Fleet & business

Whole life costs

Understand the true value of plug-in cars and vans by considering their ‘whole life costs’

Plug-in vehicles benefit from government grants, tax incentives and can have significantly cheaper running costs, all of which help to reduce the whole life costs of your fleet.

Key points:

  • Plug-in cars and vans can be cheaper to operate than petrol or diesel equivalents
  • You can save around £14,000 on a fleet of 10 cars annually by embracing EV technology
  • Finding the right vehicle for the right operation is key for all fleets

The benefits of considering whole life costs

‘Whole life costs’ reflect the associated operating costs of running a vehicle during its owned or leased fleet life. Forecasting whole life costs provides the best forward estimate of the real costs to an organisation over a replacement cycle.

A whole life cost approach can be useful when assessing the suitability of electric vehicles for your business. Despite sometimes higher P11D values, plug-in cars and vans can be cheaper to operate than petrol or diesel equivalents, offering the potential for huge savings wen multiplied across an entire fleet.

Whole life cost forecasts consider vehicle funding inclusive of any VAT recovery and corporation tax relief; the cost of borrowing money; fuel; employer Class 1A National Insurance Contributions; service, maintenance and repair; Vehicle Excise Duty; and insurance.

That is a lot to consider – but luckily, if conducting your own whole life costs analysis fills you with dread, there is plenty of support out there.

Working out your fleet whole life costs

Many leasing companies actively promote the use of whole life costs to help fleet decision-makers see the big picture regarding pure electric and plug-in vehicles. The guidance and tools they offer can help you to find the right vehicle for the right business requirement.

It could make you more popular too! Using whole life costs as the basis for company car decisions might also mean you can offer your staff a more attractive car.

The latest whole life cost figures from Lex Autolease (see table below) illustrate how the higher initial cost of plug-in vehicles can be more than offset by significant fuel savings, tax benefits, and an estimated 20-40% reduction in service, maintenance and repair (SMR) costs.

For example, the data shows that both the pure electric Hyundai IONIQ (IONIQ Electric Premium 5dr Auto) and plug-in hybrid (IONIQ 1.6 GDi PHEV Premium 5dr) models benefit from a £120 monthly whole life cost saving compared to the Hyundai i40 (i40 1.7 CRDi Blue Drive Premium 4dr). This adds up to a yearly saving of £1,440. On a fleet of 10 vehicles that’s an annual saving of £14,400, and £57,600 over a 48 month contract.

Expert view

Understanding the full costs of plug-in vehicles is key and although these technologies will often have a higher list price, Government grants, tax incentives and greatly reduced fuel costs, mean these vehicles often have a lower whole life cost than traditionally fuelled vehicles.

It is therefore vital to understand the in-life and basic lease costs when evaluating alternative technologies.

Chris Chandler, Lex Autolease

Data

See Lex Autolease data table

  • Source: Lex Autolease, September” 2017
  • Contract Term: 48 months / 20,000 miles per annum
  • Energy Saving Trust 15% mpg adjustment for real world driving
  • Fuel Cost for EVs based on 3p per mile
  • Fuel cost for PHEV based on 30% of official mpg x current pump price for petrol for 60% of annual mileage and 3p per mile for 40% of annual mileage
  • All costs per month

The Energy Saving Trust also provides in-depth consultancy to help you reduce your fleet operating costs. It engages with organisations across a range of sectors, providing expert assessment of fleet vehicles and sustainable business transport processes to help organisations make financial and environmental savings. With funding provided by the Department for Transport (DfT) the Trust’s services are provided at no cost to you. Find out more at www.energysavingtrust.org.uk.

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