Budget changes put focus on Ogilvie’s ‘True Cost’ comparison tool

THE operating cost effectiveness of company cars is being masked for many businesses because they are failing to take account of all relevant data when choosing which models to introduce to their fleet, according to Ogilvie Fleet.

 

That’s why the fast-growing, award-winning independent contract hire and leasing company believes its unique Ogilvie True Cost, which takes the established principle of whole life costs as its base and then adds in crucial additional financial elements, provides customers with a far more accurate representation of the actual costs associated with vehicle operation.

 

Whole life cost calculations from contract hire and leasing companies are often based on a just an effective rental (with or without maintenance) plus the cost of fuel.

 

But Ogilvie True Cost also includes the critical cost associated with employer Class 1A National Insurance contributions and subtracts a corporation tax saving before adding back in to the calculation any applicable lease rental disallowance.

 

And, with the Government pledging in the recent spring Budget to further reduce corporation tax rates from 24% in 2012/13 (down from 26% in 2011/12) to 23% in 2013/14 and simultaneously lower the emissions threshold at which the lease rental restriction applies from 160 g/km to 130 g/km in 2013/14, business-related taxes are set to play an increasingly critical role in company car selection criteria, says Ogilvie Fleet.

 

Ogilvie Fleet sales and marketing directorNick Hardysaid: ‘Ogilvie True Cost is a far more accurate representation of the actual costs associated with the operation of a vehicle and allows a far more precise comparison to be made between different models.

 

‘We highlight Ogilvie True Cost on every individual vehicle quotation we produce. As more of the correct data is used to calculate the Ogilvie True Cost figure, a far clearer cost of ownership is shown, resulting in a far more accurate, and often lower, representation of the net cost of contract hire.

 

‘Ogilvie True Cost could, correctly therefore show a lower, more accurate cost than a

traditional whole life cost analysis and allows a fleet manager to make a far more accurate comparison between real vehicle costs.’

 

Example 1: BMW 118d SE five-door (118 g/km) P11D value £21,975 3 years/75,000 miles contract with full maintenance monthly cost

NEW Ogilvie True Cost       Traditional Whole life cost

Total effective rental                           £439.91                                   £439.91

Cost of fuel (£1.21/litre plus VAT)    +£181.90                                 +£181.90

Employer’s NIC                                  +£42.96                                   n/a

Gross true cost                                                =£664.77                                 =£621.81

Corporation tax saving (24%)             -£159.55                                  n/a

Lease rental disallowance                   +£00.00                                   n/a

Actual monthly cost                          £505.22                                   £621.81

 

Example 2: Honda Accord 2.2i-DTEC EX four-door auto (162 g/km) P11D value £28,915 3 years/75,000 miles contract with full maintenance monthly cost

 

NEW Ogilvie True Cost       Traditional Whole life cost

Total effective rental                           £572.60                                   £572.60

Cost of fuel (£1.21/litre plus VAT)    +£249.12                                 +£249.12

Employer’s NIC                                  +£86.46                                   n/a

Gross true cost                                                =£908.18                                 =£821.72

Corporation tax saving (24%)             -£217.96                                  n/a

Lease rental disallowance                   +£15.59                                   n/a

Actual monthly cost                          £705.81                                   £821.72

 

Hardy said: ‘As can be seen the Ogilvie True Cost calculation reveals the actual monthly cost to be significantly lower than the monthly cost using a more traditional whole life cost calculation basis.

 

‘Many fleet decision-makers and drivers use monthly rental rates to compare and select vehicles but unless all applicable figures are included the real world financial picture is distorted. We believe that Ogilvie True Cost delivers a win-win benefit for both businesses and their drivers and enables the right vehicle choices to be made.’

 


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