LEASING company Alphabet believes the Expensive Car Supplement threshold is too low for electric vehicles when it comes into play from 01 April 2025.
Alphabet wants the threshold raised from £40,000 to £60,000 for EVs, saying at the £40k level it could hinder the take up of electric cars
Caroline Sandall-Mansergh, pictured above, the Consultancy and Channel Development Manager at Alphabet (GB), is calling on the Government to raise the level of the Expensive Car Supplement , commenting: “I don’t believe the current threshold of £40,000 is at the right level. Based on a review of Alphabet (GB)’s data relating to 3,508 quotable vehicle models, our view is that it should be raised to £60,000.”
What is the Expensive Car Supplement?
The Expensive Car Supplement has been levied on new petrol and diesel cars as part of Vehicle Excise Duty. Until now, EVs have been exempt. But from 01 April 2025 any EV costing more than £40,000 will be required to pay the Supplement for the first five years of registration, adding an additional £395 to the VED each year.
She urged ministers to then review the level annually based on P11D values of the nationwide vehicle parc, adding:
“Our data reveals that the average P11D value of quotable petrol, diesel, hybrid and EV models reviewed is £51,855 – just over 25% more than the current ECS threshold. However, if you look at 961 of quotable EV models, the average list price is £60,273. And for 81% of quotable EVs that are listed over £40,000, the average P11D equates to £66,041 which shows just how much the threshold needs to shift to be truly reflective of the market.”
She adds that raising the ECS threshold from £40,000 to £60,000 should only be a temporary measure, with annual reviews gradually lowering it as more affordable EVs hit the market.
Caroline is calling on the Government to implement change ahead of the Spring Statement in March 2025, and certainly before 01 April, saying it would be welcomed by the fleet and leasing industry and further assist the Government’s green mandate.
Caroline added: “Any delay to moving the Expensive Car Supplement threshold is likely to increase drivers’ hesitancy and potential reticence from making the switch to EV, because including EVs from 01 April will mean increased cost of ownership. There is a genuine concern that drivers will decide to stick with what they know, rather than look favourably at an EV, based on the numbers available to them now.”
She said this stance is perpetuated by misinformation and negative mainstream media coverage, which does not show the context of owning an EV and the potential longer-term savings.
“We know business users are largely driving EV adoption. Therefore, operators with large fleets of EVs, which have previously been exempt, are now going to be carefully evaluating fleet composition and budget forecasts.”
“It’s also a really difficult time because a lot of the EV residual values have gone down,” she added, “so, it’s a ‘double hit’ with RVs worsening and the Expensive Car Supplement exemption being removed. This will put a lot of EVs dramatically outside of grade.”
Her advice to SME fleet operators wondering what to do is simple – make sure you’re getting your numbers right.
Caroline explained: “Many operators don’t take into consideration every element within whole life cost. For example, they don’t use an accurate ‘fuel vs energy’ comparison when comparing EVs and ICE vehicles. If the average contract is for 20,000 miles a year, the operator may not be able to distinguish between business and personal usage, meaning the difference could be huge. Calculations are further complicated because some end-users charge privately at home while others use public infrastructure, which would have significant cost-implications.”
Caroline concluded: “Operators should be reviewing the way they construct their car choice list to try to make it as reflective as possible of actual cost. They need to ensure they’re taking a detailed and sophisticated enough view of every element to get accurate results. We know they can’t build a car list based on, for example, 25 different averages, but they must have something structured – and now more than ever it needs to be accurate.”
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