Fleet report huge demand for PCH while the BVRLA’s newly published Q4-2018 Quarterly Leasing Survey shows that personal contract hire rose by 24% year-on-year, partially offsetting the impact of a 10% drop in business contract hire during the same period. PCH now represents 25% of the BVRLA car fleet.

Peter Golding, managing director at FleetCheck, commented: “We are seeing a small but steady number of company car drivers taking a cash option and switching into PCH but it is something that many employers have often not thought through in sufficient detail.

“The fact is that someone moving to PCH is essentially becoming a grey fleet driver. The extent to which their employer manages this fact is crucial. Some take a very structured approach, creating affinity PCH schemes that closely mirror company car policies. However, others adopt a hands-off attitude which creates a whole host of potential problems.”

Golding said that the issues inherent in poorly managed PCH on fleets ranged from employees choosing models that were unsuitable for company car use through to duty of care and compliance difficulties surrounding maintenance.

“It is very easy for PCH to bring the same headaches as grey fleet. Our advice to employers who want to provide a PCH option is to ensure that it is as closely controlled as possible.

“Many major leasing companies now have PCH affinity schemes that help to recreate some of the control inherent in company car schemes and these can be a good option but they do take a fairly high degree of setting up and administering. It’s a commitment.”

Golding added that it was difficult to decide whether the swing towards PCH was indicative of a long-term trend or a shorter term reaction to current circumstances.

“It is very probable that the current WLTP-Benefit-in-Kind situation is the main driver behind what we see currently occurring. However, it is worth remembering that this has happened before in the fleet sector on an almost cyclical basis in response to short-term uncertainties, and that many drivers end up returning to their conventional company car scheme.”

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Natalie Middleton

Natalie has worked as a fleet journalist for nearly 20 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day.