What do company
cars actually cost?
The true cost of a company
car is not easy to calculate because comprehensive
data isn’t always readily obtainable. But
without it no evaluation of alternatives will
be of value.
So what’s
your starting point?
The real cost of company
cars is made up of no fewer than eight elements:
• Funding
• Depreciation
• Service and Maintenance
• Road Fund Licence
• Vehicle Insurance
• Fuel
• National Insurance
• Administration
For companies using full
maintenance Contract Hire, these first four items
are easily identified from the rental documentation.
Companies that buy vehicles
outright and manage their own maintenance in-house
will find that isolating these costs is more difficult.
A project to evaluate future
policy must consider future costs. You therefore
might be best served by using full life cost projections
from external sources, or contract
hire rentals.
Very few company cars spend
all their lives working on company business, so
remember to add in the unreclaimable portion of
VAT on rentals to your overall cost calculation
where appropriate.
Insurance
Premium costs are easy to
identify, but be careful to identify less obvious
costs. These might include:
• Excess charges
• Short term hire costs
(even though courtesy cars are frequently
available)
• Internal administration costs
Fuel
If fuel cards are in use
then costs will be easy to assess.If not, the
only answer is to analyse individual expense claims.
This kind of work is time-consuming,
so before committing too much effort in this area,
it’s important to consider whether there
will be any change to fuel reimbursement if the
company car ceases to exist.
It may well turn out that
the actual impact is negligible.
National Insurance
Class1A National Insurance
is payable by the employer based on the CO2 rules
and will be a percentage of the scale charge.
Administration
The ease of obtaining an
internal administration cost for your company
cars depends on who does the work.
For example, if you
have a dedicated fleet department then your administration
cost will simply be the payroll figure plus operating
costs such as telephones etc.
