What is TCO?

You will many times on this site us at LetsTalk are extolling the virtues of Total cost of ownership (TCO) as this is the most accurate way of evaluating business car leasing options and is simple to calculate:

How is it Calculated?

An effective TCO approach brings together the key costs of running your fleet such as Business Lease Costs, Fuel, Taxation, Maintenance and Accident spend to ascertain the total running cost of vehicles and fleet, once this is done it makes different vehicles, products and services much easier to evaluate and compare.

When comparing vehicles its common place to exclude costs such as accidents as they will on average apply similarly to all vehicles. 

The simple task of calculating TCO is a great way to compare vehicles as it allows car lease comparison by a single cost figure, which is especially helpful when comparing Electric Vehicle Leasing against Combustion Engine Vehicles for example. 

These factors vary but generally include:

• Business Car lease Costs
• VAT Disallowance
• Fuel Spend (Business Miles only)
• Maintenance (Budgeted spend works best)
• National Insurance Costs
• Vehicle Insurance 
• Corporation Tax

TCO can also apply to commercial vehicles and is simpler to do as the company van taxation regime is more straight forward.

TCO brings into focus all the costs associated with each company car, allowing a better understanding of the total cost of running that vehicle. Looking at one figure, rather than looking at costs in silos without ever consolidating them to one cost line, means a tighter focus on spend and value.

TCO in Action

Here is an example of 2 similar SUVs from Jaguar, one I-Pace and one F-Pace.

As you can see despite the fact these 2 vehicles have headline lease rates which are £116 different the TCO is identical at £740 a month.

With the changing state of company vehicle BIK tax its now more important than ever for businesses to employ some form of TCO when selecting company vehicles as the impact of making the incorrect decision could run into thousands of pounds per vehicle per year.

Our Business car lease TCO model has values for every quotable vehicle so just let us know what you are looking for and we can do the car lease comparison for you.

Interested in finding out more, LetsTalk on 0330 056 3331