Managing the costs of the company cars your small business runs means keeping an eye on CO2 emissions and using whole life costs, reports editor Ralph Morton.WE ALL want to drive a decent car. If you’re managing the business cars for your SME firm, I’m sure that’s a constant refrain from your company car drivers. As well as your directors!

As a director yourself, no doubt you’ll be looking at the bottom line, too.

And that must include Class 1A National Insurance (NI) contributions, which went up from 12.8% to 13.8% from April 6, 2011.

Although the rise wasn’t unexpected, this increased tax on employment simply pushes up the cost base of any business – even it was perhaps masked by the rapidly escalating cost in fuel at the time.

So what can be done?

The best way to lessen the impact of this NI rise is to ensure your company car drivers choose the most fuel-efficient business cars possible. Not only will that help reduce your business costs – the cars will go further on a gallon of fuel after all – it will lower the company car tax benefit in kind your staff will pay, and the amount you pay in NI contributions on the benefit.

If you add in the NI contributions the next time you’re replacing a company car then it will give you a better overall picture of your likely costs: this is known as assessing whole life costs.

Whole life costs should include the monthly rental, the disallowable VAT element, the NI payable, fuel economy based on the combined mpg, as well as insurance.

Lowering the CO2 emissions of your company cars needn’t be painful for drivers in terms of what they drive, either.

How car lease company Arval lowered its fleet emissions

Car leasing and fuel management company Arval has recently undertaken the very same process to reduce the CO2 emissions of its business cars to under 130g/km.

Arval’s own consulting team set maximum CO2 limits for each company car entitlement band as well as pulling the most efficient business cars into a special ‘ECO group’ comprising a range of sub-110g/km vehicles, with some cars emitting less than 99g/km CO2.

Cars within Arval’s ‘ECO group’ include the BMW 320d EfficientDynamics, VW BlueMotion Golf and Ford ECOnetic Focus as well as efficient versions of the MINI Cooper and the Audi A3 1.6 with a CO2 of 99g/km. Hybrid models such as the Honda Insight and Toyota Prius also featured on this list according to Arval – so nothing too disastrous there in terms of car choice.

Tracey Scarr, fleet & road safety manager at Arval explains more: “Our new choice list has proven to be very successful in influencing the vehicle selection of our employees and reducing the average emissions of our fleet. With average CO2 falling to 128g/km in less than a year, this provides a clear demonstration of how a well thought out choice list can positively shape behaviour.

“Our whole life cost approach means that the choice list remains broad and we are by no means forcing drivers to select the lowest emission vehicles. However, with environmental performance and costs directly linked, selecting more efficient cars has become a compelling choice for many Arval employees.”

Car makers drive down CO2 emissions

If you prefer to put your company car drivers in slightly bigger cars, then again the car makers have been reducing the CO2 emissions, to the benefit of both the driver in terms of benefit in kind, and those SMEs running business car fleets.

Ford has just launched its latest Mondeo 1.6 TDCI with ECOnetics technology that has CO2 emissions of 114g/km. The forthcoming Hyundai i40 saloon and estate have CO2 emissions of an astonishing 113g/km.

And then there are executive cars like the latest Audi A6 2.0 TDI and BMW 520d that would grace any company car park and private drive – but have CO2 emissions of just 129g/km (which places them in the same company car tax band category – 18% – as a VW Golf Match 2.0 TDI 5dr).

There are signs, though, that businesses are beginning to understand that lower CO2 emissions means lower company car costs. Fleet solutions provider Fleet Alliance says that in quarter one of this year, 62% of all new cars ordered by customers had carbon emissions below 140g/km, with 29% of them less than 120g/km.

So next time you have a company car due for renewal, consider the car’s carbon content – and its overall costs using whole life costs. Your business car leasing provider will able to help you make those decisions based on whole life costs.

“Choosing low CO2 emission cars doesn’t mean you have to drive a small car – it means being smart,” adds David Rawlings car tax and SME specialist at Business Car Finance – and one of the experts from our Ask the Experts panel.

“The reality of why choosing a low emission or ‘green’ car makes good financial sense is simple to understand – you and your drivers spend less on fuel and pay less tax.”

You can’t argue with that.

Fleet Alliance expert comment on reducing business car costs

Back in May 2010, we launched a product called Fleet360. It was a direct response to those business car managers who wanted help in lowering their fleet runnings costs.

Using Fleet360, we work in conjunction with the business car manager to focus on all aspects of the fleet’s make up in order to understand where the best cost savings can be achieved. Whole life cost analysis and a focus on CO2 emissions when selecting company cars is a crucial part of our cost reduction programme.

As both companies and drivers take steps to combat the increasing cost of fuel a prudent choice of car is only one part of the exercise. Many fleets are now looking at many of the additional products on offer, such as fuel cards, which help streamline the process of purchasing fuel and add efficiencies linked to fuel re-claim. Mileage capture and management tools such as our e-fleet system also help guard against end of contract costs arising from unexpected excess mileage charges.

We have found that using a fleet solutions provider to engage in a full fleet audit has helped many business car managers to identify a number of areas where fleet running costs can be reduced.

David Blackmore
commercial director of fleet solutions provider, Fleet Alliance