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Small businesses don’t look at the whole life costs of their company cars

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Audi A3 Sportback diesel - company car drivers heading for a company car tax rebate

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29 October 2013

Audi A3 Sportback
Cars like Business Car Manager’s Audi A3 diesel business car do well in a whole life cost comparison, even if the list price looks higher than some of the alternatives

SMALL businesses are swayed by the up-front price of a vehicle rather than the whole life costs – and they’re paying dearly for it.

That’s according to leasing company Arval’s research into the SME company car market, in its Corporate Vehicle Observatory report.

The Total Cost of Ownership is always a much better measure than the initial price of a vehicle or the lease rental.

It showed that nearly a third of small businesses are more focused on the car’s price rather than the Total Cost of Ownership, or whole life costs, and it’s exposing them to unnecessary expenditure.

Mike Waters, senior insight & consultancy manager at business car leasing company Arval commented: “The Total Cost of Ownership is always a much better measure than the initial price of a vehicle or the lease rental.

“We see many examples when comparing similar cars where the one with the lowest purchase price or monthly rental doesn’t deliver the lowest costs on a total cost of ownership basis, particularly when you factor in costs and fuel spend.”

Total Cost of Ownership covers everything from depreciation and maintenance to fuel, insurance and even administration – it’s the in-life expenditure required on a company car.

There’s also concern raised by Arval that small businesses were buying company cars outright without giving any thought to business car leasing options like contract hire, which would remove the risks of the used car market – see our advice article What is contract hire? 

And those risks could be high, as 70 per cent of businesses with fewer than 100 employees surveyed by Arval expected vehicle values to decrease this year.

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Matt Morton

Matt Morton

Matt Morton is an automotive content writer for Business Car Manager

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