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Stay one step ahead of new VED regime

By / 7 years ago / Latest News / No Comments

From this date, new cars will be subject to a new first-year VED rate, based on CO2 emissions and commonly referred to as a "showroom tax".

This showroom tax will see cars with emissions of 130g/km or under paying nothing for the first year's VED, as an incentive to opt for such low-emission vehicles, while the charges will increase exponentially for cars with higher emissions. A vehicle with over 255g/km will face a first-year bill of £950.

Such extra costs will be reflected in lease rental costs, which could rise by almost £600 for those cars in the highest category over a typical three-year term according to Lombard. As a result fleets are being advised to consider the new charges carefully when it comes to forthcoming leases.

Paul Connor, head of portfolio management for Lombard Vehicle Management, commented: 'Although the effect of the new VED regime on the monthly rentals for most cars will only be between around £0.50 and £5.00, the effect over the lease term, even for many SME fleets, will be substantial, especially given the ongoing economic uncertainty.'

He added: 'Where possible, we would advise fleets to order new vehicles now for delivery prior to April to avoid the new first-year VED altogether and benefit from the existing standard VED rate.

'If that is not possible or early termination charges for existing vehicles mean that it would not be cost-effective, choose cars producing up to 165g/km – opting for a car which emits 130g/km CO2 or less will actually result in a saving in monthly rentals, while the maximum first-year VED for vehicles up to the 165g/km threshold will be a relatively manageable £155. That increases sharply to £250 for the next banding and on to the top rate of £950, the consequences of which need to be borne in mind even if they apply to a small number of senior management vehicles.'

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