More than one third of UK financial directors are unsure of how to calculate the total cost of ownership (TCO) of their business vehicles, research suggests.

The ALD Automotive/YouGov survey also revealed that 35% of financial directors are unaware of the impact of CO2 emissions on employer’s national insurance (NI) contributions and only 15% of respondents felt they had any detailed understanding of the costs associated with the running of their company fleet.

Total cost of ownership (TCO) is calculated by adding VAT, National Insurance and fuel costs to the monthly lease price of the company vehicle.

With significant tax changes relating to vehicle emissions taking place in 2012, it’s imperative that FD’s have a complete understanding of how to calculate their business vehicle’s TCO and review their fleet policy, in particular by continuing to reduce CO2 emissions from their business vehicles, says ALD.

From April 2012, the emissions threshold will be reduced, meaning that the new 10% low rate band for company cars will start at 99g/km as opposed to the current 120g/km. Company car tax will increase by 1% for each 5g/km rise in CO2 above the 99g/km.

The new charge for 120g/km emission company cars moves from the current 10% level to 15% in 2012/13. The key impact for employers is the effect on national insurance (NI) contributions, which is based around the taxable list price and CO2 emission of the company car, which contributes to the overall TCO figure.

Keith Allen, managing director of ALD Automotive said: "Organisations need to ensure that they understand how TCO is calculated otherwise there is a danger that if the warnings are unheeded, then businesses will suffer as a result of the tax changes relating to company vehicles next year.

“At ALD Automotive, we are working with our clients to assist them in calculating TCO and by offering advice and recommendations to ensure that they have the most cost-effective fleet policy in place.”
 

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