Electrification is happening in stages, so there’s plenty of choice if you’re shopping your next company car – but each has its pros and cons.
Diesel
The diesel engine enjoyed a decade of strong demand in the UK following a reform of the company car tax system in 2002.
Designed to incentivise efficient, low-CO2 vehicles, cheap Benefit-in-Kind (BiK) tax created an almost overnight ‘dash for diesel’ in the fleet sector, doubling its market share to 60% of company cars and slashing average emissions by 15g/km within two years. By 2012, over half of all new registrations, including private cars, were diesel-powered.
That market has collapsed quickly since then as public perception has changed, tougher emissions regulations have made diesel engines more expensive, BiK has increased and the choice of models has declined.
Diesel’s share of the company car market has since fallen behind hybrid and electric vehicles, and it became the least popular fuel choice for new lease cars back in 2022, according to the British Vehicle Rental and Leasing Association (BVRLA). Plenty of once-popular diesel cars are now petrol or hybrid only.
Who should consider a diesel company car? It’s a niche market, but if you’re regularly towing or don’t have for regular, pricey charging stops, then a diesel can still make sense.
Petrol
Petrol is the most popular fuel for passenger cars globally, and it’s benefiting from an influx of investment as manufacturers rush to fill the gap left by diesel engines.
With precise fuel injection and ‘mild-hybrid’ technology (a very light form of electrification), todays downsized petrol engines can deliver the sort of efficiency you’d have only wrung out of a diesel car a few years ago.
For drivers, the main advantage is choice: unlike diesel or hybrid cars, manufacturers typically offer petrol versions across their entire model range, and they’re cheaper than either of those alternatives. However, a small, turbocharged petrol engine can still be thirsty if it’s working hard, and company car tax can be almost as pricey as the finance costs for buying privately.
Who should consider a petrol company car? Drivers who can’t plug in at home, and who need a wider choice of vehicles than are available with a hybrid system.
Hybrid
Fleets were quick to take advantage of tax breaks for full hybrids (sometimes referred to as ‘self-charging’ hybrids) when the first models launched in the UK more than 25 years ago. These usually combine a petrol engine with one or more electric motors, which provide assistance under load and offer a short range on battery power while coasting.
Hybrid company cars overcome some of the challenges of plug-in vehicles for fleets, offering diesel-like efficiency, fast refuelling without drivers having to plug in regularly to get the most out of them. However, their short electric range means they miss out on the hefty CO2-based incentives afforded to plug-in hybrids (PHEVs) and a lot of manufacturers have skipped them as a middle ground.
Who should consider a hybrid company car? Today’s hybrids can be a direct replacement for a high-mileage diesel car, but they offer the biggest fuel savings for city drivers. Stop-start traffic offers plenty of opportunities to slip into EV mode.
Plug-in hybrid
Plug-in hybrids (PHEVs) are effectively a ‘full’ hybrid with a larger-capacity battery that can also charge from the mains.
With a much longer electric range (some can travel more than 70 miles on battery power) a diligent driver should be able to cover most of their day-to-day journeys without using any fuel before slipping back into hybrid mode on longer journeys. Even with the plug-in range depleted, it’ll shift into EV mode for short bursts to wring more miles out of every gallon.
For drivers, PHEVs deliver ultra-low CO2 figures with a corresponding reduction in Benefit-in-Kind tax, while avoiding the need to use public charging. Although a few can now rapid charge, it’s often cheaper and always faster to fill up with fuel. The downside is you’ll get nowhere near the published efficiency if you do.
Who should consider a plug-in hybrid company car? Drivers who can commute on electric power and charge at home and/or at work are best placed to get the most out of a plug-in hybrid.
Electric
New petrol, diesel and hybrid cars will be phased out within a decade in the UK, but there are plenty of reasons for fleets to go electric today.
Most manufacturers offer a selection of different vehicle types, often with a range of 200-250 miles between 20- to 30-minute charging stops. Meanwhile, company car tax incentives were renewed in 2020, just as the tougher WLTP fuel economy test raised the CO2 emissions and tax bands of other vehicles. Two in every five company cars are electric, according to the latest HMRC figures.
EVs take some adjustment, but early range concerns are dissolving and the UK has a well-developed (if expensive) public charging network for regular motorway drivers. The upshot is electric company car could reduce your benefit-in-kind bill by 80%, save your employer money on fuel and servicing costs, and shrink their carbon footprint, too.
Who should consider an electric company car? Even high-mileage drivers can go electric in 2026, but it’s a much easier (and cheaper) option if they can charge at home or work.
