Benefit in kind rules lure more firms to finance ecars
Bank of Ireland data shows 45% of car loans this year went to businesses
According to data from the Society of the Irish Motor Industry there were 1,902 electric vehicles sold from the beginning of January to the end of May. Photograph: iStock
Retention of aspects of the benefit in kind rules for motor vehicles has prompted an increasing volume of businesses to seek out car finance for electric vehicles, analysis from Bank of Ireland shows.
The analysis, carried out by Stephen Healy, head of the bank’s motor sector in its business banking team, shows that 45 per cent of loans for electric vehicles in the five months to the end of May have been for business customers, with 55 per cent for personal customers.
That compares to 28 per cent of all car loans last year going to business customers with 72 per cent for personal customers.
The increase follows an extension of the 0 per cent benefit-in-kind (BIK) rate for electric vehicles for a period of three years from last October’s budget. A BIK is a non-cash benefit an employer gives to an employee and the retention of the 0 per cent rate effectively means that no taxable benefit arises for an employee where they’re given an electric car or van by their employer.
However, in Budget 2019, Minister for Finance Paschal Donohoe put a cap of €50,000 on the original market value of a vehicle that qualifies for this tax rate. Any amount over the €50,000 limit will incur BIK.
Mr Healy’s analysis shows that the cap has prompted businesses to increase the amount they’re spending on electric vehicles from an average of €26,500 in 2018 to €29,000 for the period. Business customers fund roughly €4,000 more than personal customers, the data shows.
Additionally, the average term length from when a loan is signed has reduced, from 54 months for business in 2018 to 50 months.
Speaking to The Irish Times, Mr Healy noted that about 60 per cent of electric vehicles sold were in cities. Diesel car sales, meanwhile, accounted for about 65 per cent of sales in rural environments.
According to data from the Society of the Irish Motor Industry (SIMI) there were 1,902 electric vehicles sold from the beginning of January to the end of May – the latest month for which data is available.
The SIMI figures show that electric vehicle sales accounted for 2.4 per cent of total new car sales, a figure that is mirrored in the share of Bank of Ireland’s loan agreements.