Fleet car choice: why electric is the better option

Fleet car choice: why electric is the better option

Posted by

Robert Wentworth-James

February 2023

In 2022, sales of new electric cars were second only to petrol. EV volumes were up 40% – compare that to the 38.9% decline in diesel cars to see the clear direction of travel. Good job: only electrified new cars can legally be sold from 2030. By 2035, the entire new car market will be pure electric.

Of course, there are teething troubles in our switch to electric motoring. You can’t have missed the queues of Teslas waiting to charge over the Christmas break, nor the hysterical headlines that followed. The public charging infrastructure isn’t yet perfect, and there are very real challenges in rolling out enough new chargers to keep up with all the new electric vehicles (EVs) being sold.

Issues such as broken chargers and payment problems are challenges to be encountered, too – and who can blame an EV newcomer venting their frustration on social media. If you run an EV, you’ll almost certainly have been there.

What’s hard to argue with, however, is the fact electric cars can save both business drivers, and the fleets supplying the cars, serious money. This is why going electric right now is the intelligent option.

The cars: let’s look at the costs

In isolation, EVs look expensive. New car grants have been reduced, too. But list prices are only part of the picture. What’s often overlooked by EV naysayers is the actual operating cost – known as the whole life cost. And here, electric cars boast a considerable advantage.

To show the savings, we turned to the Fleet Alliance’s suite of sophisticated whole life cost calculators. The figures here are based on a 3+33 profile, with a mileage of 10,000 a year (5,000 of which are business miles), for a driver who is a 40% taxpayer.

The MG4 EV is one of the most affordable new EVs in Britain, costing £27,485. To lease, the monthly rental is £346; add in running costs and the actual cost is £430. And, drivers, this will be music to your ears: the monthly average benefit-in-kind is just £18. Yes, £18.

Let’s compare the MG’s costs to an archetypal company car, the petrol-powered Ford Focus 1.0 Ecoboost mHEV 155PS mild hybrid. It costs £28,534, and has a monthly rental of £486; that’s already £140 more than the MG4 EV. Add in running costs, and it leaps up to £655 a month – an eye-watering £309 a month more. Oh, and instead of paying an average £18 a month, company car drivers will be paying £266 a month in BIK. Ouch.

Maybe the MG is an exception. Let’s compare like-for-like: a MINI Cooper S petrol vs a Cooper S E electric. Here, the EV list price is over £5,000 more expensive – but still comes out £17 cheaper in monthly lease rentals. Add in whole life costs, and the gap extends to £128 a month. Meanwhile, drivers will pay £23 in BIK for the electric MINI, compared with £311 for the petrol Focus.

Let’s move upmarket, and compare the closely-related BMW M440i xDrive and BMW i4 eDrive40. List prices are similar, but the i4 is £819 a month to lease, instead of £1,001. Running the petrol M440i takes the running costs up to £1,344 a month; for the i4, they are just £912. And drivers will pay £37 in BIK compared to – wait for it – £709 a month…

For company car drivers, running an EV is like being given a pay rise. And a generous one at that.

But there are more savings to be enjoyed. By choosing Fleet Alliance for vehicle acquisition, businesses can also benefit from cost efficiencies that drop straight to the bottom line. That’s because  Fleet Alliance offers the best market rates on each vehicle, each time, thanks to our panel funding fleet management method.  Each EV goes out to multi tender and we then choose the best rate on the day.

Surprisingly, these rates can vary more than you believe, thanks to differing positions taken by funders on the residual values of EVs. This often results in a price difference between the best deal and the most expensive of more than £80 per month – saving nearly £3000 in procurement costs over a three year period.

What about the cost of charging though?

Research from the RAC recently revealed the cost of using the very fastest EV chargers (which give a full charge in well under an hour) increased 50% from May 2022 to January 2023. Each kWh costs an average of 70p using a rapid charger, and 75p for an ultra-rapid charger.

It currently costs around 17p a mile to fuel the average petrol car; based on these prices, for an electric car using a public rapid charger, the cost is 20p per mile.

But there’s a significant qualifier here. According to statistics from fleet driver EV charge payment management firm MINA, a huge 92% of EV drivers charge at home, rather than at expensive public chargers. Savings here will quickly offset any extra costs incurred on the move.

Popular chargepoint locator app Zap-Map has a handy journey cost calculator. We used it to compare the aforementioned MG4 EV and Ford Focus petrol.

Let’s look at a theoretical 300-mile trip. With petrol costing an average of 149p a litre, it will cost £48 in unleaded – compared to £29.55 in electric, even with energy prices currently averaging 34p per kWh. Do this trip twice a week and, over a year, going electric saves almost £1,800. And the thirstier the petrol car, the bigger the savings.

Is salary sacrifice a better way to drive an EV?

Salary sacrifice is a great way for employees not eligible for a company car to drive a new EV. It costs them significantly less than if they’d leased the same car privately; payments are taken from their gross salary, with income tax and National Insurance contributions (NIC) then based on the lower gross salary.

Add in significant VAT savings, and it allows employees to drive a high-end new electric car for a temptingly low monthly sum. And employers benefit too, thanks to further monthly NIC savings.

In a market where staff recruitment and retention are real issues, adding an additional benefit, such as salary sacrifice for electric cars, is a significant attraction and adds greater substance to an employer’s Environmental, Social and Governance (ESG) programme with a commitment to zero emission vehicles.

The other area where salary sacrifice can also assist businesses is duty of care and grey fleet drivers. These are drivers using their own vehicle on business trips, for example cash takers, where the responsibility for the car and driver rests with the business on the journey, but actual management of the car is difficult and complex.

Switching such cash drivers into a salary sacrifice electric car provides the employee with a fully maintained vehicle, reduces their personal credit exposure (the contract lies with the employer) and provides the business with a vehicle that can be audited as part of its duty of care process.

So what are the savings available to drivers?

Fleet Alliance, which offers EV salary sacrifice solutions, has crunched the numbers. The Vauxhall Corsa-e is one of the most accessible electric cars on the market; it’s available to lease for a monthly gross salary sacrifice of £499. There’s no up-front cost, so employee credit lines are not impacted, while tax, insurance, servicing and breakdown cover are all included.

The figures speak for themselves. There’s a £100 income tax saving, and a £66 NIC saving; even with BIK tax of a paltry £9 a month (because the car is a benefit, but the BIK is very low on EVs), it will still only cost a basic rate taxpayer £342 a month. Over a three-year term, this equals a £5,652 saving – while the employer will also save £2,488 in NIC liabilities over the three-year term.

For higher-rate taxpayers, who may be drawn to a fancy Mercedes-Benz EQA Sport, savings are even more tantalising. A monthly gross salary sacrifice sum of £786 becomes just £478 once the various deductions are made; this will save them £11,088 over three years, while their employer will save £3,816.

And what about the savings available to businesses?

As in business contract hire, Fleet Alliance can bring additional value to the offering with competitive tendering of the lease rentals providing savings of between 6% to 13% over a sole supply (single funder) salary sacrifice set up.

Such a set up  provides constant savings on an ongoing basis depending on when employees decide to switch to salary sacrifice, offering real value that can be enjoyed by both employee and employer on a consistent basis, whereas with sole supply you and your employees are potentially at the mercy of ‘price creep’ from the ongoing lack of commercial tension in the relationship

Are there any other perks?

If you’re not already convinced electric cars are the better fleet car option, there are other savings to be had. Some local authorities offer cut-rate or even free parking. Supermarkets are increasingly fitting public electric car chargers, handily located near the shop entrance. While they’re no longer free to use, they’re still pretty cheap.

You’ll be able to drive into local authority Clean Air Zones, and even escape the £17.50 a day London Congestion Charge – provided you register your vehicle for the Cleaner Vehicle Discount with Transport for London. It costs a paltry £10. Naturally, you won’t have to worry about the ULEZ, either – even when it expands to Greater London. As for your corporate Environment, Social and Governance (ESG) agenda, switching your fleet cars to EVs is one of the most beneficial things you can do.

And finally, it’s always worth remembering the benefits of zero emission driving to local air quality – cleaner air to breathe in urban areas is another beneficiary of switching to EVs.

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