Fleet cars: is electric, hybrid, petrol or diesel best for a company car?

Company car drivers can pick from several power sources, but some are easier and cheaper to run than others. Here are the pros and cons of petrols, diesels, hybrids, PHEVs and electric fleet cars...

Company car drivers used to have it pretty easy when it came to deciding what sort of engine their next fleet vehicle should have.

There were two choices – petrol or diesel – and until a few years ago, diesel was the go-to choice because of the low company car tax applied to vehicles running on the fuel. That all changed as concerns grew about the emissions from diesel engines.

That leaves fleet managers and drivers with a tricky choice. Should they go back to petrol cars and vans, and accept an increase in fuels costs and benefit-in-kind (BIK) tax rates, or should they stick with "dirty diesel"? Well, fortunately those are no longer the only options.

Hybrid cars have been around for a while now, and although they still use fossil fuels, they used them more efficiently. Better still, they emit less CO2 than models with pure petrol and diesel engines, so the tax bills they attract are generally much lower. No brainer. And yet...

The goalposts have shifted once more, and mild hybrids and self-charging hybrids are being taxed more heavily these days. Step forward plug-in hybrids – PHEVs – which offer lower tax bills because they emit even less CO2 and can do some journeys on electric power alone.

Still find the BIK tax on PHEVs a bit steep? Well, you could well be better off with an electric car. Electric vehicles (EVs) emit precisely nothing, so for the time being they draw very low BIK tax bills. They do place certain compromises upon you in terms of range and recharging times though, so you need to be sure an EV will fit your life as a fleet driver.

In this guide to the best fuel choice for your next fleet car, we'll consider all the options, and assess them for cost and convenience to help you make an informed choice. You can find lots more advice to help you get the best out of your company car fleet – including choosing the right model – on our fleet cars pages.

Electric vehicles

The world of electric-vehicle technology is advancing at a fearsome rate, which is making EVs suitable for more and more people. That's a good thing, because an EV is by far the most tax-efficient fleet car option.

Zero-emission vehicles are taxed at 2% in the 2023-24 tax year, and this rate will remain frozen until the end of the 2024-25 year. So, an EV will cost much less in BIK tax than a small hatchback with an internal combustion engine.

And, of course, everyone has seen how quickly EVs can accelerate, so they’d leave drivers of fossil-fuelled fleet cars breathing their exhaust fumes – if they emitted any. Which, of course, they don’t.

One thing to be aware of is that HMRC will gradually increase taxation on EVs, in a bid to claw back some of the revenue lost by people buying less petrol and diesel. But even then, the rate will rise to just 5% in 2027-28, so EVs will still be miles cheaper to run.

Pros
· Supremely low company car tax rates
· Most EVs can travel more than 200 miles on a charge
· Makes even more sense if you can charge at home

Cons
· Long waiting lists
· Expensive to lease
· Not ideal for high-mileage drivers

Hybrids and plug-in hybrids

Most car makers feature hybrid power somewhere in their range. Some of these are traditional hybrids, which recover energy that would be lost during braking to recharge a battery (a process known as regenerative braking). They can typically only go a short distance on electric power.

Plug-in hybrids (PHEVs) have an advantage where fleet drivers are concerned, because they generally emit much less CO2 so they sit in a lower tax band.

The further they can travel on electric power, the lower their tax banding, so an efficient PHEV with a good range could really pay off. We are starting to see models able to officially do more than 70 miles on electricity alone.

Pros
· Lower tax bills than a pure petrol or diesel
· A PHEV has an engine, so no range anxiety worries
· A comfortable step on the way to a full-on EV

Cons
· An EV is still much cheaper in company car tax
· Hybrid batteries cut loads space in some models
· PHEVs need to be charged up to get the best efficiency

Petrol cars and vans

Petrol cars have had a resurgence in popularity following the decline of diesel. However, fleet drivers would be much better off with a PHEV because pure petrol cars will emit a lot of CO2 and will attract higher BIK tax bills because of it.

Pros
· No range anxiety, and filling up is easy
· Much better than diesels for urban motoring
· Small turbocharged petrol engines are economical

Cons
· A pure petrol emits more CO2 than a hybrid
· Much thirstier than diesels on long journeys
· Comparatively high CO2 means higher BIK bills

Diesel cars and vans

Diesel’s star has been on the wane for some time now, but there’s still a place for it if you’re a fleet car or van driver.

Modern diesel vehicles must meet the RDE2 emissions standard, which means that they are exceptionally clean. You’ll pay more in tax to run a diesel, but if you’re a high-mileage business driver then it really is the best option because of the high economy figures and huge tank range.

Pros
· RDE2-compliant diesel avoid the 4% tax surcharge less efficient diesels face
· Diesels are more economical than hybrids on long journeys
· A pure petrol car will emit more CO2

Cons
· An EV or PHEV will cost much less in BIK tax
· Even the cleanest diesels are more detrimental to air quality than an EV
· Diesel particulate filters can become clogged if the car is used only for short journeys

Electric, hybrid, petrol or diesel – conclusion

If there’s one thing that's abundantly clear in this ever-evolving world of company cars, it’s that the surest way to lower your tax bills is to choose a car with some form of electrification.

PHEVs or EVs are the most efficient options, but you need to make sure an electric car will fit your life. Only choose a diesel if you do a huge number of miles each year.

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