The Power Of Whole Life Costs
It’s hard to think of a time when fleets didn’t have cost as a major focus – but right now it’s more important than ever.
Jessica Chapman, Corporate Sales Director:
If you want to make your fleet as cost effective as possible, one thing that can make a real difference is to look beyond the list price – or the ‘sticker price’ of your vehicles. This applies across the board, but it’s particularly important when you’re thinking about electric vehicles (EVs), which is why I’ll focus on them for the rest of this article.
Let’s say you’re looking at an EV and a comparable combustion engine car. It’s likely the EV has a higher sticker price – possibly by several thousand pounds if you’re buying - or several hundred a year if you’re leasing. So, is the EV the more expensive vehicle? In many cases, I think it won’t be. You just have to take all the costs into consideration. This is called the ‘total cost of ownership’ – or, the phrase that I prefer, the ‘whole life cost’.
So how does it work with EVs versus petrol or diesel? Yes, the list price of the vehicle may be higher, but there are a lot of other savings. This starts with tax, as drivers will pay far, far less for benefit in kind. There really is a huge difference this year and it’s set to stay that way for several years at the absolute minimum.
A fully electric vehicle currently has a benefit in kind tax rate of 1%, where the most-efficient petrol or diesel car still starts at 25% – and the figure rises rapidly from there. If you compare a Polestar 2 against a BMW 320d, for example, the annual benefit in kind on the electric car is £335. On the BMW it’s £4,511. (prices correct as at June 2022)
On top of that, electric vehicles mean less Class 1A National Insurance contributions for employers. Using the same example, it’s £126 a year on the Polestar and £1,697 a year on the BMW. Electric cars also pay less road tax, no congestion charge and no charges for entering low emission zones.
Then there’s the cost of looking after them. Electric cars only have a handful of moving parts, so there’s no oil, no spark plugs, no filters, no exhaust, no clutch and so on. You can even save on brake pads thanks to the regenerative breaking. This adds up to lower maintenance costs, while maintenance should also mean less time off the road. I’ve seen suggestions that maintenance costs can be as much as 15% lower.
Finally, there’s the saving that you were probably expecting me to lead with. Electricity versus petrol or diesel. It’s a hot topic now, given everything that’s going on in the world, but even with recent price rises, electricity still comes out ahead. Using HMRC’s reimbursement costs per 100 miles driven, an electric car costs £7, while petrol and diesel are both over £17. The further you drive, the more that adds up. You can even charge an electric car in your fleet’s downtime, so you can use your time more efficiently as well.
Want to know more about the benefits of using whole life cost calculations? Speak to your LeasePlan Account Manager.
Cost-saving tips from LeasePlan experts
This is part of the series
With a difficult winter likely on the way for many, we’ve continued to ask our experts for ideas about how you can save money on your vehicles.
Important information:
This blog was originally published on leaseplan.com website. The views expressed may no longer be current and any reference to specific vehicles or products is for reference only. This information is not a personal recommendation for any particular vehicle, product or service - if you are unsure about the suitability of a product, you should consult with an expert.
