Fleet operators are reconsidering their replacement cycles due to upcoming tax changes, says Mercia Fleet Management. The combination of new vehicle excise duty (VED) rates from April and falling electric vehicle (EV) residual values is creating financial challenges.
Andrew Leech, head of Mercia Fleet Management and founder of Fleet Evolution, explains that businesses are reassessing fleet strategies. Many outright purchase fleets with high EV numbers are delaying replacements, hoping residual values improve. Some are turning to short-term rentals, which can be costly.
The VED rise, announced in the Autumn Budget, applies to both EVs and plug-in hybrids (PHEVs). First-year VED rates will rise to £10 for battery EVs and £110 for PHEVs, while second-year rates for EVs jump to £195. EVs over £40,000 will also incur a luxury car tax of £425 annually for five years from the second year on.
Mercia suggests flexible fleet policies could help control rising costs, with one option being to flexibly introduce EVs on subscription rather than long term leases. This is especially relevant for businesses with seasonal or contractual requirements.