The company car comeback

By Thom Groot, CEO of The Electric Car Scheme

The increasing popularity of electric cars in recent years has sparked a revival of company cars as a desirable perk for employees.

In the past decade, the number of company cars had steadily declined due to the removal of tax incentives and cost-cutting measures by companies. Over a quarter of company cars on the road in 2016 have since disappeared.

However, the emergence of electric cars has led to a significant shift in the company car landscape.

In 2022, the UK saw a substantial increase in the registration of fully electric vehicles (EVs), with nearly 270,000 cars registered - a 40% increase to the year before.

This growth can largely be attributed to the rising adoption of electric vehicles as company cars, with salary sacrifice schemes accounting for over 60% of the increase.

If this trend continues, we can expect a resurgence of company cars on the roads that surpasses previous highs.

The number of EVs registered in 2023 has already increased by 33% compared to the same period last year. With the 2030 ban on new diesel and petrol cars approaching, more individuals are making the switch to EVs driven by environmental concerns and the long-term cost benefits.

The driving force behind this shift is the tax incentives provided by the government exclusively for electric cars, leading to a transformation of traditional salary sacrifice schemes.

Employees can save between 30% and 60% on the cost of their electric car using salary sacrifice.

Salary sacrifice schemes allow employees to exchange a portion of their pre-tax salary for non-cash benefits, such as an electric car.

Previously, this practice was used to provide employees with poor credit access to a new and reliable leased car for commuting when public transport was unavailable.

Today, salary sacrifice schemes are a widely used employee benefit, primarily aimed at making it more affordable for employees throughout the UK to switch to electric cars.

This arrangement benefits both employees and employers. It enables employees to access brand-new electric cars at a more affordable cost, while employers can provide an attractive and environmentally friendly perk without incurring any additional business expenses.

Implementing an electric car scheme can bring several advantages for businesses.

Firstly, it helps attract and retain top talent in a competitive job market. Employees are increasingly conscious of their environmental impact and are drawn to companies that prioritise sustainability.

In a recent survey, we found that 38% of working-age people expected their employers to support their sustainable commute to work, and 60% stated that an electric car scheme would make them more likely to stay in their current job or switch to a new one.

Offering an electric car as part of a company car scheme demonstrates a commitment to reducing carbon emissions and aligning with employees' values, making the company an appealing choice for prospective employees.

Additionally, modern salary sacrifice schemes solve a common problem faced by businesses when employees leave unexpectedly.

In traditional company car arrangements, employers can be left with a fleet of unused vehicles in the parking lot if employees depart.

Modern schemes help employers avoid this situation by facilitating the transfer or return of cars at no cost.

The rise of electric cars and salary sacrifice has revitalised the concept of company cars, making them an attractive and valuable employee benefit once again.

By embracing electric car schemes, companies can attract and retain top talent while promoting environmental sustainability without the challenges associated with traditional company cars.

Ultimately, this transformation in the company car landscape can lead to significant cost savings for employees while contributing to a greener planet.