THE influential think-tank, the IPPR, wants the government to change its policy on the removal of 100% First-Year Allowances (FYA) for leased cars.
Since the Budget, an SME buying a low-emission vehicle (CO2 emissions below 95g/km) can claim 100% first year allowances.
However, leasing companies supplying low-emission company cars to small businesses and SME fleets have been blocked from doing this. As a result of this leasing penalty, the monthly lease cost of a qualifying low emission car has risen.
How the Volvo V40 D2 has been affected by the leasing penalty
- Prior to April tax change: £239 a month on a 6+35 profile over 30,000 miles
- Post April tax changes: £259 a month on a 6+35 profile over 30,000 miles
- Difference: £20
“The impact of the government changes are going to make low emissions cars like our Volvo D2 R-Design more expensive to lease,” Selwyn Cooper, Volvo’s corporate sales manager, told Business Car Manager back in January.
A glance at the change in lease prices of the Volvo V40 D2 R-Design suggests Selwyn was correct (see table right).
The IPPR (Institute for Public Policy Research) reckons that the block on the 100% FYA will account for a minimum 5% increase in the monthly business car lease.
For a typical small fleet of 25 sub-95g/km cars financed over a four-year period, this could add a total of £18,000 to the cost of running that small fleet, reckons the IPPR.
Commenting on the report, chief executive of the British Vehicle and Rental Association, John Lewis, said:
“We are delighted that this independent report has recognised the vital importance of the leasing industry in driving the uptake of low emission vehicles, something that the government has chosen to ignore.
“We will continue to lobby for them to reinstate 100% First Year Allowances for our sector.”
Also read this
Click for The Budget: Capital allowances on low emissions cars extended to 2018
Read Selwn Cooper interview here: Business sales remain critical to Volvo
