Magazine article Management Today

The Perk That Doesn't Pink

Magazine article Management Today

The Perk That Doesn't Pink

Article excerpt

They sit in ranks on the drives of thousands of suburban homes: shiny, new - and paid for by someone else. The company car is as British as roast beef and Manchester United, an essential part of the pay packet for millions of people. Companies spend as much on their car fleets - more than 13.5 billion [pounds] - as the Government spends on law and order every year.

Fleet sales are also the driving force behind the survival of Britain's single biggest manufacturing industry, keeping car plants running during the recession when they otherwise would have been closed down if they relied on orders from customers in the high street.

But there can have been fewer more conspicuous targets for government attention over the past few years than the product which has kept thousands of sales representatives, managers and district nurses mobile. Pilloried and reviled by anyone who does not have one, the company car became the cash cow to be milked by a succession of chancellors. Tax rates on the personal benefit that accrues from company cars trebled in just eight years.

And there was more to come. The rules governing personal benefits were given their biggest shake-up from May, this year, ending years of abuse of the system, getting rid of the anomalies and unfairness that had helped bring the company car into disrepute.

The changes had fleet managers reaching for their calculators and fearing the worst amid a deluge of predictions about the end of the company car, with more and more companies offering the alternative of cash to employees worried that their annual tax payment would be more than a car was worth.

They need not have worried. There seems no end to the growth of company fleets in spite of the greedy attention of the Inland Revenue. At a time when fleets were expected to dwindle, sales to companies are taking a bigger share of the market than ever. Ten years ago, fleets of 25 cars and over - the official motor-industry definition of a fleet - accounted for about 22.6% of annual sales. Last year, that share was at a record 41% and rising. In the first five months of this year, the fleet share had topped 48%. However, carmakers estimate that the true figure for company car sales is nearer to 75% when small firms, whose purchases do not show in the statistics, are taken into account. Solicitors, doctors, surveyors and the self-employed may not be buying in bulk but their cars are still very much a part of the business. That means almost 1.5 million cars this year could be paid for by a company cheque. If chancellors Lawson, Lamont and, most recently, Clarke thought Budget changes to tax legislation would put the brakes on the company car, then they have been proved hopelessly wrong. As fast as tax has risen, so have sales to company fleets.

Colin Grant-Wilson, managing director of Lease Plan UK, Europe's biggest vehicle-leasing and fleet-management company, says simply: |The company car remains a good deal for most people. What is so often overlooked is that the company car is an essential tool for the vast bulk of employees.' It is in the interests of the company to have control over the cost and quality of the car. Even though company motorists are paying more tax than ever, using, a car that is bought and paid for by someone else is still an irresistible attraction. Apart from not having to go through the torture of buying a car, there are none of the worries that beset a private motorist of the regular servicing bills or the major breakdown.

No wonder that Britain is curiously driven by the company car. There are obvious fleet-car users: sales representatives and the like. But the company car really became part of the industrial fabric during the 1970s when government pay restraints prevented firms from offering wage rises. Instead they rewarded staff with a car. Now it is an important part.of the pay packet in thousands of key jobs, with an estimated 3.5 million workers using a car provided by their company. …

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