Dealers fear recruitment crisis as Treasury targets employee car benefit scheme

Dealerships are warning of a looming recruitment and retention crisis following the government’s decision to scrap employee car ownership schemes (ECOS), a benefit widely used across the motor retail sector.

According to new research by Startline Motor Finance, 45% of dealers believe the end of ECOS will directly harm their ability to attract and keep staff.

The schemes, which allow dealership employees to drive new cars at heavily discounted rates without triggering benefit-in-kind tax or National Insurance contributions, have been a key incentive for staff across the industry.

The Treasury announced last year that it would abolish ECOS from April 2026, claiming they were “contrived” and primarily designed to avoid tax.

However, the automotive sector says the move risks removing a crucial perk at a time when dealerships are already facing significant staffing challenges.

“These schemes have helped thousands of employees afford a new car while giving dealers a useful pipeline of well-maintained vehicles for resale,” said Paul Burgess, CEO of Startline Motor Finance.

“Removing that benefit without a clear replacement is going to make recruitment even harder for an industry already under pressure.”

The government has yet to publish details or hold a consultation on how the change will be implemented, despite pledging to do so over six months ago.

While some in the industry agree the schemes were problematic - 35% of dealers surveyed said they had concerns about ECOS even before the Treasury's announcement - others view the move as part of a broader pattern of policy decisions making life more difficult for dealers. These include increases to employer National Insurance and the National Minimum Wage.

Despite the uncertainty, some dealerships are taking proactive steps. Nearly one in four dealers (24%) say they’ve already replaced their ECOS with a different staff benefit, hoping to maintain their appeal as employers in a competitive market.

The government expects the move to boost tax revenue by £275 million in the first year after implementation, falling gradually to £175 million by 2029/30.

But industry leaders are questioning whether the financial gain is worth the risk to workforce stability and the wider health of the car retail sector.

“There’s no doubt that ECOS needed reform, but removing them altogether without providing a viable alternative risks harming the very people the industry relies on most,” said Burgess.

The findings come from the Startline Used Car Tracker, a monthly survey produced in partnership with APD Global Research, which gauges sentiment among used car dealers on market trends and policy developments.