If your business uses cars or vans it can make great financial as well as environmental sense to switch to electric and hybrid cars. You might initially think about the reduction in emissions they can achieve when compared to a petrol or diesel engine and that’s a good thing in itself – and as the UK works to reduce its emissions significantly by 2030, you might find yourself a couple of steps ahead of new legislation if you’re proactive here. However, electric and hybrid vehicles can also have a significant impact on your bottom line.
- Businesses that commit to reducing emissions are finding favour with an increasingly eco-conscious customer base. In 2019, 67% of consumers identified as ‘environmentally aware’, with the market for eco-friendly goods looking increasingly lucrative.
- Despite higher upfront cost per vehicle and infrastructure spend, electric vehicles are generally more reliable and cost significantly less to run. In addition, businesses that use electric or hybrid vehicles can benefit from a number of tax incentives.
These are good incentives for a small business considering switching to an electric or hybrid car. To make the most of the new car’s potential you do need to find the right vehicle for your needs since if you end up with vehicles that are a poor fit for your organisation, you risk increasing costs elsewhere to compensate. Here are some of the most important factors to consider when buying electric and hybrid vehicles for your small business.
1. Treat this as a project and gather requirements
In many ways, buying electric vehicles for your business is just like making any other vehicle or equipment purchase.
- What are they going to be used for?
- Will they be travelling short or long distances?
- How much motorway driving do you anticipate?
- How much can you budget per vehicle?
The answers to all of these questions will determine what sort of car you need. For example, plugin hybrids have relatively poor engine economy and might not suit businesses with long-distance motorway driving needs.
To stop yourself buying vehicles that are a poor fit for your needs, map out the following before looking at any models, visiting any showrooms or talking to any dealers:
- What the vehicles will be used for (for example, deliveries, car pool, local/long-distance travel, company vehicle as benefit for employees)
- What your ideal budget is per vehicle
- Any non-negotiable features (for example, minimum range, smart charging)
- Whether you’d like fully electric vehicles or hybrid electric-petrol cars
2. Hybrid vs Electric: Range considerations
The good news: for electric cars, range is increasingly becoming a non-issue. Top-of-the-range electric cars can manage over 400 miles without a charge – that’s Leeds to Cornwall without a break.
And, even in the mid range of the market, ranges of between 200 and 400 miles are increasingly the norm. This means that fully electric vehicles will manage all but the longest journeys without needing a recharge along the way.
Because of this, range isn’t likely to be your deciding factor when choosing between an electric and a hybrid. Instead, when making the choice, consider:
- Whether you can commit to the upfront costs associated with electric vehicles – for example new vehicle purchase and installation of charge points at work and/or employees’ homes.
- Whether the financial incentives available are enough to make these costs manageable for your business.
- If using as a company car incentive, whether employees would be open to installing at-home charge points (and whose responsibility it is to finance these).
- Whether there are enough (and the right type of) charge points across your local area for fully electric vehicles to be a viable option for your business.
There are currently more electric charge points than petrol stations in the UK, but not every model of electric car is compatible with all of them. Check the networks in your area to see whether your vehicle choice is a good fit.
If you don’t have the resources to spend more upfront, self-charging hybrids are a great way of reducing emissions and keeping costs down without having to configure charge points. And, if you’re mainly using your cars for urban driving, both plugin and self-charging hybrids will be zero-emission up to 30-50 miles.
On the other hand, if you have a larger budget and a need for extensive motorway driving, fully electric vehicles are likely the most efficient option.
3. Business costs and incentives
There are a variety of UK Government tax incentives that apply to low or no-emission cars. These apply to both fully electric and hybrid vehicles, though their exact value will depend on the type of car you buy.
You can find more details about electric vehicle finance options here, but as a quick checklist, look for:
- Cash grants at point of purchase for fully electric vehicles and chargers. For cars, businesses can benefit from up to 35% of the value of the car (capped at £2,500) for vehicles under £35,000.
- Decreased road tax charges. Fully electric vehicles are exempt from road tax. Hybrids will pay significantly less than traditional petrol cars because road tax is calculated based on emissions.
- Lower Benefit in Kind rates. Again, these operate on a sliding scale depending on fuel source, emissions, and how far the vehicle can travel on a single charge.
- Capital allowances. Cars with CO2 emissions of less than 50g/km are eligible for 100% first year – which results in a £7,600 saving on a £40,000 vehicle.
These incentives could have a huge impact on the overall cost of running and maintaining your fleet. If you’re not well-versed in making tax benefits work for you, talk to your accountant who can help advice and provide accurate estimates of total costs and incentives.