Starting from 1 July, the new motor vehicle tax rates will be based on the results of a new CO2 testing method; the WLTP (Worldwide Harmonised Light Vehicle Test Procedure). The WLTP was introduced to obtain a more accurate and realistic measurement of harmful vehicle emissions and fuel consumption. The new measurement method may therefore affect the fiscal value and lease price of a new car.
How does it work again?
Every car brought to market is first exhaustively tested to determine whether it meets all of the requirements. Vehicles are tested for their fuel consumption, CO2 emissions, and emissions of other harmful substances. The motor vehicle tax rate for the car is then calculated based on the results of this test.
However, over the past few years car technology, our driving habits and road conditions have all changed. The old NEDC testing method, which was last updated in 1997, was therefore no longer representative for the performance of contemporary automobiles. The WLTP is a new testing method that provides more accurate results. As legislative amendments were needed to introduce the WLTP, the government provided a transition period. This period will end as of 1 July 2020, when the new motor vehicle tax rates will go into effect for all new cars.
What should we take into consideration?
Different testing methods will inevitably result in different values. The WLTP method is more rigorous than the old method, which results in higher CO2 values that can increase the motor vehicle tax rate. This is because many vehicles have become heavier over the years and engines have become more powerful, which increases the CO2 emissions per vehicle. The resulting higher motor vehicle tax rate will therefore affect the monthly costs for a vehicle.
Fortunately, the government has taken some measures to accommodate drivers: the motor vehicle tax rates have been adjusted as of 1 July. If you drive an electric vehicle, then the WLTP will have no effect; the vehicle does not emit CO2, so it is not subject to the motor vehicle tax. The new motor vehicle tax calculation will make the average conventional or PHEV car ‘budget-neutral’, so the changes may not affect the monthly costs. Nevertheless, there may be some positive or negative changes depending on the individual vehicle.
What are the consequences for lease drivers?
Lease drivers who already have a contract will not notice any changes for the time being, as the WLTP only applies to new cars. If the vehicle is delivered after 1 July 2020, however, the changes may have consequences for the lease price. Some options affect CO2 emissions and are therefore subject to the motor vehicle tax. The amount of motor vehicle tax also affects the lease tax rate, so we can only calculate the definitive price once the car is delivered.
Naturally, our ALD Automotive consultants can bring you up to date on all you need to know about the influence that motor vehicle tax rates will have on your lease vehicle or fleet. If you would like to know more, please feel free to contact us!