There is no doubt that electric cars are the future. They are cheap to run, kinder to the Earth and all-around a great innovation. As part of Boris’s Green Industrial Revolution, all new cars must be electric or hybrid by 2030.
However, electric cars cost more in the short term; they are more expensive to buy and as such, electric vehicles (EVs) should be bad news for business owners... right?
How your company can save money by switching to an electric fleet
Most company car drivers want to drive the latest and best models, and these can be expensive to run as a company-funded vehicle, for example, the Audi A4, BMW 3 Series and Mercedes C Class have often been seen as a status symbol in the company car park.
But with electric cars being more expensive than traditional petrol or diesel models, do electric car owners, or more specifically those who have company cars, actually save money when going electric?
Yes - but in some surprising ways. Benefit In Kind (BIK) tax relief is the unheralded hero that can help electric car users and businesses save serious cash. Here’s how it works:
BIK is a tax that usually applies to company car drivers. It requires the driver to pay up to 41% income tax on the value of the vehicle, this is called the P11d value. The BIK tax amount is then scaled based on the CO2 emission level and (in the case of Plug In Hybrid Models - PHEV) how far the car can travel on pure electric (called the AER - Average Electric Range). The BIK tax is also applied if the driver is offered private fuel, this is taxed again using the CO2. So the higher the CO2 and the higher the value of the vehicle, the greater the tax bill will be for the driver and the company (they get charged Class 1 National Insurance in a similar way on the BIK)
But, when opting for an electric car, the BIK is low, currently 1% of the P11d value (compared to say 345 for a typical Audi A4). This incentive enables electric car drivers to reduce their tax expenses thanks to the government "green plan", which aims to push for electrification throughout the car industry by no later than 2030.
Not only will you help your business save money through the BIK tax benefit, but you will also save money on fuel costs.
For years we have known that electric vehicles are cheaper to run fuel wise than conventional ICE’s but did you know how much by?
Fret not, as we have all the information you need. In an article from jct600, they compared the price of fueling three different Golf’s, one being electric.
In the article they cite the EV being around 4p per mile, while an ICE vehicle is around 15p per mile. 3.7p compared to 14p doesn’t seem too much. However, it is a difference of 26.43%. If you take these figures up to £1000 on petrol/diesel, it would cost around £735 for an electric car to do the same mileage.
These figures may not seem too consequential to your business on paper, but if your fleet is built up of 20 cars driving hundreds of miles every week, then the savings made could start to add up, and that £265 saving could quickly become thousands.
The average car will travel around 18,000 miles per year. Imagine all of that mileage and wear-and-tear on the engine. If you're not putting in regular maintenance work like oil changes or tyre rotation, your chances of breaking down are higher.
According to manufacturers' specifications, most vehicles only last between 10 to 12 years if they aren't adequately maintained.
When your car’s annual inspection (MOT) nears its due date, many potential pitfalls await drivers unfamiliar with their vehicle's parts list. From unexpected repairs for obscure items or systems like airbags to hefty fees for replacement parts for any number of things.
To put it simply, with petrol or diesel cars, a lot can go wrong without you even knowing, and that can cost...a lot.
When it comes to electric cars, however, due to the lack of a conventional internal combustion engine (ICE), there are fewer moving parts, which means a lower likelihood of things breaking over time. In addition, the advancements in technology associated with the development and rise of electric-powered vehicles are helping to significantly reduce their chance of breakdowns.
What does this mean? In simple terms, electric cars can end up being cheaper to service. No more oil and filter changes every 12 months.
Car insurance is one of the heftiest price tags that come along with the after purchase or lease of a car, and it can tally up a bill from hundreds to even thousands of pounds.
The average insurance premium for a private car per year is around £485 (for ICE vehicles) according to moneyadviceservice.org.uk.This isn’t an insignificant amount, especially after you have just bought a car, never mind an entire fleet of them.
However, in an article from yourmoney.com, they cite data from GoCompare, saying that on average, while comparing a Nissan Leaf (Electric) to a Ford Fiesta (ICE), the price difference was around £154 cheaper on the Leaf.
Further data from MoneySupermarket, highlighted a similar correlation between the Renault Zoe (Electric) and the Vauxhall Corsa (ICE). The costs on average were £451 for insurance on the Zoe, while a Vauxhall Corsa cost around £776, which is a relatively significant increase from the electric car.
Whilst most company cars are covered on a fleet policy, the risk and policy costs above will be comparable, so in theory, the fleet policy will have similar savings to those identified by private drivers.
People have long speculated that insurance may cast a large shadow on electric cars. For some time, it seemed as if this was true, but with more people opting for EVs, the price of insuring them is falling year by year.
Electric cars may be the answer if you are looking for a more fuel-efficient, tax-efficient and eco-friendly way to operate your fleet of vehicles.
Along with the significant impact on tax savings and how much cheaper it will make running your business over time when taken care of properly.
Get in touch with us now to help you find out how electric cars can work for your company
0161 406 3936