Consultancy

Objective:

To reaffirm the decision to switch from ICE vehicles to PHEVs and justify the increased rental costs to the finance team through whole life cost analysis.

What we did

Compiled and analysed the fleet spend data, to show the movement of costs over time.

The findings

Fleet spend increased due to a larger fleet, higher funding costs, and greater depreciation on PHEVs, but these were offset by reductions in National Insurance, Corporation Tax Disallowed, RFL, and fuel expenses

Conclusion

External factors limited some savings from the switch to PHEVs, but the projected savings remain in line with expectations compared to equivalent ICE vehicles today.

Recommendation

Continue with PHEV transition and continue to trial EVs across fleet

ICE vs PHEV vs EV Whole Life Cost Comparison

Objective:
To analyse and compare the whole life costs (WLC) of internal combustion engine (ICE) vehicles, plug-in hybrid electric vehicles (PHEV), and electric vehicles (EV) for a company looking to consider different powertrains.

What We Did:
We carried out a thorough WLC analysis of the fleet, considering all customer and driver specific factors such as companies VAT and Corporation Tax positions, benchmark term and mileage, business and private mileage split, fuel reimbursement policy whilst adjusting for realistic fuel consumption rates.

Findings:

• PHEV Fuel Costs: The actual fuel costs for PHEVs were significantly higher than the manufacturer-stated miles per gallon (mpg) estimates. For example, PHEVs advertised at 282.5 mpg achieved only 50-60 mpg in real-world conditions, leading to higher running costs than in basic WLC calculations.
• Savings on Lease Terms: Extending lease terms from three to four years resulted in whole life cost savings of up to 11%.
• Brand-Specific Discounts: By negotiating better terms with the most requested vehicle brands, we achieved savings of up to 15% on certain models.
• Employer and Employee Savings: The move to PHEV and EV created an opportunity for both the employer to make a saving on equivalent models.

Conclusion:
The tailored approach to WLC analysis highlighted opportunities for substantial savings by addressing inaccurate fuel cost assumptions for PHEVs and optimising lease terms. These adjustments helped the company align fleet costs with its financial and sustainability objectives.

Recommendation:
Transition towards a greater proportion of EVs and phase out ICE vehicles in the next renewal cycle. Whilst providing the employee with significant saving on BIK, take the opportunity to make further savings for the business by extending the lease term. Focus on realistic WLC calculations, ensure tailored mileage management, and leverage strong manufacturer discounts to optimise future fleet costs.

Salary Sacrifice v Traditional Company Car Scheme

Objective:

To assess the suitability of a salary sacrifice scheme for electric vehicles compared to traditional company car programs, and to evaluate the benefits, risks, and overall effectiveness for both employers and employees.

What We Did:

We reviewed and compared key features of traditional company car schemes with the salary sacrifice model offered by JCT600 Vehicle Leasing Solutions. We considered; Vehicle selection, Term and mileage management, Cost implications for both employers and employees, and Handling of vehicle allocation upon employee departure.

Findings:

Flexibility: Salary sacrifice schemes provide employees with a wider range of vehicle choices based on their personal needs and preferences, as opposed to traditional company cars which are typically selected to meet company objectives.

Cost Control: Employers benefit from fixed costs in salary sacrifice schemes, whereas employees assume risks related to market fluctuations, mileage, and early termination.

Employee Retention: Salary sacrifice schemes can serve as an attractive benefit, improving employee retention by offering savings on tax and fuel, especially appealing to eco-conscious employees.

Risks: Both schemes carry risks, such as termination costs upon employee departure. In salary sacrifice schemes, these can be mitigated by termination/payment support products or passed on to employees through policy.

Conclusion:

The salary sacrifice scheme offers more flexibility and sustainability advantages compared to traditional company cars, particularly for companies focused on eco-friendly initiatives and cost savings. However, it also transfers more financial risk to employees, particularly regarding mileage and early termination.

 Recommendations:

Employers should consider the different populations within their fleet, namely job need and perk and consider matching the solution to meet their individual needs.

Companies should ensure that they provide clear communication on the benefits and risks to employees, especially in terms of cost variability and the handling of lifestyle events on Salary Sacrifice schemes.