Nat Barnes reveals the key factors to consider when buying company cars.

Company car drivers used to be something of a joke. The free car to be used and abused, the shiny suits, the jacket hanging up in the rear window, the Overdrive credit card filling their cupboards at home with free petrol station glass tumblers. Now, though, everything has changed.

Well, almost. When it comes to company cars, drivers and their fleet managers have to be sharper and wiser than ever. While some of that old-school car snobbery remains among drivers, fleet managers have to take into account everything from constantly changing tax regimes, emissions and maintenance costs, to staff well-being and happiness.

“Running a car fleet has become much more diverse and professional in recent years,” says John Pryor, chairman of the Association of Car Fleet Operators and fleet and travel manager at Arcadia Group. “It’s now much more about pure mobility and how you want to get your staff from A to B. It’s not about the price of the car, it’s about the cost of the journey and also about the company’s overall carbon dioxide emissions.”

The government introduced new emissions-based company car tax rates in 2002 to encourage the purchase of cleaner vehicles. As those rates became increasingly punitive, the company car lost its appeal for many. With so many car financing options now available, the monthly cash sum offered by many firms, in lieu of a company car, is easy to spend on a new vehicle of your choice.

That had been the case according to figures from HMRC, which show that while 1.6 million UK residents paid company car tax in 1999-2000, that number has been steadily dropping. Still, the 2014-15 figure of 950,000 was the first rise in a decade of drivers paying benefit-in-kind tax on a company car.

The reasons for the turnaround are numerous. Despite new car financing being more affordable than ever, many forget about the everyday running costs such as servicing, insurance, road tax and fuel that are taken care of by a company. And if you switch or lose jobs, you’re still committed to making those payments until the end of the agreement.

“Many drivers have opted out of the system in the past and then found out just how expensive it is to run a car, so are returning to the company schemes,” explains company car consultant Paul Barker. “Personal finance leasing has undoubtedly become easier and more popular, but a lot of people simply don’t want that hassle. Agreeing to take a company car makes it an easy one-stop-shop option.”

Since the emissions-based tax rate changes, fleet managers have got a lot smarter in their deals with car manufacturers. Whereas in the past, the focus was on the biggest discount available on the purchase price (a “pile ‘em high and sell ‘em cheap” approach), now many fleet operators are more concerned with the whole life costs. Nowadays, the car’s initial price, average fuel economy, servicing and running costs and end residual value for the next three years and 60,000 miles, or sometimes longer, are reduced to a single pence-per-mile rate. In particular, a higher residual value after those three years can mean a car that is initially more expensive can work out to be cheaper to run long-term.

At the same time, the new generation of plug-in hybrid cars have become attractive options for their ultra-low emissions (see panel, page 55). On the surface, that’s good, but only if they have easy access to charging posts at work or home and, crucially, use them. Without regular charging, some fleet managers have found the running costs for these cars to be far higher than a more traditional equivalent.

There are other issues to consider, too. How do you want your company to be perceived when your employees go out to meet clients? In competitive sales environments, a company car remains an obvious status symbol, especially with premium brands. Cars are often seen as a retention tool and a perk for staff, which might be a somewhat outdated concept, but it’s one that works for many firms at certain levels. Go too premium with your cars, though, and your clients might start questioning your fees. It’s a fine balance.

That doesn’t mean having to go with obvious choices. Mini expects to do more than 13,000 corporate sales this year, and its Business Partnership Programme offers SMEs a dedicated local corporate business manager. And while the Citroen C4 Picasso people carrier is hardly your archetypal fleet car, it has vast appeal to those with larger families – more than three-quarters of them leaving showrooms this year have been to fleets and company car drivers.

In all shapes and sizes, with a premium badge on the bonnet or not and whatever the tax regime, it seems that the popularity of the company car is set to continue for some time yet.


While there’s no question that interest in electric and plug-in hybrid cars has grown tremendously, there are still question marks over their longevity for fleets.

At present, their low emissions give them temptingly low levels of benefit-in-kind tax for drivers, as well as 100 per cent capital write-down allowance for fleet operators for the first year and reduced national insurance payments. However, if plug-in hybrids aren’t regularly recharged then they could actually be costing more to run than conventional cars.

Plus, the problem of refuelling has yet to be properly tackled by HMRC. If a company offers recharging posts, that’s akin to free fuel (which is usually taxed), but if a driver recharges at home, there’s no easy way for them to claim back that cost. Technically, drivers will have to complete the amount of benefit from that recharging on their annual tax returns, but the chancellor is only now catching up to the fact that this is an issue.


Ford Mondeo

  • From £20,895

Despite the rise of premium badges in the company car sector, Tony Blair’s core voter, Mondeo man, is still alive and well. The car itself is better than ever with petrol-electric hybrid and upmarket Vignale versions now on offer too.

BMW 740e

  • From £68,330

Plug-in hybrid battery technology and four-wheel drive come to BMW’s luxury 7-Series flagship range with the 740e and 740Le. With a 0-60mph time of 5.3 seconds, an all-electric range of 29 miles and 49g/km emissions, it’s a tempting proposition.

Vauxhall Astra

  • From £15,445

Like the Mondeo, the Vauxhall Astra is another traditional fleet stalwart. With the Focus now starting to show its age, the excellent new Astra was declared the 2016 European Car of the Year. It also features Vauxhall’s brilliant Onstar connectivity system for remote onboard assistance such as satnav programming or vehicle diagnostics.

Renault Kangoo ZE

  • From £17,298

While hybrid and electric power is growing in popularity for cars, sales are still relatively rare in the van world. Along with the Nissan e-NV200, this Kangoo ZE is the perfect way for your company to make green deliveries.

Audi A4

  • From £26,350

Along with the BMW 3-Series, the Audi A4 has become the go-to premium saloon for junior execs. A good range of engines and exceptional build quality make it a great choice.