New guide to company car policies


New guide to company car policies

The government expects there to be more cars on the road, but driving fewer miles, as a result of its new company car tax regime, due to come into force in April 2002. These changes will add yet another complicating factor to the equation, as firms start to reshape their current provision to balance out the winners’ and losers’ gains and losses. Incomes Data Services has just published a report on company car policies which provides an overview of the issues and brings together details of company car policies in 25 major employers.


The IDS research identifies the main trends in company car policies, finding that policy changes are being driven by a need to contain fleet costs and a desire to give employees more choice as part of wider moves to modernise human resource strategies.

  • Cash alternatives: The clearest indication of this increasing flexibility is further growth in the use of cash alternatives to company cars. There is also a shift in the type of employee being given the option, with the choice previously reserved for status car drivers now increasingly being extended to essential users.

    IDS has found in the two years since its previous report on company cars that there has been an increase in the take-up rates of cash allowances.

  • Trade up: The move to greater flexibility is not, however, confined to the introduction of cash allowances. There has also been a growth in arrangements allowing employees to trade up to more expensive models or down to cheaper vehicles.

  • Winners and losers: The new tax regime will increase the tax bill for high mileage job need drivers unless they switch to more environmentally friendly models. Those with perk cars who drive few business miles each year are likely to gain from the new arrangements.

  • Changes to car policies: Just 15 of the 25 case study organisations had modified or were reviewing their car policies in the light of the new regime, and the changes ranged from undertaking communication exercises to phasing out their provision of cars altogether.

What you will find in the IDS research

Spread over 115 pages, this IDS report:

  • looks at buy-outs, flexibility and the cost control pressures driving company car policies

  • reviews companies’ responses to the forthcoming tax changes
  • brings together details of company car policies in 25 major employers, including BOC, Lloyds TSB, Peugeot Motor Company, PricewaterhouseCoopers and Somerfield.

Contents of the report

Reactions to the new car tax regime

Provides details of policy responses in 15 companies and an analysis of the impact of the tax changes on sales staff, junior, middle and senior managers driving different mileages.

Fleet acquisition and management

Summarises the three main fleet acquisition methods used by the case study companies — contract hire, outright purchase and contract or lease purchase — and how the fleet is to managed.

The basic choice facing employers is whether fleet management should be outsourced or dealt with in house.

Eligibility and allocation

Details of how cars are allocated, along with eligibility, choice and car users’ rights and responsibilities in 25 companies.

Cash allowances and flexibility

Approaches to cash alternatives, and trading up or down arrangements.

Additional costs: insurance and fuel

A look at the other costs associated with the provision of company cars, including details of fuel allowances for both company and private use.

Case studies

Detailed case studies of 25 companies.


Want to know more?

Title: Company car policies 2001 , IDS Management Pay Review Research Report, August 2001.

Availability: Contact the IDS customer services department in London, tel: 020 7324 2599, or email:

If you would like more details of the report, jump to . . .

Incomes Data Services is an independent research organisation providing information and analysis on pay, conditions, employment law and personnel and practice in the UK and the rest of Europe. To find out more . . .

Posted 4 December 2001