Creating a true Total Cost of Ownership

Fuel is the biggest vehicle running cost.

How you reimburse drivers for business-related travel and how they charge their vehicle determines the savings you could achieve. 

The government provides advisory fuel rates (AFR), recommending the rate at which company car drivers should be reimbursed on a pence per mile (ppm) basis:

• Electric vehicles: 7ppm (home charging), and 15ppm (public charging)
• Petrol:  12ppm to 22ppm, depending on engine size
• Diesel: 12ppm to 18ppm, depending on engine size

Through our partnership with Ohme, you can offer your drivers a complimentary home charger with their company car - so they can benefit from cheaper charging.

Or you could offer employees access to workplace chargers and charge cards for public charging. Whatever your decision, including electricity costs as fuel in your TCO analysis will have a significant impact on its results. 

Servicing is another area where EVs can deliver savings. EVs still experience wear on parts (such as tyres and brakes), but given there are fewer components, there’s generally less wear and tear and less need for repairs. EVs don’t use oil either, so oil changes aren’t required.

If your business leases its vehicles, the costs of SMR may be included in the monthly rental. If so you won’t need to include this in your TCO analysis.

If fleet vehicles are insured individually, it could be worth factoring into your TCO analysis so you can build a more detailed picture.

However, with most fleets choosing a companywide coverage policy, including this won’t necessarily alter your EV v. ICE cost comparison.

How often do your employees drive in low emission zones?

The current cost of entering London’s Ultra Low Emission Zone (ULEZ) in an ICE vehicle is £12.50p a day. If a driver makes this journey just once a week, the annual cost could exceed £600 per driver, per year.

For a comprehensive TCO analysis, this should be included.

Taxes and fees for businesses that lease vehicles tend to be included in the monthly rental. Typically, you won’t need to include them separately in your TCO.

If you don’t lease your vehicles, every time a new vehicle is registered with DVLA, it incurs a £55 cost. You’ll also have to pay Vehicle Excise Duty (VED), commonly referred to as vehicle tax or road tax.

All-electric vehicles are charged £10 VED in the first year of registration, followed by the standard rate of £195 from year two onwards.

EVs with a list price exceeding £50,000 are subject to an additional charge of £440 per tax year (from year 2 – year 6) – this is as part of the additional rate, also known as the ‘expensive car supplement’.

While employees are liable for Benefit-in-Kind (BiK), employers are required to pay Class 1A National Insurance Contributions (NICs) on the value of the benefit.

A low BiK rate for EVs results in a lower taxable benefit for the employee. In short, it means the employer pays less Class 1A NICs.