Those who buy and use company cars are often disparaged by other road users, and even the motor trade itself. The phrase “rep’s car” is basically an insult in itself, and you’ll often see cars that are ex-fleet marked down in the second-hand ads. The idea of owning an ex-fleet car seems almost abhorrent to some, in spite of the fact it probably means the car has been carefully serviced and maintained, indeed probably to a higher standard than most private cars.
The fleet sector is also one of the mainstays of the motor trade in Ireland, often representing as much as a third of all sales in a given period. For 2019, that seems unlikely to change, and indeed the sector as a whole seems resistant to change, but there are undercurrents beneath the surface which could, potentially, turn the company car landscape on its head.
The biggest, and most obvious, is the anti-diesel crusade currently at large in both the press and the halls of power. So far, it hasn’t much yet permeated the company car world, mostly because it’s a world that works exclusively on the bottom line. Thus far, nothing has happened to shift that bottom line.
“From a company car perspective, it’s still very much a diesel market,” Conor Kelly, commercial director of Sixt Leasing Ireland, says. “You can see from the sales figures that the rest of the car market has turned 180 degrees, but not the business motoring.”
There’s little sign of that changing, unless the Irish Government performs a dramatic volte-face in the way it taxes cars, and company cars and their fuel in particular. Many had expected to see one change in the recent budget – the extension of the ability to claim VAT back on fuel from just diesel, to diesel and petrol. Such a move might have begun to encourage fleet users and operators away from diesel power and into hybrids, but it didn’t happen.
The zero-rating for BIK for electric vehicles (EVs, those costing under €50,000) has started to have an effect, though. “There’s certainly a shift towards electric, and we’ve noticed that our EV leasing sales are definitely up. Even those on car allowances seem to be going down the EV route, mostly because it allows them to spend more of their budget on the car itself, and they need to keep less back for fuel. I don’t think we’ll see much change away from diesel in the core company car market yet though. Certainly, the lack of a VAT claim back on petrol is an issue. Mind you, we have other challenges right now, including the 1 per cent vehicle registration tax increase for diesel cars, and the introduction of the WLTP emissions figures,” says Kelly.
WLTP, or World Light-duty harmonised Testing Procedure, is the new official test for a car’s economy and Co2 emissions, and it has been causing chaos in the car world, as car makers scramble to get their vehicles through the new tests. Some, such as BMW and Honda, got their ducks in a row early on, but others – notably the Volkswagen Group and its various brands – have failed to do so, meaning many key models have had to spend some time on the benches and off the price lists, at least until the testing can be carried out.
Driving up the cost
It’s also driving up the cost of buying some of those cars. The more stringent testing procedure has seen Co2 levels rise almost across the board, causing some cars to jump up a tax band, and so cost more to both buy and run.
Of course, that doesn’t make any difference to benefit in kind (BIK) tax, which is calculated as 30 per cent of the vehicle’s original list price, but there are other things happening in that arena. The change in BIK legislation last year, which saw all electric cars given a zero-rate for BIK, was modified this year to put a cap on the price – as long as you’re spending €50,000 or less on your electric car, you’ll still pay no BIK.
That led to some confusion, early on, however, and one of the biggest questions was on optional extras. There are not many electric vehicles on sale in Ireland as yet, and most are below that €50,000 barrier, but two key models – the Volkswagen e-Golf, and the BMWi3 – flirt with it, and will easily exceed it once you add in a few options. The worry, initially, was that if options pushed you over the limit, you’d have to pay BIK on the whole cost of the car.
Thankfully, that turned out not to be the case – if you bust the €50,000 barrier on options, you’ll only have to pay BIK on the amount exceeding €50,000, which is somewhat more palatable, but the zero-rate incentive has clearly had some effect. Electric vehicle sales have increased by 98 per cent so far this year, albeit from a very low base. There are, however, concerns the zero-rate only incentivises a tiny proportion of the market. Many have argued that incentivising hybrids and plug-in hybrids would actually have a greater, and more immediate, effect on air quality and Co2 emissions, and there are more of these types of car available on the market right now.
The problem with that is the experience in the UK market, where the purchase of plug-in hybrids has been encouraged for some time, shows that many users and fleets are buying the cars, but then not plugging them in. By not using the part-electric capability of the car, they’re getting the tax benefit, but actually ending up using more fuel overall, causing more emissions overall, and letting their company pick up the tab for the extra cost at the pump. While incentives for more efficient cars are to be welcomed and encouraged, there’s not much point if people aren’t going to use them properly.
There are other trends in the company car market, including one potentially money-saving, and one potentially life-threatening.
On the money-saving front, there’s potential for both individuals and companies to claw back some tax if they have to hire a car for work purposes. Eileen Devereux, commercial director at Taxback, says: “The habitual car rental idea is definitely growing in popularity. This is particularly true for two-car households, which are coming more and more into question with the advent of more sophisticated car-sharing options. An example of this is the growth in the use of GoCar, the car-sharing service. You can book cars online for as little as an hour at a time. The car rental providers offer a variety of observations to promote the use of their service, and while the benefits of ditching your private vehicle are obvious in terms of cost-reduction and environmental impact, few people have considered the tax benefits it could offer if you use the car for work.”
It helps, in this instance, to be self-employed because then a bigger chunk of the cost of rentals can be clawed back from Revenue. The trick, as ever, is to distinguish between business and personal use, which should at least theoretically be easier if you’re sufficiently organised to divvy up your rentals as you go.
Organised car-sharing
A study into the potential of organised car-sharing in Ireland conducted by the Irish Transport Research Network in 2015, found that, on average, customers of GoCar (the service that sells micro-rentals of cars with on-street pick-ups and drop-offs) made one trip every two months, cars were booked for 2.3 hours, travelled 21.67km and operated as per the basic monthly membership package. The estimated average usage of GoCar members in Dublin was 130km per year. For self-employed users, almost all of the cost of each rental, those for business purposes at any rate, could be reclaimed.
For those on PAYE, it’s a little more complex, and a little less rewarding, but there are at least some possibilities in the system. If, for instance, your employer were to give you a GoCar membership instead of a company car, then you’d still pay benefit-in-kind tax on the membership, but you could defray some of that depending on the purely business miles you were racking up.
If you rent a car yourself, and charge it to your employer, it’s more straightforward, as there’s a simple deduction of the value of the miles covered at standard civil service mileage rates. Not quite the claw-back the self-employed can make, but every little helps.
The idea of renting-on-demand for short business trips feeds into another, rather more serious, concern. That’s the worry employers are leaving themselves wide open to potential lawsuits because they’re turning a blind eye to employees using their own cars for business purposes.
Sixt Leasing claims the so called “grey fleet” of drivers who use their own cars and vans for work, usually in return for a cash allowance or expenses, are at risk because employers are not properly checking that their vehicles are fit for use.
“Company directors and State bodies are playing Russian roulette with the lives of ‘grey fleet’ drivers. They are gambling on a tacit understanding that the employee has a valid NCT certificate as the sole means of protecting themselves and the lives of their employees and other road users,” says Conor Kelly.
Kelly says the Government should ensure that employers, both State and private, are properly trained and informed about how to care for their employees when on the road, as their car is defined as a place of work by the Safety, Health and Welfare at Work Act 2005. Furthermore, Kelly has called on the Government to sign the stalled Corporate Manslaughter Bill 2016 into law, without the stick of which he believes neither private companies nor State bodies will change their ways.
“State bodies and company directors need to take action and wake up to the fact that they are exposed to fines of up to €3 million and imprisonment for up to two years under health and safety legislation for failing to protect the health and safety of employees driving for work.
“They have a duty of care to their employees to ensure that their car is fit for purpose, whether they are driving the short distance to the post office or to meetings the length and breadth of the country. Right now, they are gambling on employees not being involved in an accident and returning alive and uninjured.”
According to Sixt’s figures, of the two million cars currently in use on Irish roads, some 200,000 of them are corporate vans or cars, and a huge 600,000 could potentially be “grey fleet”. “The risk of an accident occurring certainly exists and business owners need to realise that managing a ‘grey fleet’ is not as black and white as it may appear, says Kelly. “Many organisations have no policies or procedures for checking whether ‘grey fleet’ drivers have a valid driving licence, whether their private motor insurance includes business use, whether the car is taxed and NCT road-worthy and whether they have completed routine safety checks before setting out on their journey.”
Best business cars for 2019
1) Nissan Leaf
With zero-rate BIK, you can thumb your noses at any passing Tesla driver, and with the massive 40kWh battery on board, you can go for longer journeys than you might think, but, sadly, shorter journeys than you might hope. Motorway runs between Dublin and, say, Belfast or Cork, will still require a stop half-way to top up the battery. The rest of the Leaf is pretty impressive, though – spacious inside, well built, not bad to drive, and with no engine noise it’s hugely refined. Go for the €32,600 SVE model for the plushest possible experience.
2) Toyota Camry
A familiar name, but one that’s been away from Ireland for a long time now. In 2019, the Camry is coming back and it’s coming back only as a hybrid. That might make it a no-no for some fleet managers, but they will be pleased by the fact that, mechanically, it’s identical to the much more expensive Lexus ES300h. Toyota Ireland reckons customers for these two models won’t cross-shop, but we reckon they’d be mad not to. If you can have all of the Lexus’ refinement, comfort, reliability, and that frugal hybrid system for €10,000 less, why wouldn’t you? Prices start from €39,750.
3) Audi A6
Another familiar name re-invented this year, and many executive buyers will be relieved to hear that this one is just diesel for now. The new A6 might look, broadly, similar to the old one but actually the more you look at it, the more subtly muscular and complex the shape starts to appear. It’s a seriously good-looking car. That’s true too of the inside, where you get the double-decker touchscreen arrangement from the more expensive A7 coupé and A8 luxury limo, and the quality levels are off-the-scale good. It’s superbly refined too, thanks to double-glazed windows, which helps those long motorway miles to glide by. 204hp 2.0-litre TDI diesel engine is the best one for now – frugal, but still with punchy performance. Prices from €50,800.
4) Mazda 6
Mazda’s trad four-door (and five-door estate) may be looking a touch less desirably in some eyes than its SUV competition, but it’s a car for which it’s well worth ignoring the fashion for crossovers. Slip inside, and you’ll find that this Japanese family car has a cabin worthy of comparison with the big German luxury brands. That’s especially so if you go for a pricey Platinum Plus version, which comes with soft-grain leather on the dash, Nappa leather on the seats, and gorgeous Japanese “sen” wood trim on the doors. It’s also terrific to drive, with a blend of comfort and precision that your typical SUV simply cannot match. Plus, the 2.2 turbo diesel engine, which was for a long time rather thirstier than it should have been, has been updated and suddenly figured out how to be economical. From €31,945.
5) BMW 3 Series
For 2019, an all-new 3 Series, and to be honest, there’s a lot about it which we still don’t know. There will be basic versions using the three-cylinder turbo petrol and diesel engines from a Mini Cooper, but we don’t know what those will be like yet. There will be two plug-in hybrid versions this time around – a mid-spec 325xe and a more powerful 330e. We also don’t know how much the drop in power (it’s only 6hp, but still) will affect the core 320d model. Nor how the styling – rather less clean, and certainly less simple than we’ve been used to – will play with buyers. We do know this, though: BMW’s engineers have worked a rare magic on how the new 3 Series drives, to the point that it might not be just the best car in its class to drive, but maybe just the best car, full stop. The first cars arrive in Ireland in early 2019, and prices start from €43,770.
