The company car has had a chequered history. I remember an outcry when higher-paid employees, defined as earning £8,000 a year or more, were to be taxed for the benefit. How times have changed.
Remember the historic reasons for having a company car? ‘Cost-effective’, ‘released personal capital’, ‘status symbol’, ‘sign of corporate esteem’ and ‘a better car than you would buy yourself’.
Later chancellors saw the company car as a cash cow and a relatively easy tax to collect, so the pressures built, and environmental issues have subsequently entered the equation.
Statistics may indicate that the number of company cars has slipped, but this is partly due to the dire economic climate and partly due to changes in business practice. Communications have also evolved, as have the increasing cost of car provision and management, and the growth of alternative forms of business mobility.
So much for the business justification for the company car.
In terms of an employee benefit, the financial incentives have largely evaporated and are unlikely to return. Other benefits are taking precedence and salary sacrifice arrangements are an emerging science.
While the company car is still ‘nice to have’, it comes at significant financial cost. Certainly, the company car will always have a place, but as a working tool rather than as an employee benefit.
There appear to be many schemes to minimise the cost of a company car, but I feel that in future, any employee benefit from the provision of a company car will be other than financial.
Peter Cooke is professor of automotive management at the University of Buckingham
Dear Editor
Professor Cooke is right. The days of the ‘User-Chooser’ fully expensed company car provided as a ‘perk’ are numbered. Yes, there will perhaps always be company-funded cars, but the nature of the funding is changing and will continue to move away from the blank cheque book practice of the 19701’s, 80’s and early 90’s.
In the middle, currently, is David Russell’s sentiments whose company, William Hill, is moving towards the employee-funded car with already a 50% voluntary take-up. Which depends entirely upon how accomodating is the level of car allowances offered.
From our 15 years’ experience in designing car allowance schemes, what might be a voluntary policy at the moment is more and more likely to become compulsory, driven by cost and indirect tax burdens.
Employees given clear, unbiased information can see they can be financially better off running their own cars; can have tax-free incentives from HMG and save tax. With a Managed Car Allowance Scheme they can also have all the security and fleet managed support individually as they might have had from their company car.
What is disingenuous, the the point of being wrong, is John Lewis’s comments from BVRLA: ” . . . there are no signs of this changing”. The number of company-allocated cars has reduced from 1.95m in 1990/1 to 0.95m in 2010/11. See:-
http://www.hmrc.gov.uk/statistics/receipts/info-analysis.pdf
This is HMRC’s count of the number of company-funded cars allocated to employees, available for private use and reported on P11Ds. What other definition of a ‘company car’ applies?
The decline is reflected in other comments such as those recently from Lex outlining the decline in corporate business.
Companies are more and more seeking key alternatives to the traditional company car as evidenced by the growing popularity of the seminars we run on the subject.
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