Insight: Is the diesel-only policy dead?

Let’s get one thing straight: diesel is still a great choice for company cars.

Diesel cars generally have a higher purchase price than petrol models and, until 2016/17, attract a 3% benefit-in-kind tax surcharge, but they offer better fuel economy and often attract a higher residual value.

A sales rep who frequently does long motorway journeys is typically better off in a diesel.

And from a company car tax point of view, diesel’s low CO2 emissions usually mean lower benefit-in-kind tax bills.

But that doesn’t mean that all fleet operators and company car drivers should simply default to diesel.

“A diesel-only policy is a blunt tool, introduced mainly in response to the changes in company car tax in 2002,” says David Watts, fleet partnership manager at the Energy Saving Trust.

“While it serves a purpose, it is not particularly sophisticated and doesn’t guarantee the most effective solution.

“From my perspective, diesel-only policies should have died out a long time ago.”

For low-mileage drivers, particularly those doing urban journeys, there is a case for considering petrol, hybrid and even fully-electric vehicles.

Andrew Baxter, business development manager at Hitachi Capital Vehicle Solutions, adds: “Petrol becomes a better option than diesel if drivers are covering less than the 10,000 miles per annum due to the lower purchase and running costs.

“When buying a diesel car you have to consider the higher purchasing cost, but also that they’ll have to be driven further to receive the full benefits.”

Fuel prices are a factor for low-mileage drivers.

Diesel prices dropped by 3.4 pence per litre (from 142.5ppl to 139.1ppl) last month, according to the AA’s fuel price report, but the price difference between unleaded and diesel grew 2p to 6.9ppl.

With the price gap widening it is worth assessing whether drivers do enough miles to justify diesel, particularly for those that pay pump price. That threshold tends to be around 10,000 miles.

Also consider where drivers fill up (visit http://bit.ly/fnfuelcomparison to compare fuel prices).

David Bushnell, fleet consultant at Arval, points out: “With disparity of fuel prices across the country, the tipping point in one location can be different to another depending on the current pump price.”

Fleet operators that purchase fuel using a fixed weekly price (Platts) rather than pump price will also have a different view on when petrol becomes more cost-effective than diesel.

Where the fleet operates has a bearing on which fuel is best. Fleets that operate mainly in city centres need to consider the problems associated with diesel particulate filters (DPFs).