Green company cars to slash firms' fleet costs

A new tax break to be introduced from next April will save thousands of pounds for firms that opt to operate green company car fleets, according to a new study from accountants Grant Thornton.

The research assessed the cost under the new tax regime of procuring and running a fleet of 50 company cars based on the average mix of the UK's 10 most popular company cars and compared it with the cost of a fleet based on an average mix of the 10 greenest cars available, excluding superminis such as the Smart car or electric G-Wiz.

The study found that the green fleet would cost more up-front, with the average price of the 10 most fuel efficient vehicles standing at £16,151 compared with £15,472 for the average price for the 10 most popular cars. However, when the reduced fuel and tax costs from the green fleet were taken into account, the study found that the higher initial start up costs would be recovered within 18 months.

Furthermore, over a four-year period, the green fleet would cost almost £60,000 less compared with the conventional fleet.

"When the combined fuel savings and tax benefits from the company car scheme are taken into account, the savings on fleet costs are staggering," said Clive Fathers, report author and tax partner at Grant Thornton. "The lower tax costs and fuel efficiency should also more than offset the higher capital or leasing costs of greener vehicles."

A large chunk of these savings can be attributed to the new tax break that offers a lower rate of tax for company cars that emit less than 120g of CO2 per km, such as the Toyota Prius and Honda Civic Hybrid. The Grant Thornton study found that by utilising the tax break, firms operating a green fleet would save £8,500 a year.

In addition to delivering significant cost savings, the green fleet would also emit 30 per cent less carbon dioxide than the conventional fleet, cutting a company’s carbon footprint by 36 tonnes a year.

"Not only will this save the average business a considerable amount of money over the life of its fleet, it will reduce its carbon footprint dramatically, by up to 134 tonnes over a four-year period," said Fathers.