Whole Life Costs

Fuel PumpRemoving uncertainty from vehicle policy decisions

Can you run a greener, more environmentally-friendly company car fleet and save your business money and fuel at the same time? How do you really know which cars are best for your fleet and your bottom line?

The answers can be found in Whole Life Cost calculations, as they provide an irrefutable means for selecting the right vehicles at the lowest total cost to the business.

Why Whole Life Cost decisions are so important

The “credit crunch” has forced increased pressure on businesses to run greener fleets and save money on their car fleet operations. And for businesses, there are stronger than ever incentives to reduce CO2 emissions of their car fleet – not only from an environmental attitude – but also as a way to minimise the impact of volatile operating costs and rising fuel taxes.

Choosing the right vehicles is therefore vital; every fleet decision you make “locks in” CO2 emissions and running costs such as fuel and tax bills for the lifetime of the vehicle on your fleet – and in the case of some tax charges, long afterwards. However, commonly used criteria such as purchase price or front-end lease rental costs will not help you define and run a low-cost, low-CO2, low-tax fleet.

The alternative – using Whole Life Costs – is the only tried and tested method when it comes to maximising financial, environmental and tax efficiency. A Whole Life Cost car fleet policy shapes your fleet around the entire range of known fixed and variable costs. It takes into account future changes such as CO2 -based writing down allowances that will undoubtedly have a significant effect on the feasibility of many currently popular models.

Real savings for business and employees

Whole Life Cost policies give your organisation three “wins”:

  • A green win from running cars with low CO2 emissions, thereby lowering fuel consumption
  • A financial win from selecting vehicles with optimum funding, operational and tax costs
  • A personnel win from lower P11d tax bills and lower fuel bills

How are Whole Life Costs calculated?

Unlike list price or lease rentals Whole Life Cost calculations accurately compare the full lifetime impact of each vehicle choice on your business’s bottom line, as they take into account all factors which make up the lifetime cost.

We can help you model all of these factors and assess Whole Life Costs against a wide range of variables such as contract length, lifetime mileage and expected future fuel prices.

Our calculations can help you to do even more than simply comparing vehicles. By modelling the relationship between prices, funding costs, taxes, depreciation and mileage, a Whole Life Cost approach helps you establish the optimum replacement cycle and funding method for your business as well as the best cars for your choice list. Some companies find they can reduce costs substantially by using different funding methods for separate parts of the fleet, for example a Personal Leasing plan for high business mileage users and higher CO2 rated cars and Contract Hire vehicles for cars with CO2 emissions of 160g/km or less.

Whole Life Costs and existing allocation policy

Can you use Whole Life Cost calculations with either a fixed allocation list or a user-chooser policy? The answer is a resounding “Yes!”.

If you have a fixed allocation list, using Whole Life Cost calculations enables you to specify the right vehicles for your fleet in every respect – whatever the application. If your priority is simply to minimise overall costs, our Whole Life Cost calculation illustrates the options with the lowest overall costs, accurately factoring-in all costs – many of which are often overlooked at the fleet procurement stage. On the other hand, if status is also a factor, you can take advantage of the fact that a premium model with low CO2 emissions may have a better Whole Life Cost than many typical high-volume models; this gives you the opportunity to give more desirable brand cars to staff at a lower cost to the company, with clear benefits for recruitment and retention.

For user-choosers, grade benchmarks can be set according to Whole Life Costs, which will ensure that drivers’ choices fairly reflect the relative cost of providing vehicles and helps prevent poor choices, such as selecting cheaper vehicles with heavy fuel consumption or poor CO2.

Implementing a Whole Life Cost policy

And we can also help you to implement a Whole Life Cost policy in your business. We will review your fleet, focusing specifically on choice lists from both the company and the drivers’ perspectives. With our Whole Life Cost calculations, we will draw up recommendations for tackling your existing vehicle costs, improving efficiency and achieving green objectives. We have a successful history of implementing innovative solutions, each of which have been adapted to our customers needs by drawing on our extensive knowledge and experience, using proven products from our comprehensive fleet funding product portfolio.

Act now on rising company car fleet costs

Fleets are at risk of escalating losses due to rising fuel prices and the impact of CO2 taxes if they continue to base policy on list prices or leasing costs. To find out how moving to a Whole Life Cost policy would help your fleet, call us today on 0800 458 0113.

Change in legislation regarding leasing of business cars

Company cars being leased after 1 April 2009 are treated in one of two ways:

  • For cars with CO2 emissions of 160g/km or less face no lease rental restriction, meaning that the cost of the lease is fully deductable against taxable corporate profits.
  • For cars with CO2 emissions of 161g/km or more, there is a 15% lease rental restriction. This means that businesses can only deduct 85% of rental payments against their taxable profits

Exclusions

For leases which commenced before 1 April 2009, all lease rental payments for cars costing more than £12,000 will be subject to the old rules until termination of the lease.

What if the lease started before 1 April 2009 but the car is delivered afterwards?
The new rules apply, the lease will be regarded as commencing from the date when the lessee is entitled to use the car under the lease.