Running your car fleet more efficiently


Running a fleet of cars can be complex and costly. But doing it more efficiently can substantially reduce your operating costs – company car tax is based on CO2 emissions so using lower-emission cars will save you money. It can also improve your business’ environmental performance and increase its corporate social responsibility.

Whether your fleet consists of company cars, allowance cars, hire cars, grey fleet or a mixture of these, running it efficiently is not just about monitoring fuel consumption and CO2 emissions – it is also about improving your working practices. For example, promoting car sharing and video-conferencing can reduce the use of cars in your business.

This guide shows how running your fleet more efficiently can benefit your business and the environment, and how you can make sure that vehicles used by your business are safe, clean, well driven, fit for purpose, reliable and affordable.

Using company cars

You can improve your business’ efficiency by considering how you use your company cars. Choosing lower emission cars can save you money on tax and reduce your national insurance payments, as well as helping to improve your environmental performance.

Whether your fleet is company-owned, leased, or supplied by an agency, you should create a company car policy. When doing so, you should consider:

  • what types of car to purchase – there may be financial advantages to choosing certain models but there may also be benefits to choosing from a wider range
  • setting a CO2 limit on your cars – many businesses set this limit at 160 grams per kilometre, as the corporation tax will be lower for these cars
  • putting in place a replacement policy – eg replacing the vehicle after a certain number of years or at a specific mileage
  • allowing your employees to trade up or down (within the approved list) with an appropriate salary adjustment
  • offering a cash alternative to employees
  • offering incentives for employees to switch to other forms of transport

Company car procedure

When you select cars for your fleet, you should think about their safety, environmental performance, cost and suitability for purpose. With these considerations, you can then produce an approved vehicle list that:

  • specifies the makes and models of cars currently available
  • gives all the New Car Assessment Programme (NCAP) safety ratings and official CO2 emissions for the cars available
  • specifies the company car tax implications for each car type

Your employee can then choose from the list of cars and must accept the conditions of your Company Drivers’ Policy and sign and return the Drivers Declaration.

Types of company car

There are two main categories of company cars:

  • status cars – for specific grades or positions in the hierarchy
  • essential user cars – for certain jobs including sales, or for drivers who travel more than a certain number of business miles per year

There is no automatic legal entitlement to a company car – it is a matter between employer and employee. However, company cars are treated as a taxable benefit.


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