Do you consider the total cost of ownership when adding a motor vehicle to your fleet? Choosing the right car can save you money and prevent adverse environmental and safety implications. This guide provides useful tips to help you select the best company car to meet your objectives without breaking the bank.
Define Your Transportation Needs
The first step towards choosing a business vehicle (whether it be a car or buying a van for business) is defining the reason why you need one. How will you be using it, and how often? Your top priority should be the car’s suitability for the job and safety.
Maximum Authorised Mass
If you are buying a van or truck, familiarise yourself with UK vehicle weights. Gross Vehicle Weight (GVW) is the total operating weight of a motor vehicle as specified by the manufacturer. It includes the vehicle’s chassis, engine, body, fluids, fuel, accessories, cargo, and occupants.
GVM is usually on the motor vehicle’s official weight plate under the bonnet or door areas. Payload refers to the maximum weight you can safely add to a vehicle’s cargo area. Deduct your vehicle kerb weight from the GVM to find the mass you can legally load onto the truck.
If you are building a fleet of employee vehicles, you must strike a balance between your business needs and employee preferences. You can go for different makes and models for various staff categories, or find a fit for purpose car for everyone. Whatever the case, ensure the vehicles are driver-friendly and adequately equipped.
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Efficiency and Car Tax
Every registered car keeper in the United Kingdom must pay car tax. If you are to keep your motor vehicle off the road and not pay the tax, you should sign the Statutory Off-Road Notification (SORN).
The primary determinant of how much you pay in car tax is vehicle efficiency and carbon dioxide emissions — the more pollutants your car produces, the higher your car tax.
In terms of tax, the best company car is a model that emits little to no carbon dioxide. The government enacted new car tax rates in April 2020 favouring low or zero-emissions vehicles. Apart from minimising your car tax, an efficient vehicle cuts your fuel expenses.
Best Company Cars for Tax Purposes
Companies provide employees with company cars as perks of employment. But HMRC stipulates tax payments on company cars, with different models attracting different taxes.
Subject to various factors, some company cars attract higher taxes than others. This article discusses things to consider to buy the best company car so you can pay lower taxes.
What to Consider When Buying a Company Car to Keep Taxes Low
Here are a few things to keep in mind when considering the best company cars for tax purposes:
1. Vehicle emissions
Her Majesty’s Royal Customs (HMRC) charge a Benefit-In-Kind (BIK) tax on company cars. To an extent, individual BIK charges are based on the carbon dioxide emissions of the model in question.
The HMRC usually measures CO2 output of cars using the European World Light Vehicle Test Procedure (WLTP). It then specifies BIK taxes for cars, based on their emissions figures.
Generally, vehicles with low and zero emissions have lower BIK taxes charged on them, which makes them the best company cars. The lower charges on low-emissions cars are an incentive to get companies to add them to their fleets.
Conversely, cars producing higher emissions have higher taxes charged on them. Obviously, this is a tactic to discourage the use of such cars.
By choosing a car with low or zero emissions, you will qualify for a lower BIK tax. Certain electric (zero emissions) company cars even qualify for zero BIK taxes under new HMRC rules, making them some of the best company cars fleet managers can buy.
2. Personal income tax bracket
Your personal income tax bracket also determines how much BIK charges you’re liable for on a company car. HMRC splits taxpayers into different categories, based on income tax paid.
These categories include Basic Rate, High Rate, and Additional Rate. Members of each tax bracket are liable for different BIK rates on company cars owned.
More often than not, a higher income tax rate means a higher company car tax. This situation is reversed for company car owners with low income tax rates.
3. Purchase value of vehicle
A company car’s purchase value also influences the taxes charged on it. Typically, HMRC stipulates higher taxes for more expensive cars while cheaper vehicles attract lower taxes.
Purchase value is also known as ‘P11D value’, from the name of the form (P11D) employers submit to the HMRC detailing benefits granted to employees. The P11D value represents the total cost of buying the company car, including the purchase price, optional features, and delivery prices.
The best company car will have a lower price and limited or zero optional additions to reduce its P11D value. Ultimately, this means you’ll be paying the HMRC lower taxes than you would on a high-end car.
4. Vehicle usage
HMRC regulations stipulate a reduction in BIK tax charged on your company car if you cannot use it for 30 consecutive days or more. Say, your car stays in the repairs shop past 30 days, HMRC will reduce the BIK rate based on the number of days it was unused.
5. Personal contributions
The money you contribute to the purchase of a company car is usually subtracted from the BIK tax rate. Also, HMRC deducts money employees pay to their employer to use a company car for private purposes from the final BIK tax.
Buying a Van for Business
Vans are usually the backbone of any small to medium-sized business. Without them, most businesses wouldn’t be able to get to suppliers, buyers or customers. Buying a van for business, and buying the right van, is therefore critical. See below what kind of things you need to consider when thinking about the right van for your business.
Journey Types and Fuel for the Best Company Car
Another consideration to help you buy the best company car is the kind of journeys it will be making. Think about the conditions of the roads, length of trips, and the frequency of vehicle usage. These factors will guide you in selecting the correct engine size and fuel type.
Long-distance shippers prefer diesel-powered vehicles due to their high fuel economy. They are suitable for regular hauling of loads on motorways over hundreds of miles.
If you are looking for a means to travel for relatively short distances, consider a petrol engine car. It will make economic sense.
Frequent Start-Stop Trips
Hybrid and electric vehicles are best suited for running errands in cities. They are ideal when you have to make several successive starts and stops.
Electric cars are quite pricey, but they are the cheapest to operate in the lone term. However, you should ensure that your city has enough charging points.
When buying a van for business, or any vehicle for that matter, you must look at Euro NCAP and their safety ratings for new cars, suggesting the level of damage that would occur in the event of an accident. Carmakers are also installing advanced active and passive safety features in standard models or as options to protect car occupants.
Insist on motor vehicles with excellent Euro NCAP safety ratings. Check for features like airbags, seatbelt pre-tensioners and head restraints. For safer driving, consider a car with add-ons like electronic stability programs, intelligent cruise control, lane departure warning and automatic braking.
Want advice on how to better manage your fleet? Our fleet experts can give you a free consultation!
Number of Vehicles Needed
After finding the motor vehicle models that match your business needs, you must decide the quantities to procure. In most cases, you’ll buy new cars after three or four years to replace older ones or those whose contracts have expired.
Keep your business future in mind. If your workforce is growing, you might need to increase the number of employee vehicles. Consider the delivery timelines so that you can order at the right time.
Buying a Van or Car for Business: New or Used?
You can buy new or used vehicles for your business, but each choice has its merits and shortcomings. If you are torn between the two, this section will give you some insights.
Buying a New Car
Buying a new company car or fleet motor vehicle is not that complicated. The reason is that new cars of the same model are usually the same. If you have decided the make you want, the most important thing is to identify genuine dealerships and compare offers.
The perks of buying a new company vehicle include:
New cars are typically more reliable than pre-owned cars since they haven’t had any wear and tear. If a mechanical or electrical failure occurs during the warranty period, you can have it fixed for free.
A brand new car often comes with the latest technology, accessories, and safety features. It renders a mix of comfort and performance. If you buy a pre-owned vehicle, you’ll only access the technology that was available at the time of manufacture.
There is no need to evaluate the condition of a new car, so you don’t require a mechanic. Further, you can quickly tell the recommended price range for a brand new car by checking the automaker’s website.
Multiple Financing Options
Loans for new cars usually have reasonable interest rates. Additionally, carmakers offer incentives like cash rebates to attract buyers. After negotiating the final price and applying the incentives, you’ll potentially pay thousands of pounds below the original price tag.
Buying a Van for Business: what’s the best way?
While a new fleet vehicle may be desirable, you can get better value for money by choosing a used vehicle. You may have heard people comparing buying a second-hand vehicle to inviting problems, but it’s not always true. The secret lies in selecting a well-maintained motor vehicle.
The Truth About Used Vehicles
Some used cars are indeed unreliable, but it’s also true that reliability and performance depend on maintenance. New technology has made motor vehicles more dependable than ever before. With proper upkeep and annual inspections, a car can clock 100,000 miles without requiring significant repairs.
Here are some benefits of buying a used car for your business.
Lower Insurance Rates
Replacing a low-priced car is cheaper than a new one, which makes insurance for pre-owned cars inexpensive.
Cheaper Registry Renewal
Registering a used car costs far less than for a new motor vehicle.
Affordable High-End Cars
A new vehicle depreciates at a rate of 15% to 35% every year. The rapid loss of value enables you to afford slightly used luxurious vehicles at considerably low prices.
Total Cost of Ownership
Since companies aim to minimise costs, you must evaluate the TCO of various vehicles to decide the best company car. A realistic calculation should factor the buying price plus all other expenses. These include but are not limited to registration, insurance, fuel, tax, maintenance and depreciation.
Fleet Management and the best company cars
Vimcar Fleet Geo is a reliable fleet management solution that tracks all your vehicles in real-time. You can limit the operation hours and the region your fleet can access to minimise car misuse by drivers. If someone attempts to steal your motor vehicle, the fleet Geo mobile app issues theft warnings.
Visit our website for more details on how you can slash fleet costs by 15% with our easy-to-use fleet management software.