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How much is your company car costing you? Chances are it could start costing you a little more with April’s budget changes and it could be time to switch to personal car leasing. Kate Finburg examines the Chancellor’s intentions.

Being Green is a confusing business. It is no longer enough to purchase Jamie Oliver farm assured chicken and recycle cat litter into compost, one must now offset ones carbon emissions by planting a forest every time one takes a long haul flight. In order to ensure we comply with an ever greener country, the government are using a clever method – incentives in the form of cold hard cash – cash which you could towards new personal car leasing deals.

When it comes to cars, you are never going to achieve full green kudos if you own one – or have taken out a personal car leasing deal on one – (better to get on one of Boris Johnson’s city bikes for that), but the government wants to persuade you that greener cars – i.e. ones that emit a low amount of carbon are not only better for the environment, but will be better for your pocket if you were to choose them.

If personal car leasing is not for you, especially those with the perk of a company car, Labour’s final budget in April further incentivised choosing a carbon friendly car (or as some might say, narrowed the choice to two options; be a gas guzzler and taxed, or choose something more modest and have the ability to buy daily bread).

Labour’s budget will mean that come Olympic Year, if you drive a company car that currently is taxed at 10% with CO2 emissions of 120g/km or more, you will now be taxed at 15%. For diesel motors the sting is even more, with tax rising to 18% on cars emitting more than 120g/km, which makes the case for personal car leasing even more compelling.

Luckily car manufactures are savvy to the government’s requirements and indeed the country’s zeitgeist for anything eco-friendly. In 2008 there were just 272 models of car with CO2 emissions of below 121g/km, now there are 639, meaning more choice, more money left after tax and more smug green feelings (although if you want to be completely smug invest in your company’s cycle to work scheme…).

To register fairly high on the smug scale the greenest car has to be an electric one, which are even available on personal car leasing contracts. Currently only six are on sale and the practicalities of having to stop and charge your car whilst on the way to a sales conference in Slough might not be particularly practical.

Despite sounding like something invented by Steve Jobs to cause 4 hour queues outside the Apple store, the Mitsubishi i-MiEV looks like it could be a contender for an electric city runaround. Costing only 96p to fully charge you could drive 12 000 miles for £115, that leaves a lot of change for free range eggs. However, company car drivers aren’t as persuaded by cars that run on anything other than good old fashioned petroleum.

The RAC’s Report on Motoring 2010 states that they are marginally less likely to buy (or sign-up to a personal car leasing contract on) a car powered by alternative fuels, with more than a third unlikely to consider such vehicles as opposed to 3 in 10 of private car drivers.

If electric cars do still seem a little absurd (the Nissan Leaf – now available on personal car leasing deals – only does 100 miles on full charge and there is no fuel back-up), there are plently of other eco-friendly-er options. lists its top five fleet cars that could transport you from meeting to meeting not only in style but at a tax effective price.

The BMW 320d Touring and Volvo V70 1.6 Drive are included in this list and whilst some may baulk at the lower weight of the Volvo’s engine, Autocar’s tests show that whilst not a fast car, it is very capable if not completely overloaded.

Whilst many people are keen to board the low CO2 emitting bandwagon, not everyone wants to give up a gas guzzling, yet undoubtedly more powerful model of car, especially those who already use personal car leasing as a way of funding their new car, as – of course – there is no company car tax to pay on a personal car leasing contract.

How can the Con-Libs persuade a high proportion of company car owners or personal car leasing customers to essentially downgrade? Oops, did I say downgrade? I meant become more eco-friendly.

Peter Fries of freight company Salvesen explains the tax conundrum faced by company car owners; “Company cars are such an ingrained perk that most of us will have them no matter what cost as it is the only way we can get one up on neighbours and relatives who still run their own ancient cars.

However the tide is now turning and many at my company have realised that low CO2 is more tax efficient. I can only hope this continues for the sake of the environment but in truth the cost of the cars is more about how many miles they cover which determines the price we as a company pay!”

The RAC’s 2010 Report on Motoring would suggest that whilst company car drivers claim to think green, the reality is quite different.

Only 26% said they would definitely consider a more environment-friendly model for their next vehicle whilst 53% said it was ‘maybe’ an option. Which leads us to suspect that an environmental conscience isn’t what is driving (ahem) choices when it comes to picking a company car. Other factors come into play of course; is it practical for the family? How safe is it? How much luggage can you fit in the boot? Will my employer offer me a car allowance so that I can take out a personal car leasing deal in my own name and stop paying hefty company car tax altogether?

The new budget will also affect fuel allowances with the free fuel benefit charge rising from £16 900 to £18 000 which is yet another thing to take into consideration.

With all these things to think about the Chancellor is possibly steering company car drivers to only one option. The new tax bands will have an impact and with salaries fixed for many and the cost of living rising the only choice might be to pick a lower CO2 emitting vehicle – and to probably grow your own veg.

Would you give up a more powerful car for the sake of the environment? Will your next personal car leasing contract be on a more fuel-efficient car? Please get in touch with us and let us know.