Fleet & business

Fuel savings

Companies and their employees can potentially save thousands of pounds on fuel by going electric

Costs for running electric vehicles can be up to 90% less than for a conventional vehicle, returning significant savings for your business.

Key points:

  • Plug-in vehicles can be driven for as little as 2p per mile, compared with 10-12p for a conventionally powered car
  • Best cost-savings are made by driving in electric mode
  • Experts say 2.5p-3p per mile for reimbursing private electricity use is acceptable

Electric savings can stack-up

Plug-in vehicles can be driven for as little as 2p per mile, compared with 10-12p for a conventionally powered car, potentially saving your business thousands of pounds per year. Employees who pay for fuel used privately could also make significant financial savings by choosing an electric vehicle as a company car.

When considering an electric car for your fleet, or as a user chooser, it’s best to consider the vehicle’s whole life costs. This approach considers fuel costs as well as all other operating costs, resulting in the most rounded picture to compare a plug-in car or van with its petrol or diesel equivalent.

This is good news for workplace charging because it removes any issues around employees charging their company cars at work, and whether that is a taxable benefit akin to paying fuel for a petrol or diesel model.

Reimbursement for employees

Advisory Fuel Rates (AFR) can also have some bearing on the savings on offer – if you have a petrol-hybrid car, you can use AFR petrol rates; if you have a diesel-hybrid car, you can use AFR diesel rates. Advisory Fuel Rates for plug-in hybrids and range-extended electric vehicles are based on the size of the car’s petrol or diesel-fuelled engine.

As electricity is not classed as a fuel by HM Revenue and Customs (HMRC) there is no AFR equivalent for pure electric vehicles.

Experts (see box out) have established a figure of 2.5p-3p as an acceptable reimbursement rate on pure electric vehicles, which is a huge saving for companies versus the government’s 7p-20p Advisory Fuel Rates for petrol or diesel models, depending on engine size.

Plug-in hybrid models are reimbursed as if all the miles were driven on the internal combustion engine, giving your drivers an extra incentive to charge the vehicle in order to claim back at a higher mileage rate than it has actually cost them.

A word of warning – plug-in hybrid cars not correctly deployed, like doing too many miles on the petrol or diesel engine before being recharged, won’t necessarily return big savings.

Expert view:

Fleets should reimburse ‘fuel’ used by EVs at a pence per mile rate calculated to closely reflect actual cost using available data: manufacturers’ figures for miles per kilowatt (kW) and electricity cost data.

For example, a car with a 25kWh battery and a typical range of 85 miles returns 3.4 miles per kWh. Using an average cost of 10p per kWh – assuming the vehicle is primarily charged at home overnight, the cost per mile is 2.94p. That should be the mileage reimbursement rate.

This approach enables the company to agree a pence per mile rate for an electric car based on known parameters: car’s battery capacity, range in real world conditions and the average cost of electricity from typical sources – home, workplace, and public chargepoint.

Paul Hollick, The Miles Consultancy

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