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Why buy a green car?

Reasons to buy a Green Car We list the nine top reasons why you should buy a green car, including money reasons such as tax and running costs savings, and environmental reasons, for those who want to lessen their ecological impact.

We begin with the cost savings of running agreen car – how much money you could you save on fuel, road tax, company car tax and even congestion charges if you changed your car. Under new proposals a high emitting car could soon pay £950 road tax in its first year, whereas a low emission car could be free.

9 Reasons to buy a Green Car

1. Save money on fuel

2. Save money Vehicle Excise Duty (VED)

. Company Car Tax

4. Capital allowances

5. Reduced Parking Charges for Low-emission Vehicles

6. Depreciation and Whole-life Costs

7. Corporate Environmental Policies

8. Exemption from the London Congestion Charge

9. To save the environment

1. Save money on fuel

The price of petrol and diesel is rising all the time, and the forecasts predict that it will continue to do so. There are hundreds of cars out there to choose from; depending on your choice, you could end up with a car that averages 25 miles per gallon or 50 miles per gallon – in other words you could slash your fuel bills in half by choosing the right vehicle.

2. Save money Vehicle Excise Duty (VED)

Most UK cars are liable to an annual ‘road tax’ known formally as Vehicle Excise Duty (VED) or Graduated Vehicle Excise Duty (GVED). VED applies to cars registered before 1 March 2001 charged by engine size. After that date GVED is graduated, based on a car’s emissions – with cars emitting less than 100g/km being free to tax, and less than 120g/km costing just £35 per year. Whereas a car emitting over 225 g/km CO2 falls in Band G and pays £400.00 per year.

The government has proposed changes to the vehicle excise duty system in 2009. It is proposed that the current 7 bands (A-G) will expand to 13 bands (A-M), with a new band over 255g/km. A new first year ‘showroom’ tax will also be introduced. Both the ‘showroom’ tax and the annual vehicle excise duty will cost less for lower emitting vehicles, and conversely will cost more for higher emission vehicles. Highest emitters (over 255g/km) will have to pay a new ‘showroom’ tax cost of £950, and £455 for subsequent years.

The proposals are also retrospective, to include cars registered between 2001 and 2006.

These proposals have received much criticism and are currently being reviewed.

For more information see the www.dvla.gov.uk website and for frequently asked questions on this subject try the www.dvla.gov.uk/gved/question.htm page

3. Company Car Tax

In 2002 company car tax became based on a combination of a car’s value and its official CO2 emissions.

From 1st April 2008 a new lower 10% band was introduced which applies to cars with a CO2 value of 120g/km or less.

The 2008-09 levels will also apply to 2009-10. In 2010-2011 the levels will be tightened by 5g CO2.

The company car tax payable is calculated by taking a percentage of the car’s ‘P11D’ price (the list price including any options, but excluding the cost of first registration and road tax). This percentage relates directly to a car’s CO2 emissions. The table below shows how this works.

The resulting figure then needs to be multiplied by a person’s rate of income tax, either 20% (basic) or 40% (higher rate). This figure is the company car tax bill that the employee has to pay.

Table: Percentage charge relative to CO2 emissions (before discounts)

% of P11D price to be taxed
CO2 (g /km) – 2008/09
10 120
15 135
16 140
17 145
18 150
19 155
20 160
21 165
22 170
23 175
24 180
25 185
26 190
27 195
28 200
29 205
30 210
31 215
32 220
33 225
34 230
35 235

So the lower a car’s emissions, the lower the company car tax that needs to be paid. – See the VCA’s Car fuel consumption versus CO2 Tool for more resources on this subject.

Example: BMW 3 Series Saloon 318d Edition ES

P11d Price
BMW         £24,445

CO2 emissions
BMW         123 g/km

Benefit in Kind tax rating 2008/09
BMW         18%

Annual company car tax
BMW, based on a 40% tax payer = £1,760

The calculation
BMW:     18% of £24,445 = £4,400 x 40% tax = £1,760 tax to pay

4. Capital allowances

From April 2009 cars above 160g/km CO2 will only get a 10% writing-down allowance (WDA) per year, which will make running such vehicle fleets expensive. Cars from 111g to 160g will attract a 20% WDA, and cars up to 110g/km CO2 will get 100% first year allowance (FYA).

5. Reduced Parking Charges for Low-emission Vehicles

Some parking charges are now becoming emissions-based. For example, Westminster Council offered incentives to motorists through emission-based parking charges in a bid to combat poor CO2 emissions. Zero emission vehicles were able to park free of charge at any meter, pay by phone and pay & display during controlled hours throughout the borough. Owners of these electric cars that lived in Westminster were also eligible for a free residential parking pass, as were owners of hybrid and gas vehicle owners.

More local authorities such as Richmond Upon Thame Council are now following Westminster’s lead, offering incentives like residents’ parking concessions and free re-charging facilities.

However the City of London has recently announced that it is to end free parking for electric vehicles because the scheme has become ‘too successful’, making it the first borough to introduce a concession – and then scrap it.

6. Depreciation and Whole-life Costs

A car that is cheap to run is one thing, but if its value plunges dramatically over time then any cost savings of being cheap to run will be wiped out by its depreciation. Therefore a vehicle’s residual value must be taken into account if whole-life costs are looked at.

According to EurotaxGlass’s, the 98 per cent increase in Vehicle Excise Duty (VED) announced by the Chancellor for a selected group of used cars is certain to have an impact on their residual values.

The cars that will experience the biggest jump in VED, if the proposed changes go ahead, are those emitting over 226g CO2 per km, registered after 1st March 2001 but before 23rd March 2006. These cars, which move from the current band F to the new bands L or M, will see their VED jump from £210 to a minimum of £415 from next year – a significant amount relative to their likely value.

Adrian Rushmore, Managing Editor at EurotaxGlass’s, says that the widespread uncertainty about the detail of the VED changes is likely to reduce the likelihood of any dramatic falls in values for the affected cars in the short term. However, he also reports that these same vehicles are already becoming characterised by above-average rates of depreciation.

“We have seen a widening differential in used values between high and low polluters in the last two years, in particular because of increases in fuel costs – high polluters are usually also high consumers of fuel. The latest rises in VED will increasingly be viewed as an integral part of overall rises in motoring costs for high polluting cars, putting their values under further pressure.”

Therefore a car with best-in-class energy efficiency has to be a smart choice for low whole-life costs.

7. Corporate Environmental Policies

More people are now making the switch away from company cars. However, whether employees have company cars or not, many companies are increasingly encouraging staff to switch to more efficient vehicles as part of their Corporate Environmental Policies.

8. Exemption from the London Congestion Charge

Taking a vehicle into the Central London Congestion Charge Zone currently costs £8 per day. The western extension to the Congestion Charge area started on 19th February 2007.

At the moment vehicles exempt from the Congestion Charge include electric cars , petrol-electric hybrids and other vehicles on the Powershift register (such as authorised LPG conversions).

This means you could travel in London by electric, hybrid or other exempt car and save almost £2000 per year, based on driving into London five days a week for 46 weeks, compared to a car that pays the £8 per day charge

Changes were proposed by Ken Livingstone, to be based on CO2 emissions from 27th October 2008. Bands A & B (ie. cars with emissions of 120g/km CO2 or lower) were to be exempt from the Congestion Charge. Cars in bands C-F were to pay £8 per day, and cars in band G were to pay £25 per day. However the new Mayor Boris Johnson has scrapped the plans.

Congestion charging is likely to rolled out in other cities in the UK such as Manchester.

Greater London is also a Low Emission Zone (LEZ). This aims to reduce air pollution by discouraging the most polluting vehicles from driving within Greater London. These are generally older, diesel-engined heavy goods vehicles (HGVs), buses, coaches, heavier vans and minibuses.

9. To save the environment

Cars are getting cleaner, however due the increase in car usage they are still seen as a key contributor to climate change due to their carbon dioxide emissions. By choosing a car with lower emissions you can help to play your part in the fight against climate change – which some scientists regard as being the greatest future threat to our planet.

Vehicles also have a negative impact on local air quality by producing pollution emissions that can affect our health.

Also see: Our list of Green Car Reviews for 2012 featuring all vehicle types from purely electric cars through to hybrids and standard petrol and diesel models with high efficiency and / or low emissions.