Why a diesel company car will save you money

  • Dropping the 3% surcharge in 2016 makes diesel the money saver
  • Equivalent petrol models increase in cost in comparison
  • Choosing diesel now can save you money over three years

To save money on their next car, company car drivers need to be prepared for a key change in the way cars are taxed.

From April 1st 2016 the diesel surcharge of three percent BIK over petrol-powered cars will be dropped.

Diesel versus petrol – which is cheaper?

That means where some efficient petrol models were competing with the equivalent diesel model in terms of tax, the removal of the three percent BIK surcharge widens the tax gap.

Take two examples of the popular Ford Focus. The same trim but one with a 1.6-litre petrol engine and one with a 1.6-litre diesel engine. Here’s how the costs work out:

1.6 EcoBoost Titanium Navigator (petrol)

P11D: £20,415
CO2 emissions: 137g/km
Fuel economy: 47mpg (official combined figure)
Power: 147bhp
0-62 mph: 8.3 seconds
Tax costs per month at 20 percent pay scale:
2014/15: £136.10
2015/16: £149.71
2016/17: £163.32

1.6 TDCi (115bhp) Titanium Navigator (diesel)

P11D: £20,640
CO2 emissions: 109g/km
Fuel economy: 67mpg (official combined figure)
Power: 113bhp
0-62 mph: 10.5 seconds
Tax costs per month at 20 percent pay scale
2014/15: £117
2015/16: £130.72
2016/17: £123.84

In the current tax year the petrol proves competitive but come the 2016/17 tax year the diesel model will save you nearly £40 a month or nearly £475 a year.
It’s the same for other models.

The petrol Audi A3 with Cylinder-on-Demand technology returns some very impressive results, emitting just 109g/km of CO2 and returning a claimed 60mpg. It’s not the most efficient in the range, (that’s the 1.6-litre TDI diesel at 99g/km and 74mpg) but it’s close.

Drop the three percent tax surcharge, though, and paying 12 percent for the diesel compared to 14 percent for the petrol means £41.06 versus £47.67 per month at 20 percent pay. That’s nearly £80 a year or £238 over a three year lease.

What’s the best bet for company car drivers then?

Petrol models have come a long way and offer very fuel-efficient motoring. With the three percent surcharge in place petrol models are very competitive in terms of company car tax and cheaper at the pumps to fill up.

Come April 1st 2016 the diesel surcharge disappears and petrol models lose that advantage. Given that’s less than two years away diesel-powered cars now provide the best opportunity to secure a low company car tax bill.

To find out about all of these changes check out our Company Car Tax Explained article along with a graphical representation of BIK tax right up to 2018-19.