RESEARCH by one of the UK's leading human resource consultancies suggests company car drivers would pay an extra £600 per year in tax to keep their company car.

This is the 'emotional' value of a company car that employers have to overcome if they want to incentivise staff to select a cash-for-car option, according to the Hay Group. Its findings indicate that the vast majority of drivers would not accept a cash alternative that merely kept them in a tax neutral position, but instead would require a financial 'sweetener' to compensate them for the loss of the peace of mind of a company car.

'About 85% of employees would be prepared to pay something for the emotional premium of having a company car,' said Steve Watson, director of reward expertise at the Hay Group. His research found 10% of drivers would pay more than £1,000 to keep their company cars, 45% would pay an additional £500-£1000, 30% would accept a tax increase of up to £500, and only 25% of drivers would accept no increase in tax before moving out of their cars.

'If you want to bribe people to give up their cars you have to overcome the emotional premium and pay them more than cost neutrality, typically adding on about a £600 per year premium,' said Watson.

His survey found an extremely strong correlation between the popularity of a company car and the geographical location of the driver. In London, 70% of drivers took the cash, but outside London 95% opted for the car. The reasons for taking cash ranged from no need for a car, the desire for a greater choice of car than that offered by a fleet choice list, and even the wish to avoid having to report embarrassing motor accidents to the company.

Employees opting for the company car identified a range of advantages, from high personal mileage to the insurance costs of living in a high risk area, peace of mind motoring, and the appeal of selecting a car to personal specification.