Half of all new car registrations in the UK are comprised of company vehicles. The market is evolving to meet the demands of last year’s taxation changes, which switched to a scheme based around vehicle emissions. Despite these changes, the market has confounded expectations by remaining strong.
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The new scheme taxes users a total of 15-35% of the vehicle’s value dependent on the quantity of carbon dioxide that it emits. This has hit the users of uneconomical vehicles and those who rack up high mileage very hard, in some cases more than doubling their costs.
When the changes were originally introduced, it was anticipated that the new scheme would herald the end of the traditional company car sector. Users were expected to migrate to employer schemes offering cash incentives in place of a company car.
Instead, more companies are offering cars simply as perks to employees, rather than as a means of accruing high business mileage. Under the old tax rules, this sort of company incentive would have been a massive tax burden, however now users can choose a low emission vehicle and enjoy considerable savings over the cost of buying and running their own car.
Manufacturers are responding to this situation with a wealth of new low-emission vehicles targeted at the company car sector. In addition, new low-emission diesels are swelling the ranks of vehicles that can be run with lower tax rates due to their relatively clean exhausts.
As a result of UK leasing companies increasing their demand for diesels to more than 50% of all new orders, many car companies are rushing to produce higher-powered diesel vehicles to cater for executive and luxury car demand.
These trends are driving new activity in a sector that had previously stagnated due to market saturation. With changes in the way leased vehicles are used and changes in the perceptions of the value of diesels, the company car market is looking like it has room for new development despite its maturity.
For more detailed information and analysis on the UK company car market, please click here.
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