7:27 am, August 18, 2025
There are concerns that a government clampdown on a perk enjoyed by car dealer and manufacturer staff could hit car vehicle production.
The government is set to change Employee Car Ownership Schemes (ECOS) from October 6 next year which allows car industry staff to buy posh company cars at reduced rates.
ECOS schemes allow staff to buy cars from their employer at drastically reduced rates and run them for short periods of time before handing them back.
These are usually top of the range models which are then sold by dealers as nearly new cars in six months time.
The perks are often handed out by car dealer groups and car manufacturers with some jobs at car makers coming with up to four or five of these cars which the employee can dish out to friends and family.
The government announced in the Budget that it is set to close this ‘loop hole’ next year and tax these vehicles as if they were a standard company car.
The Treasury expects to net £275m in the first year after the change.
On its website, accountancy firm Cooper Parry warned: ‘When the Budget was announced, the main concern was how the automotive sector would cope.
‘For some businesses, providing high-value cars without triggering a car benefit charge has been a big part of their employee reward strategy.
‘But now, it’s clear the changes are far-reaching. Any employer using an ECOS arrangement, whether directly or through a third-party provider, should be reviewing their position now.’
The changes have caused ramifications across the industry.
Vertu boss Robert Forrester is concerned the changes will hit car production. He has written to the Treasury to express his fears and questioned the savings the treasury expects to make.
He told the government that ECOS schemes make up around 5% of the new car market and ‘underpin a large share of the nearly new market’.
‘We are very confident your proposed policy will mean current ECOS volumes will not be produced and sold on in other channels,’ he wrote.
He believes this risks damaging both the ‘new and used car markets’ and said his calculations show the ‘aggregate exchequer’ income would actually be reduced when you take into account the VED rates and VAT on the cars typically bought on these schemes.
Other dealers have told Car Dealer they have concerns about the policy. One dealer group boss said a large number of his staff were on packages that included these car perks and costs would have to rise for businesses if they were removed.
‘The ramifications of this are huge’ said the dealer boss. ‘These are perks for our teams and if you take them away you’ll have to compensate them,
‘That means costs for our business will go up, not to mention the lack of used car supply from these nearly new models coming back into our showrooms.’
Cooper Parry is advising car dealers not to include ECOS scheme perks in their new starter packages from now.
Many car dealers used the schemes to put high spec cars on the road that might not otherwise get registered and therefore seen by customers before purchase.
Cooper Parry’s head of automotive Ian McMahon said: ‘This will be an initial blow to the UK sector if this guidance bites, with a lot of dealers not being able to have the higher emission and specification vehicles on the road to allow the public the chance to see them in action.
‘Our overarching guidance for dealers and similar businesses is to assess the commercial impact as soon as possible.’
