Diesel remains the cost-effective company fleet choice

15 June 2008

Diesel remains the cost effective fuel of choice for company cars despite the fast rising prices and a widening pump price differential with unleaded petrol, according to an analysis by All In One Leasing.

Whether opting for a Ford Focus - Britain’s best-selling car - or a Mercedes-Benz S-Class, the fuel economy offered by diesel derivatives more than compensates for the huge increase in pump prices and the 60p/gallon (13p/litre) difference in average UK forecourt prices for the two fuels.

Add in the fractionally higher leasing cost for a diesel model at the benchmark three years/60,000 miles, and take account of both the lower personnel benefit-in-kind tax of diesel models and corporate National Insurance contributions and diesel continues to trump petrol equivalents.

Tony Williams, managing director of All In One Leasing, a wholly-owned subsidiary of the £480m UK Car Group, says “Diesel has been the fuel of choice of the majority of company car fleets in recent years as a result of the twin benefits of lower CO2 emissions and better MPG than petrol equivalents. However, rocketing fuel prices and, particularly, the widening price differential at the pumps, has resulted in many of our leasing customers questioning whether diesel models remain financially viable. Our analysis reveals that while the fuel benefits have been significantly reduced, fleets that remain loyal to diesel will still save money - at the moment.”

Currently (June 2008) according to the AA, the average of price of a gallon of diesel is £5.91 (130.01p/litre) with a gallon of unleaded petrol costing £5.31 (116.7p/litre). A year ago in June 2007, the price of a gallon of diesel was £4.43 (97.4p/litre) with a gallon of unleaded petrol costing £4.41 (97p/litre).

Whether opting for a petrol or diesel company car fuel prices have rocketed in the past 12 months - diesel by £1.48/gallon (32.7p/litre) and unleaded petrol by 90p (19.7p/litre). Although the price of diesel has increased significantly more than unleaded petrol thus widening the differential, it has not been enough to make fleets perform a company car choice U-turn.

In June last year the cost of fuel for a Ford Focus 1.8 Style 5dr (40.3 mpg on the combined fuel cycle) travelling 12,000 miles a year would have been £1,313.15. The cost of fuel for a Focus 1.8 TDCI Style 5dr (54.2 mpg) travelling 12,000 miles a year would have been £980.81 - a saving of £332.34. Today that saving has been reduced to £271.15 as the cost of fuel has risen to £1,579.74 (petrol Focus) and £1,308.59 (diesel Focus). Comparing figures for the same two cars clocking up just 5,000 miles a year and the saving has been reduced from £138.48 in June last year to £113.61 this month.

In the chief executive sector an analysis of the Mercedes-Benz S350 4dr (28 mpg) and S320 CDI (34 mpg) travelling 8,000 miles shows the fuel savings of diesel over petrol have been trimmed from £217.65 to £126.56 in the last 12 months. Over 25,000 miles and the fuel savings of diesel over petrol over the same period have been cut from £680.15 to £395.48.

Williams explains: “Although it is clear that diesel company cars remain financially viable, a continuing widening in the pump price differential with petrol will mean that, in some cases, fleets will turn back to petrol cars. Fuel prices are predicted to go still higher in the coming months, but it is the price differential rather than the headline forecourt price which is key when calculating the cost of fuel.”

 All in One Leasing Limited is the wholly-owned vehicle leasing and fleet management subsidiary of the UK Car Group. Launched in 2006, All in One Leasing currently manages a fleet of more than 2,000 company cars.The UK Car Group’s other brands include: Webuyanycar.com, carland.com, UCan Car Credit, Carcraft Autocentres, CC Trade Sales, Van Leasing Direct and Motorstore.