At the end of July 2010, it was confirmed by the Transport Secretary Philip Hammond that from January 2011 motorists will receive up to £5,000 towards the purchase of an ultra-low carbon car. The initiative is open to both fleet and private buyers. Now that this has been confirmed how could this influence your fleet management decisions and what type of impact, if any, will it have on commercial fleet insurance?

The Government have made this announcement even before the completion of the spending review in order to support the early market for ultra-low carbon cars. With the changes in the road tax system of Alistair Darling’s Budget, the cost implications for the more polluting cars continue to get higher.

On top of this is the one-off first year “showroom tax” which could see the buyers of high emissions cars having to pay up to £950 in the first year, whereas those who buy a new car which has less than 130g/km of CO2 emissions will pay nothing.

The Department of Transport advise that making your fleet green does not necessarily have to mean changing the class of vehicle. In fact there is a useful tool on the Act on CO2 website where you can compare the various classes of vehicles, type of fuel and see how they fare on the tax band and CO2 comparison.

For example choosing the small family class and selecting all fuels the top vehicles are the Seat Leon, Ford Focus, the new Volkswagen Golf and the Volvo C30. The fuel for all of these is diesel and there is no tax to pay on these in the first year. All of these cars fall into the 99 CO2 (g/km) category.

If it is a regular family car that is the size of some of your fleet cars then it is the Volkswagen Passat Saloon 1.6 TDI 102PS BlueMotion which is diesel that is the best option with no tax on the first year and it is classified as 114 CO2 (g/km). It is a useful search facility which can be used for research when making plans.

On the commercial fleet insurance evaluation although there are no direct impacts there can be indirect impacts. At a time like this when fleet managers are being forced into re-evaluating due to both the environmental and economic factors, the indirect effects should be taken into account.

A report by Professor Peter Cooke which aims to define the future of fleet states that a company car will have to earn its keep economically more in the future than it had to in the past. This leads us to the area of choice of company cars; who really needs them and the issue of downsizing both the overall size of company fleets as well as the class of vehicles being used.

From an insurance perspective if these decisions are made strategically we should see significant reductions in insurance premiums. Vehicles will be chosen with both the environmental and economic considerations in mind, while a global evaluation will need to be done on the overall company fleet policy, encompassing the future economic benefits being weighed up against the cost implications.