leasing year ahead
Matt Dyer, managing director of LeasePlan

As we look at the leasing year ahead let’s start with a particularly encouraging trend. The number of vehicles being bought into fleets is on the rise.

According to the Society of Motor Manufacturers and Traders, 1.28 million new cars were registered to fleets in the first 11 months of 2016 – a 5.3% increase on the same period last year. Fleets accounted for 51% of all new car registrations in 2016.

This is obviously good news for us in the leasing industry, but can this growth be sustained in 2017?

Fuel prices – on the rise

At the beginning of 2016, fuel prices were making headlines for all the right reasons. The cost of oil had fallen such that pump prices were the lowest they had been for over six years. Motorists could buy petrol or diesel for around £1 a litre.

Such a happy state was unlikely to continue and, as oil prices rose, so did fuel prices. A litre of unleaded now costs 12p more than it did at the start of 2016. A litre of diesel is 11p higher.

And there’s been another effect too: the EU Referendum and the effect on Sterling. Sterling has plummeted to a 31-year low against the dollar – which, given that crude is traded in dollars, puts British buyers at a disadvantage. They can’t get as much oil for their money. And that, in turn, has put upwards pressure on the prices that we pay at fuelling stations.

These factors are likely to continue into 2017. In fact, the Chancellor of the Exchequer himself, when explaining his recent decision to freeze Fuel Duty for another year, referred to ‘significant pressure on prices at the pump here in Britain.’ He’s clearly of the mind that British drivers need a bit of support.

Salary sacrifice changes

Another of Philip Hammond’s big announcements concerned salary sacrifice schemes. We’ve already detailed the changes in our briefing on the Autumn Statement but here’s the short version.

As of April 2017, Income Tax (for the employee) and National Insurance Contributions (for the employer) will be levied on employee benefits gained through Salary Sacrifice schemes – including cars.

As ever, though, there are some important exceptions:

  • Employees who who have a salary sacrifice car will will be exempt from the changes until April 2021
  • Employees choosing a sub-75g/km ULEV will also be exempt.

While these changes were disappointing for the fleet industry now is the time to deal with them. We shouldn’t wait until April 2017 to think about the implications.

The driver for cleaner and greener cars

ULEVs have been one of the great success stories of 2016. By the end of November 82,640 electric vehicles were registered according to the SMMT, a 23% increase on the same period in 2015.

A number of policy developments are pushing this growth along. Aside from exempting them from the salary sacrifice changes in his Autumn Statement, Chancellor Hammond also outlined a new system of Company Car Tax for 2020-21 designed to encourage  ULEVs more than the current system.

But the most notable environmental policy of the year didn’t come out of national Government. One of the first acts of the new Mayor of London, Sadiq Khan, was to accelerate and expand plans for an Ultra-Low Emission Zone in the capital.

That will take effect in 2019, but Khan also intends to introduce an ‘Emissions Surcharge’ for the most polluting vehicles travelling through the current Congestion Charge Zone from October 2017 onwards.

The upshot is that the rise of ULEVs will continue in 2017 and beyond. Not only are the vehicles themselves becoming cheaper, more practical and more desirable, but the politicians are backing them too. Fleets should certainly give them due consideration.

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