Case for EVs revealed in whole-life cost comparison
Understanding and using whole-life costs is to become ever more critical as fleets start to accommodate electric vehicles.
Fleet management provider CBVC Vehicle Management has published new data underscoring the financial case for EVs as it urges financial advisors and accountants to also get on board with focusing on whole-life costs for company car acquisition.
According to the firm, focusing simply on monthly lease rates will not only skew fleet policy, but it could lead to greater costs for the business and the driver.
Managing director Mike Manners explained: “As zero-emission cars typically have higher list prices than traditional internal combustion-engine (ICE) vehicles, savings on fuel, maintenance and tax can easily offset any initial difference and make electric vehicles much cheaper. This makes whole-life cost comparisons a critical part of any fuel transition plan, to ensure that the right technology options are deployed in the most suitable areas.”
To illustrate this, CBVC gives an example of a Tesla Model 3 Standard Plus, which has a £43,435 list price, compared to £35,164 for an equivalent petrol BMW 3 Series 320i or £34,665 for diesel 318d SE Pro.
The headline lease rates reveal the Tesla costs £471.42 per month over three-years/60,000 miles while the petrol BMW costs £410.03 over the same profile. And the diesel has a monthly cost of £550.62 per month, due its lower RV.
But while the Tesla costs more on paper, implementing a whole-life cost approach reveals a different picture. Under CBVC calculations, when the rental, VAT recovery, maintenance costs, Corporation Tax deductions, insurance and Class 1A National Insurance Contributions are considered, the actual cost for the Model 3 is £594 per month, compared with the petrol BMW at £683 per month, while the diesel is £791.
This means that overall, the Tesla will cost a company £21,392 over a three-year cycle, compared with £24,582 for the petrol BMW and £28,462 for the BMW diesel.
It’s not just the company that benefits from the Tesla – the driver will also see a significant tax saving too. During a three-year operating cycle, the diesel BMW driver (40% taxpayer) would pay £12,348 in Benefit-in-Kind tax and the petrol BMW driver would incur a company car tax bill of £14,220. In contrast, the Tesla driver would pay £864, saving £11,484 and £13,356 respectively compared with the BMWs.
CBVC added that a plug-in hybrid vehicle (PHEV) can also offer a cost-effective way to move away from diesel and petrol company cars for those businesses not quite ready to go fully electric yet.
Its analysis reveals that a BMW 330e SE Pro, which has a list price of £39,975, will cost £20,874 in WLCs over three years/60,00 miles with a monthly BiK cost of £156.
However, CBVC warned that when modelling plug-in hybrids, forecast fuel economy is substantially higher than real-life figures
Manners continued: “When advising clients, accountants should be aware that an analysis of whole-life costs demonstrates a strong financial argument for businesses to begin the switch to zero-emission motoring, and with the right approach, a business can unlock significant savings while also cutting emissions at the same time and reducing their carbon footprint.”