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Brexit: Drivers to Bear the Brunt of Increased Manufacturing Costs

The uncertainty around Brexit is hitting businesses hard. And costs are destined to increase even more once Britain leaves the EU.

Some car manufacturers are moving their operations outside of the UK  and are already planning to pass increased production costs on to consumers purchasing vehicles in the UK.

In the current climate, the harmony of a single market enables car manufacturers to build vehicles “just in time”. This allows them to source parts from all over Europe without the expense of stockpiling parts.

With new regulations expected to be introduced in the UK post-Brexit, border delays will disrupt the tight constraints employed by carmakers based in Britain and subsequently increase production costs.

In addition, the Society of Motor Manufacturers and Traders (SMMT) estimate EU tariff on cars will cost the industry £5bn more on import and export costs.

Car manufacturers say the additional costs will be borne by consumers.

 

Brexit Will Increase Motoring Costs

In the event of a ‘no-Brexit’ deal, import tariffs on cars and spare parts will incur a 10% tariff under World Trade Organisation rules. It is estimated that EU tariffs will add at least £1,500 on to the cost of foreign vehicles sold in the UK.

Drivers in the UK will also bear the brunt of increased manufacturing costs given import tariffs will also be applied to parts.

Brexit has already heaped more than £2bn on to the energy sector which has seen a rise in utility bills. Oil prices will go the same way.

Drivers in Britain are already out of pocket following US sanctions on Iran. Fuel costs added another 11p a litre on to petrol price and 13p on diesel. The RAC has warned the average cost of a full tank of petrol will hit a record high of £70.

Although Prime Minister Teresa May pledged a duty freeze on petrol for the ninth consecutive year, the policy leaves a £9bn hole in the Chancellor’s budget?

How much longer will the government permit duty-free tariffs on petrol. Once the freeze on fuel duty is inevitably lifted.

 

What Will Brexit Mean For Mobile Businesses?

2019 has already been announced as the most expensive year to own a car. For mobile businesses, motoring costs will inevitably rise year on year.

The hike in Vehicle Excise Duty last year already added an average of £65 a year on road tax for new cars with CO2 emissions over 255g/km.

With such daunting increases for motorists, mobile businesses that rely on a fleet of vehicles could be forced to downsize and cut operations.

Whilst buying business vehicles outright puts a significant stress on business capital, leasing a fleet of cars releases cash flow that is vital for businesses to function efficiently.

Business car leasing provides a solution to some of the problems posed by Brexit.

With so many companies across multiple sectors already starting to feel the pinch of Brexit, managers need to prepare for the next two or three years now. Can your business really afford to buy a fleet of cars in a post-Brexit world?

Why Business Car Leasing Needs to be Part of Your 2019 Financial Planning

The cost of buying a car outright is causing headaches for financial planners in the UK. Increased costs on road tax, car emissions, insurance and maintenance fees could mean small businesses accept losses on their vehicles.

Road taxes will go up again in April 2019 in conjunction with the government’s inflation hikes. Financial experts have warned British motorists that new tax laws will add unexpected costs on to car ownership.

As a result, business planners are weighing up the financial pros and cons of buying or leasing a car.

 

Financial Implications of Company Cars

From an economic standpoint, company cars consist of three considerations; equity, depreciation and interest on lease or loan payments (unless purchased outright).

In the current climate, a financed car is a seriously expensive commodity. Businesses with older cars are faced with the decision to pay higher rates in the CO2 emission tax band or replace your existing vehicles.

Is buying a new car an expense you can afford? The average price of a car in the UK is £33,559 – a 38% increase over the last decade! A weak sterling has meant that car manufacturers have shifted their rising costs on to consumers.

It’s safe to say, the only real financial benefit of owning a company car outright is the tax benefits. Yet with the introduction of revised tax brackets, these previous asset breaks have suffered a dent as well.

It’s important to understand the tax implications of buying a company car. This is something we discuss in our free guide to leasing a fleet of cars. Essentially, commuting expenses and personal travel are non-deductible and keeping accurate records of business travel incurs administration costs.

Leasing a company car does not incur any of the costs, depreciation, interest charges or admin expenses you lose when owning a company car outright. Everything is paid for in one lump sum payment and remains consistent.

Financial planning has never been so easy.

 

Financial Considerations of Leasing a Company Car

Leasing a fleet of cars is a cost-effective solution that requires very little financial planning. All that is required is the simple task of deciding which services you want to include in your lease plan.

The fee you pay for leasing a fleet of cars is the same every month. If you choose to include maintenance options – which is highly recommended – you don’t even have to worry about repair and maintenance costs.

Furthermore, when a leased vehicle is off the road, it is replaced with another car. This means your business will remain operational. You won’t lose profits and you won’t need to conduct a financial planning strategy to make up the loss.

Other financial considerations include the number of miles you expect to cover as this will have an impact on the monthly rental, fuel costs and the cost of insurance.

The ability to reduce your financial liability to run a fleet of cars can help to preserve capital, improve cash flow and give you more flexibility when the time comes to upgrade your fleet with vehicles that have low-emission engines.

Want to know more about how managing a fleet of cars can help you to manage your finances better in 2019?

Download our free guide now.

Challenges of Building A Fleet of Commercial Vehicles For Your Business

A wave of new laws and taxes have heaped a number of challenges on UK businesses and make it very difficult for decision makers to predict how to best manage a van fleet efficiently and cost-effectively.

Subsequently, UK companies that require vans for business use need to find solutions that enable them to minimise the new restrictions.  

The big question for decision makers is whether to stay loyal to the company-owned fleet of vans or avoid the complexities and tax burdens by switching to a managed fleet.

This is what you need to know.

Vehicle Excise Duty

There is only an increase of 5 pounds on vans sub 1549cc and 10 pounds 1549cc +, the CO2 Emmissions scale does not apply to LCV’s as they are generally classed as job need

Tariffs on Diesel Vans

A government report indicates that diesel vehicles cause harmful emissions that significantly contribute to air pollution levels. In an attempt to reduce the UK’s carbon footprint, local councils are expected to introduce a diesel surcharge.

London will become an “ultra-low emission zone” in April 2019 which will expand to surrounding areas by 2021. Non-compliant vehicles will be ordered to pay £12.50 a day.

MOTS

The Government has also expressed concerns that the condition of fleet vans – especially – are poor and unroadworthy.

To tackle the issue, MOT tests will use a ‘diagnostic tool’ to identify where repairs or replacements are required to improve road safety standards of fleet vehicles.

The FTA has reacted by promising to introduce benchmarks for the van community. It is expected that entire fleets will require servicing and will significantly increase the outgoings of companies with a fleet of vans.

Increased Vehicle Acquisition

Following the raft of new tax changes introduced in April 2018, manufacturers are being incentivised to build cleaner engines that fall below the emissions thresholds.

Whilst buying a new van for your business offers good value, the incremental increase on taxes will increase your overheads year-on-year. Ultimately, businesses will need to replace fleet vans more frequently. Going green may reduce running costs, but it increases the cost of owning a vehicle.

Increased Labour Costs

Once Britain leaves the EU, it is widely expected that fleet costs will rise significantly. A culmination of increased post-Brexit costs across the motor industry will increase the cost of running and maintaining a company van.

Trade tariffs are expected to be imposed in imports from mainland Europe to the UK once the 29 March 2019 deadline is passed. Given many high-tech motor parts are made overseas, the cost of buying and repairing fleet vans will increase.

Furthermore, the Prime Minister has already declared that low-paid workers from overseas will not be granted a work permit for the UK. Garages will be impacted with a higher wage bill which will inevitably increase service and maintenance costs.

The increased cost of owning a company van in the UK could leave businesses with a serious financial downturn. Van lease hire firms have a crucial role to play in helping UK companies cut costs by managing your fleet for you.

 

Download our FREE QUICK FLEET GUIDE to learn more about

managing a fleet of vans efficiently and cost-effectively.

How Will Brexit Effect The Cost of Your Fleet Cars?

According to a recent poll, 64.1 per cent of UK business owners expect Brexit to increase the business costs of running a fleet of cars.

Although nobody can be 100% certain how Brexit will affect the cost of owning a fleet in Britain, the early warning signs indicate the decision to leave the EU is going to cost the UK economy heavily.

According to Dataforce, the fleet market is already in decline following the Governments new wave of vehicle taxes implemented on 1 April 2018. Brexit is expected to pile even more costs of owning vehicles outright on to businesses.

How will your company be able to manage a fleet of cars by the time the March 29 deadline comes around next year? These are the pitfalls:

Cost and Availability of Vehicles and Parts

Fleets are more reliant on high-tech parts and devices and many of these parts have to be imported from mainland Europe. The pound has already lost value against the Euro, so parts and vehicles are already more expensive. And things could get worse.

When Britain leaves the EU, we will probably lose the right of free movement of trade. Subsequently, British companies will have to pay trade tariffs on imports which push up the cost of parts, repairs and servicing.

Labour Shortage

Teresa May has already said EU-workers will need a work permit in order to stay in the UK, and only for jobs that pay at least £30,000 a year. The impending migration of EU workers leaving the UK will inevitably leave a labour shortage. This will have a significant impact on the finances of businesses.

First of all, UK companies will find it more difficult to recruit foreign workers and those that do will have to pay more in salaries. That will mean the costs for repairs and servicing go up as well.

There will also be an interim period where there will be a shortage of mechanics available to carry out repairs. The delays will mean small business fleets lose revenue whilst their car is off the road.

No Brexit Deal

A no Brexit deal will also cause complications for UK fleets. If a deal cannot be reached with EU negotiators, the UK will revert to World Trade Organisation rules whereby tariffs would be enforced.

Should this be the case, the cost of living in Britain will increase due to a rise in general inflation. The knock-on effect will be that fuel prices go up, together with the cost of buying and maintaining vehicles.

Brexit could cause major problems for fleets, and UK companies risk losing a significant amount of revenue once Britain pulls out of the EU. The best way to avoid increased costs and the hassle that comes with it is to lease a fleet of hire cars.

For more information and top tips for managing a fleet of cars Contact Toomey 

or download our Free Quick Fleet Guide

The Cost Of Company Cars Under New Legislation

Ouch! Have You Seen The Cost Of Company Cars Under New Legislation

Businesses that own a fleet of cars face additional running costs under new legislation imposed on motorists throughout the UK and Europe. As a result, the business of car leasing is set to undergo some major changes.

In attempts to reduce carbon and nitrogen oxide emissions, car owners face higher taxes and penalties unless they upgrade their car.

The new tax bands introduced in April 2018 and the ‘toxicity charges’ that will be enforced in 2020 will mean businesses that own a fleet of cars will face significantly higher running costs.

And the running costs will be £1000’s!

 

New EU Car Emissions

According to the European Commission, cars are responsible for pumping around 12% of carbon dioxide into the atmosphere. In a bid to tackle pollution, EU legislations order car fleets to be more environmentally-friendly.

Under the so-called Toxicity Charge or T-charges for short, motorists are obligated to upgrade their cars to meet with the latest emission efficient standards.

 

Emission Penalties

Drivers of older vehicles that are deemed to be polluting the air with poisonous nitrogen oxide will be fined £10 a day.

The Conservative London Assembly Member estimates that 9000 car owners will be charged a combined total of £23m.

Furthermore, a growing number of councils across the UK are introducing fines for petrol and diesel cars that use ultra-low emission streets between certain times.

Furthermore, on-the-spot fines of £20 will be handed out to drivers that keep the engine running whilst waiting.

The initiatives are intended to promote more people to buy hybrid and electric-only vehicles in order to help the government meets its target of lowering the number of petrol and diesel cars to below 50% by 2040.

 

Increase in Car Tax

Authorities heightened the pressure on UK businesses to invest in low-emission vehicles in April 2018. New tax rates on cars will mean some cars will incur a small increase in Vehicle Excise Duty (VED) but for new diesel cars being registered there are increases of up to £560!  

Low emission cars 0 – 100 g/km will pay between £0 and £145 a year. For higher emitting cars these rates can increase to £2070 in year 1 with a standard rate of £450 in years 2 – 4.

Not only that, but a “first year” VED road tax rate makes owning a car in bands E-M even more expensive in the first 12 months.

Taxes in the first year incur costs of £130 (band E) up to £1,120 (band M). Low emission cars in bands A-D on the other hand do not pay road tax. Check the cost of your car in the table below:

 

 

Government Drive To Remove Petrol and Diesel Cars

As part of its “Road to Zero” plan, UK policymakers are clamping down on petrol and diesel cars – to such an extent that older cars could be banned from the road entirely.

In radical proposals commissioned by the EU to fight air pollution, diesel cars have been placed into a new system that tests energy efficiency and the quantity of emissions.

Plans to remove older cars from the road were initially introduced by under EU legislation, but the conditions are likely to remain in the UK after Brexit.

The government has promised that at least 50% of new cars on UK roads will be low-emission hybrids or fully electric by 2030.

By 2050, the only cars permitted on the roads will be zero-emission vehicles.

Businesses that have been wrestling with the decision of whether to buy or lease a fleet of cars should be able to reach a decision much more easily now. The lawmakers have made the decision for you!

The crux of the matter is that business owners need to find a better way of managing their fleet of cars in order to reduce overall costs.

 

For more information, we’ve put together a FREE GUIDE which covers everything you need to know about calculating the cost of buying or leasing a fleet of cars.