If you were due to accept a brand new vehicle in the last two weeks of March it is possible that this did not happen and you are only now having discussions around how your new vehicle can be delivered. Due to legislation changes at the beginning of April, which impacted on the CO2 emissions of your vehicle, it may no longer be possible to get the vehicle at the same monthly lease rate and the below FAQs explain why.
Frequently Asked Questions
What is Worldwide Harmonised Light Vehicle Test Procedure (WLTP)?
WLTP is the new testing system for cars and vans which provides comprehensive and reliable emission and MPG figures to help compare vehicles and determine what will best meet a driver’s needs. It is being phased in to replace the existing New European Driving Cycle (NEDC).
WLTP measures a car or van’s individual CO₂ value by testing the vehicle at different average speeds (low, medium, high and extra high) and each driving phase is also tested (stopping, accelerating and braking) to reflect real life driving styles. The values obtained with WLTP are comparable worldwide, excluding China and the United States of America, whilst NEDC values are only valid in Europe.
Since its initial introduction in 2017, the CO₂ values of WLTP have been translated back to correlated NEDC values to allow for monitoring compliance against the CO₂ targets set by the European Union. In some cases the NEDC correlated CO₂ values could be up to 17% higher than existing NEDC values for comparable cars and WLTP CO₂ values are typically 20-30% higher.
To account for the impact of the higher CO₂ values HM Treasury decreased Company Car Tax rates by 2% for 2020/21, and will then increase them by 1% in 2021/22 and 2022/23. There has been no adjustment to first-year Vehicle Excise Duty bands or other CO₂ linked taxes.
Why is the test changing?
Air quality standards from tail pipe emissions have been the concern of citizens and governments for a number of years. Vehicle manufacturers have been tasked with reducing pollutants that are proved to be injurious to health (carbon monoxide, hydrocarbons, nitrous oxides and particulates). Further information is available on the European Automobile Manufacturers’ Association’s WLTP webpage.
Why does this impact my monthly lease payment?
The amount of first year Vehicle Excise Duty (VED) you pay is linked to the CO2 value of your vehicle. On 1 April 2020 first-year VED switched from being on the vehicles NEDC correlated CO2 figure to its WLTP CO2 emissions. While there is no physical change in the emissions of your vehicle its recorded CO2 for tax purposes will have typically increased by 20-30% on 1 April.
The increase in CO2 linked to your vehicle's registration will have moved it up one or more VED bands. This increases the cost of your vehicle's first-year VED payment, which in turn will be spread over your lease term and increase your monthly payments.
My broker has contacted me and told me they need to requote for my vehicle, why?
As the cost of the vehicle has increased due to a higher tax burden your broker will need to requote you for your vehicle. There can be considerable cost differences between first-year VED bands and this may impact your monthly lease pricing.
The timing of the UK’s lockdown to fight the Covid-19 pandemic meant that many vehicles due for delivery in March were delayed beyond 1 April. All these vehicles will have their first-year VED calculated from their higher WLTP CO2 values.
As changes to the taxation system and the implantation of the lockdown are entirely outside of your broker's control it is not something they could have foreseen in the original quote.
Why didn’t the government change the implementation of the legislation?
The introduction of WLTP was a step change for governments and the automotive industry across the EU. Its implantation in the UK has taken over three years, with much government signposting of the relevant dates of the transition.
Quite simply it was too complex and challenging for the oil tanker that was the WLTP introduction to be turned around in the days before its implementation in the face of the Covid-19 lockdown. The government instead focused resource and effort on creating schemes such as the Coronavirus Job Retention Fund and Coronavirus Business Interruption Loan Scheme rescue the UK economy.