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Which car for your company?

Diesel, petrol, hybrid or fully electric? This decision is less and less of a brain teaser when choosing a new vehicle for your business. Fully electric is becoming the most appealing option from a financial and tax point of view.

Petrol still the most popular for the time being

In 2021, Belgian entrepreneurs registered nearly 6 out of 10 new cars between them. They opted for electric cars more often than private individuals. For example, 9 out of 10 fully electric cars and hybrid plug-in vehicles were registered in our country last year by companies and the self-employed, according to figures released by the Febiac, the Belgian car and two-wheeler federation.

In 2021, a third of vehicles newly registered by companies were fully or partially electric:

  • 8.6% fully electric
  • 18.9% hybrid with plug
  • 4% hybrid without plug

Petrol vehicles remain the most popular choice for companies at around 38%. There are good explanations for this, such as the lower cost of purchase and practical considerations (frequent and fast refuelling, no need to install own charging station, driving electric vehicles requires adaptations, etc.). In addition, entrepreneurs feel that the difference in tax between electric and petrol is still (too) small (for now). On the other hand, the number of newly registered diesel vehicles (just over 30% in 2021) has been declining sharply for years.

Why is driving electric vehicles becoming more popular among entrepreneurs?

1. Tax changes

Tax is probably the main reason why we will see more electric vehicles on Belgian roads in the coming years. The tax advantage is disappearing for newly registered cars with a combustion engine.

The purchase costs for a company car are currently tax deductible, as are the additional costs (fuel, insurance and maintenance, etc.). But this advantage is disappearing for newly registered cars with a combustion engine.

  • Diesel and petrol vehicles as well as hybrids ordered between July 2023 and December 2025 will still benefit from a transitional arrangement until 31 December 2027
  • The tax advantage will disappear entirely for anyone who purchases a vehicle with a combustion engine from 2026 onwards.

For fully electric cars, however, the 100% lifetime deductibility will remain in place, though this too will be lower over time. The deductibility of carbon-free vehicles will be reduced to 67.5% between 2027 and 2031. 

It is also worth noting that companies can gain significant tax benefits from the installation of charging stations. These will be fully tax deductible from the 2022 assessment year. From 2030 onwards, this unlimited deduction too will be abolished and replaced by a fixed rate of deduction of 75%. Companies that invest in charging stations accessible to the public before the end of 31 August 2024 will also be entitled to an increased depreciation rate. If the investment takes place in 2022, the investment can be depreciated at 200%. Thereafter (until 31 August 2024), this depreciation rate will drop to 150%.

2. More choice

While there were ‘only’ 64 fully electric and hybrid models (with a plug) on the Belgian market in 2019, this number had already risen to around 157 in 2021. By comparison, last year in Belgium there were 263 petrol models on the market and 200 diesel models.

There is not only a wider range of passenger cars, but also of vans. There are already electric versions of the most common vans (e.g. Citroën Berlingo, Jumpy and Jumper; Fiat Ducato; Ford Transit; Mercedes Sprinter and Vito; Opel Combo and Vivaro; Peugeot Partner, Expert and Boxer; Renault Master; VW Crafter).

In addition, electric vans are equally configurable and available in different lengths and heights, without sacrificing robustness, capacity or versatility.

3. Price difference gradually shrinking

Electric vehicles remain a lot more expensive to buy than those with a traditional combustion engine. For example, the company car with the highest sales in 2020, the Volvo XC 40, has a list price of EUR 27,107 (excl. VAT). For the fully electric version, the list price is EUR 38,347 (excl. VAT)[1].

There is also still a significant difference in purchase price between other comparable models of other makes of vehicle. However, the price difference will narrow over the longer term, partly due to the fall in battery production costs. And as competition increases and manufacturers register more economies of scale, that difference will shrink even further.

4. Cheaper loan and insurance

If you buy an electric vehicle, you can get better terms on your loan. The same applies to insurance, although, comparatively speaking, the higher purchase price will mean that the premium is no lower than for a traditional car.

5. Residual value

In recent years, we have seen an ever-increasing number of second-hand electric vehicles come onto the market. Their residual value is on average higher than for diesel vehicles and is close to the residual value of petrol vehicles. The residual value is largely determined by the condition of the battery because this is a pricey component. An analysis of 6,300 electric vehicles reveals that capacity falls by 12% after 6 years. This still provides an acceptable range. In addition, almost every make offers a guarantee on the battery if it falls below capacity after a number of kilometres or years. However, it is important to note that every improvement in technology and execution reduces the value of the old versions. As with every car, there is no avoiding this.

[1] Price for professional customers, checked on 22 February 2022

In a nutshell

Already today, the tax advantages gained from buying a diesel, petrol or hybrid vehicle are somewhat lower than for a fully electric car. The tax difference will increase further in the years to come. At the same time, the price difference between electric and petrol vehicles is likely to fall further, and the choice will increase. This means that a new diesel, petrol or hybrid vehicle will become less of an obvious choice in the next few years.

Whatever vehicle you choose, ING can assist you