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Business cars are back in fashion

Business cars are back in favour. Despite widespread predictions of the demise of the company vehicle, the latest annual HSBC Business Car Expectations Survey has found that, even for middle management, an upward trend is discernible. The report says the main reasons for this are changes to benefit-in-kind taxation and competitive pressures in the recruitment market.

The new BIK system, says the report, is also responsible for the surge in demand for diesel cars – particularly Euro IV diesels that are exempt from this year’s increase in carbon dioxide-based threshold payments. The growing popularity of diesel is such that, for the first time, the HSBC fleet of 87,000 vehicles now has more diesels on it than petrol, according to Peter Hollinshead of HSBC. He adds that for some manufacturers, it is not unusual to see 65% - 70% of the orders now being for diesels. The changes started to occur when the BIK changes came into effect, and company drivers realised there would be an impact on their take-home pay. Rather than downsizing they switched fuels to diesel.

The report adds that even middle and senior level management are embracing the diesel as well as returning to the comforts of a company-supplied vehicle. But with diesels often having a list price premium over petrol models and doubts over future residuals, the cost/benefit analysis certainly does not automatically favour diesel from the employer’s perspective.

One of the major points highlighted by the survey is that more companies are turning to contract hire – even at a time when low interest rates make outright purchase more attractive – and it is now by far the most popular acquisition method, particularly among larger organisations.

Cash for cars has plateaued, says Hollinshead, and the popularity of employee car ownership programmes is waning. He believes that as duty of care and health and safety start to gain importance on the fleet agenda, companies will feel more inclined to go for the contract hire option to control the sorts of cars their employees drive.

Looking at the findings from the retail point of view, Hollinshead says: “Pro-active dealers recognise the importance of the fleet sector – and fleets and leasing companies want to deal with people who can manage a process, more so than manage a sale.

“It is about being able to provide the right communication links and the right information. As the number of models and derivatives increases, keeping on top of information is probably the most crucial point. That’s one of the reasons why staff retention is so important.”

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