How will fleets and salary sacrifice schemes benefit from the Electric Car Grant?

The Electric Car Grant, introduced by the Government on Tuesday 15 July, is definitely to be welcomed.

I’ll caveat that slightly because it’s early days, and we really don’t have all the details of the grant. But it’s certainly a good indicator of the Government’s direction of travel and its continuing engagement with the automotive sector, while also providing additional encouragement for company car fleet drivers, salary sacrifice takers and consumers to make the switch to an electric car.

There are two levels of available grant for cars with a value below £37,000: band one is for £3,750, while band two is £1,500.

There is some uncertainty over which cars will actually qualify for the Electric Car Grant. Car makers have to submit their applications to a Government portal and must meet certain environmental criteria.

These environmental criteria are based on sustainability standards of the car makers, stemming from a Science-Based Target (SBT). The Government says eligibility is dependent on the highest manufacturing sustainability standards and includes where the car is built and where the battery is manufactured.

So that’s the broad outline of the Electric Car Grant. What’s important for Fleet Alliance customers is that the grant is available to fleets and companies that have salary sacrifice programmes with us.

What’s more, there is no cap on the number of cars that fleets can register under the system.

I can see this really working for those taking salary sacrifice who are taxed at the 20% rate (19-21% in Scotland). Bringing down the price of EVs is essential to reach a wider populace who can benefit from zero emission motoring and drive an electric car at a rate that’s cheaper than leasing it personally. Until recently, salary sacrifice had benefited the higher rate taxpayers who could afford the more expensive EVs that have been available.

Certainly, the choice of lower cost EVs is wide: the Government says there are currently 33 new electric models below £30,000. What’s more, vehicle range is becoming more extensive all the time.

The latest Nissan Leaf, built in Sunderland, Tyne & Wear, will expand the number of cars under the grant limit when it becomes available later this year, with the Standard car offering up to 270 miles on a charge and the Extended Range model offering around 350 miles of battery range.

The same benefits to salary sacrifice takers are true for company car drivers, of course, while companies will benefit from reduced contract hire rentals.

But I’d add a note of caution here.

While rentals will reduce for qualifying cars (putting price pressure on those car manufacturers whose models don’t qualify, incidentally), I’m not sure we’ll see the full £100 per month reduction over a three-year lease period.

I expect funders will reduce residual values across the board to reflect the impact of the grant on used car prices. This in turn will have an impact on the cost of the lease rental. Rest assured, though, that our panel funding approach will ensure we will always be able to identify the best value lease rental on the market.

Overall, though, I’m very pleased to see the Electric Car Grant. I’m also gratified to see that it is based on sustainable policies that align with our own business as a sustainable mobility provider. Now all we must do is wait and see which cars qualify.