Fleets using medium term rental to manage WLTP tax uncertainty

Some fleets are turning to medium-term rental as a way of managing the uncertainty that currently surrounds the new emissions testing regime, the Worldwide harmonised Light vehicle Test Procedure (WLTP), and company car taxation.

The Government has yet to announce how the new fuel and emissions testing regime will be applied to benefit-in-kind tax from the 2020-21 tax year, leaving fleets in something of a dilemma over committing to new vehicle leases that will last three or four years.

However, Phil Jerome, managing director at Meridian Vehicle Solutions, says that medium-term rental provides a constructive means to defer the problem.

“Many company car drivers and their employers don’t want to commit to a vehicle now and find that in two years, the way in which the Government has chosen to deal with benefit in kind in relation to WLTP means that they are penalised by an unnecessarily large tax bill,” he said.

“What medium term rental enables these people to do is defer having to deal with the issue.

“It is expected that the Government will make a decision later this year, so renting a car for between 1-6 months allows you to kick the can down the road, in a positive way.”
Jerome believes that this approach will have a very limited effect on fleet budgets because medium term rental was only marginally more expensive than long term leasing.

“We charge on a monthly basis and rates are much cheaper than daily rental,” he continued. “Our model is much closer to long term leasing and vehicles are supplied new from a franchise dealer.”

Medium term rental was increasingly being used by fleets in situations where they wanted to defer committing to longer-term vehicle acquisition, according to Jerome.

“There are many reasons fleets might want to put off making a decision,” he said. “WLTP is just one.

“For example, they might be undergoing some form of internal organisational change – whether growing or contracting – and use medium term rental until their future is clearer.

“Really, medium term rental is all about providing a flexible, cost-effective alternative in situations where long term leasing is unsuitable and daily rental too expensive. This means that it is the best solution in many different kind of fleet situation.”