Lombard, the UK’s largest asset finance company and specialist vehicle management business, is showing how rather than increasing overheads for companies the new Vehicle Excise Duty rates, to be introduced in April, may actually present fleets with the chance to make savings equating to thousands of pounds.
Whilst the new rates mean increased lease rental costs over a typical three-year term by almost £600 for those cars in the highest CO2 category, by switching to a very similar but lower-emitting alternative within the same class, fleets can save up to £330 per vehicle over three years making a sizeable saving for a mid-sized fleet.
Even if they stay with the same manufacturer and model range, fleets can save as much as £290 by switching from petrol vehicles to its diesel equivalent. In addition, of course, there will be the benefit of lower fuel costs in each case thanks to diesel’s substantially better fuel economy.
Big gains can also be made even if a fleet is already running diesels and does not want to reduce engine size by moving to a model’s Eco variant, for example changing from a Vauxhall Insignia 5dr 2.0cdti 130 SE to its Ecoflex equivalent, will save £135.
The same is true in the premium upper-medium sector, with savings of £150 over three years to be had by switching from the Audi A4 4dr 2.0 Tdi 143PS S-Line to the same car with a 120PS engine.
“Although the effect of the new VED regime on the monthly rentals for most cars will only be between around £0.50 and £5.00, the effect over the lease term, even for many SME fleets, will be substantial, especially given the ongoing economic uncertainty,” says Paul Connor, Head of Portfolio Management for Lombard Vehicle Management.
“Where possible, we would advise fleets to order new vehicles now for delivery prior to April to avoid the new first-year VED altogether and benefit from the existing standard VED rate. If that is not possible or early termination charges for existing vehicles mean that it would not be cost-effective, choose cars producing up to 165g/km – opting for a car which emits 130g/km CO2 or less will actually result in a saving in monthly rentals, while the maximum first-year VED for vehicles up to the 165g/km threshold will be a relatively manageable £155. That increases sharply to £250 for the next banding and on to the top rate of £950, the consequences of which need to be borne in mind even if they apply to a small number of senior management vehicles.”