1 Cash Allowances and Contract Hire C4569 02.2018
2 Executive Summary. We were recently approached by a top-200 mixed fleet who currently source their vehicles through contract hire, and were asked to put together an impartial analysis as to whether they should continue with their current funding arrangement, or offer a cash allowance scheme. Businesses who offer employee benefits want as attractive a scheme as possible whilst controlling outgoings, yet recent media briefings portray rising costs in company car schemes. With BIK rates increasing over the next five years and a reworked VED system introduced in 2017 that taxes vehicles more harshly, it is understandable why some firms are reviewing cash allowances as an alternative method of attracting and retaining staff. However, the result of our analysis found that this particular company would incur a 31.06% increase in spend to offer a comparable cash allowance scheme. In this piece we explore the analysis behind our findings, and recommendations for an attractive company car scheme that remains cost efficient.
3 Assumptions. This document will discuss the relative strengths, risks and considerations associated with contract hire and leasing, cash allowances and outright purchase. In order to provide comparable analysis many assumptions have been taken: 1. The vehicles on the firm s current orderbank have been used as the basis for the comparisons. This better reflects the current choices and preferences of the driver population today than the wider fleet as some of those vehicle choices were made four years ago, when costs, taxation and the types of vehicles available were very different than today. 2. For the purposes of the cost analysis, we have assumed that the driver would choose the same vehicle that they have ordered as a company car and then finance it through a Personal Contract Purchase (PCP). 3. When comparing against a PCP, we have assumed that the driver would opt for the same term and mileage that they have selected for their company car. 4. Similarly, we have assumed that they would attract the same discounts that the firm attracts as a major fleet. This is unlikely to be the case in reality. 5. We have made assumptions on the driver s Income Tax and National Insurance bandings based on the P11D (with P11D values of less than 26K assumed to be a 20% tax payer and over that value to be a 40% tax payer). 6. We have assumed that, in the case of PCP, an employee might expect to pay an average of 600 per year for insurance on their vehicle. In reality, this figure might be higher but it is a reasonable figure on which to base an average calculation. 7. We have assumed that the employee will reclaim fuel for business mileage, based on their fuel type and engine size, at set pence per mile rates.
4 Assumptions. 8. When calculating whole life costs, we assume that 68% of the firm s mileage is business mileage and we have used this figure when calculating what an employee might be able to claim as tax relief on their fuel, should they source their own car using a cash allowance. 9. Where we show an extra cost, it is on the assumption that the company would provide sufficient cash allowance for the employee to be able to source their vehicle via PCP a financial position that is cost neutral to them. This calculation takes account of taxation, fuel & insurance costs. 10. Where we have calculated a balloon payment for PCP, this is based on what we believe a finance house would offer and a maintenance budget which is the same as the Pendragon monthly maintenance budget. In reality, it is unlikely that a retail customer would be able to secure such a package. 11. We have assumed that, should a driver be offered either the company car scheme or the cash allowance that (due to taxation changes in 2017) they would permanently abdicate from one benefit or the other.
5 Pros & Cons. Contract Hire The Firm Driver The Firm Driver The firm have an attractive scheme and offers good choice Easy budgeting fixed cost per vehicle each month Leveraged volumes for discounts with manufacturers Financial & operational data can be provided by and held by Pendragon Pendragon take all risk on residuals 50% of VAT can be reclaimed on monthly rentals On low CO2 cars (sub 130g/km), all monthly rentals can be offset against corporation tax. For vehicles over 130g/ km, 85% of monthly rentals can be offset Can reduce duty of care risk through policy on vehicle specification and safety Useful for cash flow (even more so with the adoption of the Citibank model) Currently off balance sheet positive impact on gearing ratio Significant portion of the administration is effectively outsourced to Pendragon as part of the contract hire arrangement Only vehicles that meet policy are shown, avoiding frustration if selecting unsuitable vehicles on a personal basis Managed service with dedicated supplier for ordering, service & maintenance Major unit failures, which might otherwise cost the driver significant amounts of money, are handled through the company car process with Pendragon No credit checks Perceived to be attractive by drivers due even greater choice Contracts typically have to run for 4 years. May present reallocation issues Whilst the scheme is attractive, sourcing vehicles personally offers even wider choice A driver joining the firm with outstanding finance on their own car may have settle that finance if they are to be given a company car rather than an allowance
6 Pros & Cons. Cash Allowance (PCP) The Firm Driver The Firm Driver Less admin surrounding sourcing vehicles Dependent on personal circumstance, can be attractive in terms of retaining and attracting talent Unlimited choice on vehicle specification Can be financially advantageous for the driver (low mileage driver / high Co2 cars willing to put down significant deposit from personal funds / driver already owning their car outright.) More flexible - change car in line with their own needs/desires (change in lifestyle for example) Some drivers consider cash allowance extra salary and therefore view the benefit as attractive Perceived to be attractive by drivers due even greater choice Analysis shows it is typically much more expensive for the employer to provide sufficient gross cash allowance to source the same vehicles as the drivers have on order today Significant risk associated with managing a grey fleet Significant increase in administration of the grey fleet, or the cost of outsourcing the work to a fleet management company (a service that Pendragon would provide) Compares poorly with contract hire or capital expenditure in terms of cash flow Diminished control on quality and type of vehicles representing the firm on business Likely adverse effect on wider contract hire terms through reduced economies of scale Risk of needing to fund major repair to the vehicle and ensure they are able to fulfil their duties without interruption Inflexible unable to switch back into car scheme once the driver has abdicated company car entitlement due to recent taxation rulings Driver in effect takes the risk on residual values should they decide to sell or take a PCP with a fixed balloon payment Limited support for drivers in maintenance or financial disputes Credit checks required for private financing
7 Pros & Cons. Outright Purchase The Firm Driver The Firm Driver Own funds may be cheaper than Contract Hirer s More flexible when compared to termination & extensions of contract hired vehicles Reward of any disposal profits No additional benefit to driver over traditional contract hire - purely funding difference Significant capital tied up with no measureable ROI. Impact on company gearing No VAT reclaim Slow write down process versus favourable leasing allowances Risk of any disposal losses Significant increase in administration of the owned fleet, or the cost of outsourcing the work to a fleet management company No additional benefit to driver over traditional contract hire - purely funding difference
8 Cost Analysis. Comparison Analysing the firm s current Orderbank, it is calculated that the total cost to the firm to fund those vehicles is 816,265.87 over the life of the contracts on Contract Hire (see page 9- Cost Analysis Contract Hire). Where we have calculated the cost of the same vehicles on cash allowance, (see Page 12, Cost Analysis PCP) we have also calculated the monthly taxation impact (Monthly BIK) for the employee, which we use in the calculation on the previous page, when determining how much allowance the firm would need to pay in order that the driver could source the same vehicle, via PCP, with the net cost to them being exactly the same. In summary, if we assume that 68% of miles are business miles then we can calculate the amount of tax relief on fuel that the employee could claim. Added to the Benefit In Kind saving by not having a company car, that figure is then deducted from the total cost of the PCP to give us a true net figure for the amount of cash allowance the firm would need to pay that employee over four years. Finally, based on the Income Tax and National Insurance banding, we can gross that amount to show the actual bottom line position for the firm. The end result is that the company would pay an extra 253,547.44 to provide these vehicles via cash allowance; a 31.06% increase.
9 Cost Analysis. Contract Hire Vehicle Skoda Superb Hatchback 1.6 Tdi Cr Se Greenline 5dr 2018 Toyota C-HR Hatchback 1.8 Hybrid Icon 5dr Cvt [Nav] 2017 Skoda Superb Diesel Hatchback 1.6 Tdi Cr Se Greenline 5dr 2018 Bmw 3 Series Saloon 330e Sport Mercedes-Benz C Class Saloon C350e Sport 4dr Auto 2018 Bmw 3 Series Saloon 330e Sport Mercedes-Benz C Class Estate C350e Sport 5dr Auto 2018 Volkswagen Golf Diesel Estate 2.0 Tdi 184 Gtd 5dr 2017.75 Volkswagen Passat Estate 1.4 Tsi Gte 5dr Dsg 2017.5 Seat Leon Diesel Sport Tourer 2.0 Tdi 150 Fr Technology 5dr 2017 Volkswagen Passat Estate 1.4 Tsi Gte 5dr Dsg 2017.5 Mercedes-Benz C Class Estate C350e Sport 5dr Auto 2018 Fuel Type P11d Tax Band P11d % CO2 Monthly BIK Term Mileage Indicative rental Class 1a NIC Rentals Payable Insurance Per Contract Payable diesel 23,470.00 20% 22% 101 86.06 48 120000 400.04 2,850.20 19,202.02 2,200.00 24,252.21 petrol 24,290.00 20% 17% 86 68.82 48 56000 320.19 2,279.37 15,369.17 2,200.00 17,648.54 diesel 23,470.00 20% 22% 101 86.06 48 128000 409.85 2,850.20 19,672.70 2,200.00 22,522.90 petrol 35,865.00 40% 9% 45 107.60 48 80000 454.25 1,781.77 21,804.14 2,200.00 23,585.92 petrol 39,425.00 40% 9% 48 118.28 45 150000 654.98 1,836.22 29,474.19 2,062.50 31,310.41 petrol 35,865.00 40% 9% 45 107.60 48 100000 459.13 1,781.77 22,038.10 2,200.00 23,819.87 petrol 40,625.00 40% 9% 49 121.88 48 84000 544.14 2,018.25 26,118.58 2,200.00 28,136.83 diesel 29,115.00 40% 26% 124 252.33 48 68000 373.37 4,178.58 17,921.62 2,200.00 22,100.20 petrol 38,560.00 40% 9% 39 115.68 48 80000 456.37 1,915.66 21,905.90 2,200.00 23,821.56 diesel 23,960.00 20% 24% 112 95.84 48 120000 377.95 3,174.22 18,141.60 2,200.00 21,315.82 petrol 38,560.00 40% 9% 39 115.68 48 84000 451.73 1,915.66 21,682.80 2,200.00 23,598.46 petrol 40,625.00 40% 9% 49 121.88 48 72000 519.38 2,018.25 24,930.29 2,200.00 26,948.54
10 Cost Analysis. Contract Hire Vehicle Volkswagen Passat Diesel Saloon 1.6 Tdi Se Business 4dr 2017.5 Bmw 3 Series Saloon 330e Luxury Ford Kuga Diesel Estate 1.5 Tdci Titanium 5dr 2wd 2017.5 Bmw 3 Series Saloon 330e M Sport Volkswagen Golf Hatchback 1.4 Tsi Gte 5dr Dsg 2017.75 Volkswagen Golf Hatchback 1.4 Tsi Gte 5dr Dsg 2017.75 Ford Mondeo Diesel Hatchback 1.5 Tdci Econetic Zetec 5dr [Nav] 2017.5 Skoda Octavia Diesel Hatchback 1.6 Tdi Se Technology 5dr 2018 Volkswagen Tiguan Diesel Estate 2.0 Tdi Bmt 115 S 5dr 2017.5 Volkswagen Golf Diesel Hatchback 2.0 Tdi 184 Gtd 5dr 2018 Volkswagen Golf Diesel Hatchback 1.6 Tdi Gt 5dr 2018 Bmw 3 Series Saloon 330e Sport Mercedes-Benz C Class Saloon C350e Sport 4dr Auto 2018 Fuel Type P11d Tax Band P11d % CO2 Monthly BIK Term Mileage Indicative rental Class 1a NIC Rentals Payable Insurance Per Contract Payable diesel 24,355.00 20% 23% 105 93.36 48 100000 355.53 3,092.11 17,065.44 2,200.00 20,157.55 petrol 35,865.00 40% 9% 49 107.60 48 48000 435.60 1,781.77 20,908.56 2,200.00 22,690.33 diesel 26,180.00 40% 25% 115 218.17 48 58000 359.03 3,612.84 17,233.20 2,200.00 20,846.04 petrol 37,765.00 40% 9% 49 113.30 48 132000 573.29 1,876.17 27,518.02 2,200.00 29,394.18 petrol 30,580.00 40% 9% 38 91.74 48 80000 376.00 1,519.21 18,047.76 2,200.00 19,566.97 petrol 30,580.00 40% 9% 38 91.74 48 68000 363.02 1,519.21 17,424.77 2,200.00 18,943.98 diesel 23,720.00 20% 20% 94 79.07 48 68000 347.54 2,618.69 16,682.11 2,200.00 19,300.80 diesel 20,395.00 20% 23% 106 78.18 48 140000 405.27 2,589.35 19,452.77 2,200.00 22,042.12 diesel 24,725.00 20% 26% 123 107.14 48 68000 341.42 3,548.53 16,388.21 2,200.00 19,936.74 diesel 28,065.00 40% 27% 125 252.59 48 56000 306.75 4,182.81 14,724.10 2,200.00 18,906.90 diesel 23,270.00 20% 23% 109 89.20 48 100000 359.57 2,954.36 17,259.26 2,200.00 20,213.62 petrol 35,865.00 40% 9% 45 107.60 48 130000 504.19 1,781.77 24,201.26 2,200.00 25,983.04 petrol 39,425.00 40% 9% 48 118.28 48 80000 531.37 1,958.63 25,505.71 2,200.00 27,464.35
11 Cost Analysis. Contract Hire Vehicle Volvo V40 Diesel Hatchback D2 [120] Momentum Nav Plus 5dr 2018 Skoda Superb Diesel Estate 1.6 Tdi Cr Se Greenline 5dr 2018 Bmw 3 Series Saloon 330e Sport Seat Leon Diesel Hatchback 1.6 Tdi Se Dynamic Technology 5dr 2018 Seat Leon Diesel Hatchback 1.6 Tdi Se Technology 5dr 2018 Bmw 3 Series Saloon 330e Sport Seat Leon Diesel Hatchback 1.6 Tdi Se Dynamic Technology 5dr 2018 Volvo V40 Diesel Hatchback D4 [190] Inscription 5dr 2018 Skoda Superb Diesel Estate 1.6 Tdi Cr Se Greenline 5dr 2018 Volkswagen Golf Diesel Hatchback 1.6 Tdi Se [Nav] 5dr 2018 Ford Focus Diesel Hatchback 1.5 Tdci 105 Style Econetic 5dr 2017.5 Fuel Type P11d Tax Band P11d % CO2 Monthly BIK Term Mileage Indicative rental Class 1a NIC Rentals Payable Insurance Per Contract Payable diesel 23,250.00 20% 20% 94 77.50 48 100000 349.66 2,566.80 16,783.68 2,200.00 19,350.48 diesel 24,750.00 20% 22% 102 90.75 48 120000 407.81 3,005.64 19,574.78 2,200.00 22,580.42 diesel 35,865.00 40% 9% 45 107.60 36 147000 663.29 1,336.33 23,878.30 1,650.00 25,214.63 petrol 18,940.00 20% 23% 106 72.60 48 88000 292.38 2,404.62 14,034.34 2,200.00 16,438.96 diesel 19,870.00 20% 23% 105 76.17 48 80000 282.54 2,522.70 13,561.92 2,200.00 16,084.62 diesel 35,865.00 40% 9% 45 107.60 48 72000 434.42 1,781.77 20,852.16 2,200.00 22,633.93 diesel 18,940.00 20% 23% 106 72.60 48 76000 291.57 2,404.62 13,995.41 2,200.00 16,400.03 diesel 27,850.00 40% 21% 99 194.95 48 40000 337.55 3,228.37 16,202.54 2,200.00 19,430.92 diesel 24,750.00 20% 22% 102 90.75 43 149000 493.02 2,692.55 21,199.65 1,970.83 23,892.20 diesel 21,870.00 20% 23% 106 83.84 48 76000 325.48 2,776.62 15,623.23 2,200.00 18,399.85 diesel 19,540.00 20% 20% 88 65.13 48 100000 324.77 2,157.22 15,588.82 2,200.00 17,746.03
12 Cost Analysis. PCP Funded by Cash Allowance Vehicle Skoda Superb Diesel Hatchback 1.6 Tdi Cr Se Greenline 5dr 2018 Toyota C-HR Hatchback 1.8 Hybrid Icon 5dr Cvt [Nav] 2017 Skoda Superb Diesel Hatchback 1.6 Tdi Cr Se Greenline 5dr 2018 Bmw 3 Series Saloon 330e Sport 4dr Step Auto 2017 Bmw 3 Series Saloon 330e Sport 4dr Step Auto 2017 Mercedes-Benz C Class Saloon C350e Sport 4dr Auto 2018 Bmw 3 Series Saloon 330e Sport 4dr Step Auto 2017 Mercedes-Benz C Class Estate C350e Sport 5dr Auto 2018 Volkswagen Golf Diesel Estate 2.0 Tdi 184 Gtd 5dr 2017.75 Volkswagen Passat Estate 1.4 Tsi Gte 5dr Dsg 2017.5 Seat Leon Diesel Sport Tourer 2.0 Tdi 150 Fr Technology 5dr 2017 Volkswagen Passat Estate 1.4 Tsi Gte 5dr Dsg 2017.5 Mercedes-Benz C Class Estate C350e Sport 5dr Auto 2018 Capital Cost Balloon Payment inc VAT Insurance p/m Rental Income Tax rate +NI PCP Cost Gross Allowance Needed Tax Relief on Fuel Allowance Needed Extra Cost to Firm 19,364.00 4,920.00 50.00 438.13 32% 23,430.28 30,325.58 4,211.20 26,114.38 1,862.17 21,636.23 10,320.00 50.00 356.88 32% 19,530.32 25,417.61 2,437.12 22,980.49 5,331.95 19,364.00 4,680.00 50.00 454.20 32% 24,201.64 31,459.93 4,385.28 27,074.65 4,551.75 26,170.80 9,240.00 50.00 507.13 42% 26,742.04 40,942.40 5,811.20 35,131.20 11,545.28 26,170.80 9,240.00 50.00 507.13 42% 26,742.04 40,942.40 5,811.20 35,131.20 11,545.28 29,900.95 7,920.00 50.00 734.44 42% 35,299.97 55,539.65 7,896.00 47,643.65 16,333.24 25,641.90 8,040.00 50.00 512.22 42% 26,986.45 41,363.80 6,464.00 34,899.80 11,079.93 30,896.95 10,920.00 50.00 610.56 42% 31,707.05 48,817.33 5,941.76 42,875.57 14,738.74 22,787.70 8,520.00 50.00 416.38 42% 22,386.28 26,485.19 5,789.44 20,695.75-1,404.45 26,967.79 9,840.00 50.00 511.27 42% 26,940.82 40,897.05 6,246.40 34,650.65 10,829.08 17,509.20 4,440.00 50.00 412.46 32% 22,198.09 28,043.93 3,884.80 24,159.13 2,843.31 26,515.60 9,600.00 50.00 506.30 42% 26,702.44 40,486.05 6,398.72 34,087.33 10,488.87 30,896.95 11,640.00 50.00 560.64 42% 29,310.89 44,686.02 5,550.08 39,135.94 12,187.40
13 Cost Analysis. PCP Funded by Cash Allowance Vehicle Volkswagen Passat Diesel Saloon 1.6 Tdi Se Business 4dr 2017.5 Bmw 3 Series Saloon 330e Luxury Ford Kuga Diesel Estate 1.5 Tdci Titanium 5dr 2wd 2017.5 Bmw 3 Series Saloon 330e M Sport Volkswagen Golf Hatchback 1.4 Tsi Gte 5dr Dsg 2017.75 Volkswagen Golf Hatchback 1.4 Tsi Gte 5dr Dsg 2017.75 Ford Mondeo Diesel Hatchback 1.5 Tdci Econetic Zetec 5dr [Nav] 2017.5 Skoda Octavia Diesel Hatchback 1.6 Tdi Se Technology 5dr 2018 Volkswagen Tiguan Diesel Estate 2.0 Tdi Bmt 115 S 5dr 2017.5 Volkswagen Golf Diesel Hatchback 2.0 Tdi 184 Gtd 5dr 2018 Volkswagen Golf Diesel Hatchback 1.6 Tdi Gt 5dr 2018 Bmw 3 Series Saloon 330e Sport Mercedes-Benz C Class Saloon C350e Sport 4dr Auto 2018 Capital Cost Balloon Payment inc VAT Insurance p/m Rental Income Tax rate +NI PCP Cost Gross Allowance Needed Tax Relief on Fuel Allowance Needed Extra Cost to Firm 18,412.69 5,640.00 50.00 389.20 32% 21,081.53 26,520.93 3,776.00 22,744.93 2,587.38 28,589.80 11,640.00 50.00 490.19 42% 25,929.27 39,541.08 4,177.92 35,363.16 12,672.83 21,487.00 7,920.00 50.00 397.99 42% 21,503.37 26,602.78 5,679.36 20,923.42 77.38 28,220.80 7,560.00 50.00 642.67 42% 33,248.14 51,886.22 7,508.48 44,377.74 14,983.56 22,717.00 8,880.00 50.00 420.45 42% 22,581.78 34,530.58 6,246.40 28,284.18 8,717.21 22,717.00 9,720.00 50.00 407.94 42% 21,981.25 33,495.19 5,789.44 27,705.75 8,761.76 18,835.56 5,640.00 50.00 382.65 32% 20,767.35 26,745.01 3,079.68 23,665.33 4,364.53 17,524.01 3,600.00 50.00 445.85 32% 23,800.58 31,248.17 4,646.40 26,601.77 4,559.65 20,607.70 7,920.00 50.00 380.28 32% 20,653.53 25,230.04 2,894.72 22,335.32 2,398.58 20,478.85 8,640.00 50.00 362.12 42% 19,781.56 21,982.05 5,178.88 16,803.17-2,103.73 18,516.60 5,400.00 50.00 395.62 32% 21,389.80 27,173.91 3,776.00 23,397.91 3,184.29 25,641.90 6,960.00 50.00 562.11 42% 29,381.31 45,492.88 7,443.20 38,049.68 12,066.64 30,349.50 9,840.00 50.00 592.88 42% 30,858.19 47,526.57 5,811.20 41,715.37 14,251.03
14 Cost Analysis. PCP Funded by Cash Allowance Vehicle Volvo V40 Diesel Hatchback D2 [120] Momentum Nav Plus 5dr 2018 Skoda Superb Diesel Estate 1.6 Tdi Cr Se Greenline 5dr 2018 Bmw 3 Series Saloon 330e Sport Seat Leon Diesel Hatchback 1.6 Tdi Se Dynamic Technology 5dr 2018 Seat Leon Diesel Hatchback 1.6 Tdi Se Technology 5dr 2018 Bmw 3 Series Saloon 330e Sport Seat Leon Diesel Hatchback 1.6 Tdi Se Dynamic Technology 5dr 2018 Volvo V40 Diesel Hatchback D4 [190] Inscription 5dr 2018 Skoda Superb Diesel Estate 1.6 Tdi Cr Se Greenline 5dr 2018 Volkswagen Golf Diesel Hatchback 1.6 Tdi Se [Nav] 5dr 2018 Ford Focus Diesel Hatchback 1.5 Tdci 105 Style ECOnetic 5dr 2017.5 Capital Cost Balloon Payment inc VAT Insurance p/m Rental Income Tax rate +NI PCP Cost Gross Allowance Needed Tax Relief on Fuel Allowance Needed Extra Cost to Firm 16,933.75 4,560.00 50.00 385.08 32% 20,883.63 26,991.22 3,504.00 23,487.22 4,136.74 20,152.00 5,280.00 50.00 449.32 32% 23,967.44 30,890.23 4,211.20 26,679.03 4,098.61 25,641.90 7,440.00 50.00 746.34 42% 28,668.22 45,554.55 7,198.08 38,356.47 13,141.84 14,723.10 4,560.00 50.00 319.57 32% 17,739.48 22,602.51 3,514.88 19,087.63 2,648.67 14,540.40 4,680.00 50.00 309.25 32% 17,243.84 21,702.51 3,340.80 18,361.71 2,277.10 26,170.80 9,480.00 50.00 485.06 42% 25,682.68 39,115.92 5,550.08 33,565.84 10,931.90 14,723.10 4,440.00 50.00 316.12 32% 17,573.64 22,358.62 3,253.76 19,104.86 2,704.83 20,211.24 7,800.00 50.00 375.90 42% 20,443.07 25,889.07 3,699.20 22,189.87 2,758.95 20,152.00 4,680.00 50.00 546.76 32% 25,660.47 33,833.74 4,675.57 29,158.17 5,265.97 17,869.20 6,000.00 50.00 359.15 32% 19,639.31 24,857.26 3,253.76 21,603.50 3,203.65 14,847.24 3,360.00 50.00 354.80 32% 19,430.29 25,447.56 3,776.00 21,671.56 3,925.53
15 Summary. In our analysis for this particular car scheme, there would be a 31.06% increase in spend to offer a comparable cash allowance scheme to employees. Crucial to this is that the firm s company car scheme is attractive to begin with, offering good vehicle choice and a range of good models. Cash allowances are typically popular with employees where the company car scheme that is offered is less attractive. On an individual basis, it can be cost beneficial to the employee. If, for example, they are a very low mileage driver then they might find a very low cost PCP on the retail market. Similarly, if they are a very high business mileage driver then they would claim tax relief on the mileage driven in their own vehicle beyond the numbers we have calculated. The challenge for the company is that, unless individual cash allowance negotiations are to be conducted with all company drivers on an annual basis to take account of changing circumstances, a policy change towards cash allowances would realistically be based on offering a set allowance for each band on the company car scheme or grade of employment. In doing so, the firm must decide whether to offer a higher allowance in order to provide a benefit to everyone in that grade, which will significantly increase the bottom line cost to the business far beyond the increase that is calculated in this document, in order to make it attractive to as many drivers as possible. Unless the cash allowance scheme is extraordinarily generous, other firms can achieve most of the benefits of cash allowance in terms of driver choice through a more open company car scheme and, on balance, you can actually do it in a more cost effective fashion.
16 Summary. As a top 200 fleet, our company enjoys particularly strong discounts, but loses some of that buying power by having so many manufacturers. A smaller fleet could achieve comparable results by limiting to two or three brands e.g. 2 volume brands such as Ford and Volkswagen and 1 Premium brand such as BMW. This gives nice choice and enables some leveraging of volume. Equally important is that company cars are often provided with ancillary services such as maintenance and accident management, programmes that are designed to reduce fleet administration but also keep your vehicles moving, and your drivers safe. By providing a cash allowance and allowing drivers to choose their own cars which may be used for business use - a firm is potentially opening themselves up to grey fleet risks. Fleets will therefore need to be careful that they remain compliant. For more information please contact the Pendragon Vehicle Management team on 01332 267 389 or email info@pendragon.uk.com. Pendragon Vehicle Management, Pendragon House, Sir Frank Whittle Road, Derby, DE21 4AZ - Tel. 01332 267 389 Registered office: Loxley House, 2 Oakwood Court, Little Oak Drive, Annesley, Nottingham, NG15 0DR. Registered in England & Wales No: 141388. Pendragon Vehicle Management Limited is a credit broker/intermediary that can introduce you to a limited number of lenders to provide funding for your vehicle. They may incentivise us for introducing you to them. Pendragon Contracts trading as Pendragon Vehicle Management is an appointed representative of Pendragon Finance and Insurance Services Limited which is authorised and regulated by the Financial Conduct Authority. Copyright 2018 Pendragon Vehicle Management. All rights reserved. Whilst every effort has been made by Pendragon to ensure that information given is not misleading, this material is provided only as an overview of the subject and is not a substitute for professional advice. No responsibility can be accepted by Pendragon for any loss nor liability occasioned by any person acting or refraining from action as a result of this factsheet.