Decisions supplement - Employee benefits - Key to change.

(From Financial Director)

Byline: Catherine Chetwynd.

In anticipation of the changes in company car tax last April, much was written about the impending death of the car as a perk. Pundits suggested that company cars would cease to be an attractive option because they would be taxed to extinction. However, evidence suggests that even where companies have opted out of supplying vehicles and put in place an employee car ownership ECO plan (this allows employees to pay a deposit and a monthly fee with an option to purchase the car outright after three years), company cars are still a very popular choice.

Nigel Dumbrill, client account manager for employee benefit advisors and actuarial firm Gissings, says his firm was one that expected the tax changes last April to have more effect. "Even those who have been worst affected find that a company car is very convenient," he says.

Dumbrill also suggests there's still status attached to being given a company car because if employees had to buy their own they would probably opt for a cheaper vehicle.

According to the 2002 Monks Partnership guide Company Car UK, which surveyed 162 companies, 7,605 out of 113,801 company cars were employee owned under a car ownership plan. The majority of large companies (62%) have a policy that allows the driver to contribute to the cost of the car and trade up to a more expensive model; 81% also allow trading down, with 76% passing on part or all of the savings to the driver.

Kevin Ruffles, business services director of Hogg Robinson, says freedom of choice is all. "People want to be able to opt out. We have a package that gives everyone a benchmark car and they can trade up or down, either paying extra or taking a cash supplement. This removes the status element. Choice is important," he says.