Consideration of light duty vehicle leasing in relation to the cost effectiveness of LDV CO2

Consideration of light duty vehicle leasing in relation to the cost effectiveness of LDV CO2 regulation Service Request 9 under framework contract Ref: CLIMA.C.2/FRA/2012/0006 ___________________________________________________

Final Report for the European Commission, DG Climate Action Ref. CLIMA.C.2 (2015) 3179642

ED61414 | Issue Number 4 | Date 17/05/2016 Ricardo in Confidence

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This report is the Copyright of the European Commission. It has been prepared by Ricardo Energy & Environment, a trading name of Ricardo-AEA Ltd, under contract to DG Climate Action dated 21/08/201521/08/2015. The contents of this report may not be reproduced in whole or in part, nor passed to any organisation or person without the specific prior written permission of the European Commission or the Commercial Manager, Ricardo Energy & Environment. Ricardo Energy & Environment accepts no liability whatsoever to any third party for any loss or damage arising from any interpretation or use of the information contained in this report, or reliance on any views expressed therein.

Authors:

Felix Kirsch, Marius Biedka, Ben White

Approved By:

Nikolas Hill

Date:

17 May 2016

Ricardo Energy & Environment reference:

Ref: ED61414 - Issue Number 4

Ricardo Energy & Environment Consideration of light duty vehicle leasing in relation to the cost effectiveness of LDV CO2 regulation | 1

Ricardo in Confidence Ref: Ricardo/ED61414/Issue Number 4

Executive summary

Ricardo Energy & Environment was commissioned by DG Climate Action to provide technical support to the European Commission on “Consideration of light duty vehicle leasing in relation to the cost effectiveness of LDV CO2 regulation” (reference CLIMA.C.2/FRA/2012/0006). This final report provides a summary of the findings of the work completed during the course of this project.

Previous analysis by the European Commission on the attractiveness and benefits of CO2 reductions from cars and LCVs has been carried out assuming that all vehicles are purchased by their operators. Yet in practice, leasing of cars and LCVs in Europe accounts for over 30% of new registrations, of which most are company cars. Given the size of the leasing market in Europe it is important to be able to understand whether consideration of leasing-specific conditions in the overall analysis might affect the outcome.

The first task of this project involved an analysis of the European market for leased vehicles. Figure 1-1 summarises estimates of the number of newly leased cars across European Member States in 2014, adding up to a total of around 3.5 million. Around three quarters of these were company cars. Cars tend to be leased across all segments but that leasing shares tend to be slightly higher for upper segments. In terms of fuel type, it is estimated that around 80% of leased cars in 2014 had Diesel engines, as opposed to around 55% among average new registrations. This means that roughly half of all newly registered diesel cars and 15% of newly registered petrol cars are leased. This observation is consistent with significantly higher-than-average annual mileages for leased cars, around 30,000 km per year over the leasing contract period. The average length of the leasing contact period in Europe is 41 months, with most customers choosing a contract length of either three or four years. Further detail, including data on leasing of light commercial vehicles (LCVs) is presented in the main body of the report.

Figure 1-1: Estimated number of new leased cars in 2014 by EU Member State, adjusted by used car share (Leaseurope, 2015)

The remaining project tasks set out to examine the impact of leasing on the attractiveness (and uptake) of lower CO2 technologies among consumers and businesses on the one hand, and its impact on the social costs and benefits of these technologies, and consequently on the costs and benefits of any CO2 regulation legislation, on the other hand.

Leasing is popular for a variety of reasons including tax and balance sheet advantages for companies with vehicles, but also for the outsourcing of fleet management, enabling companies to purchase ‘full-service’ mobility packages at fixed monthly rates which entail tacit discounts on vehicle price, insurance, breakdown cover and maintenance, aided by leasing providers’ bargaining power, internal market knowledge, use of generic parts and economies of scale. Leasing providers also trade used vehicles across EU Member States, so particular vehicles are sold in those markets in which they are most demanded (and their residual value is highest). This can be relevant for reducing the high levels of depreciation which alternatively fuelled vehicles often experience in the used car market.

0

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DE UK FR IT NL ES BE AT SE DK PL* PT CZ RO SI EE SK FI EL

Operating Leasing

Finance Leasing

unknown



In principle, reductions to vehicle costs associated with leasing can increase the cost-effectiveness of lower CO2 vehicles if leasing providers offer a discount on the purchase cost premium otherwise charged for a lower CO2 vehicle. However, the general aim of the present project is to compare ‘like-for-like’; it is assumed that vehicles are purchased and leased on the basis of the same purchase prices and residual values.

The overall findings of the project can be summarised in two potential mechanisms by which the decision to lease a vehicle could affect the attractiveness and cost-effectiveness of lower CO2 technologies.

The first potential mechanism is the role of finance (as opposed to cash) in funding the ‘investment’ into the CO2 saving technology. Finance can improve the attractiveness of the ‘investment’ by providing instant payback: If the technology is cost-effective and funded in the form of an addition to the monthly lease payment; the level of the monthly fuel cost savings will exceed that of the extra lease payment. This can make investing into the technology more attractive than having to wait several years before the accumulated fuel cost savings start exceeding the initial upfront investment. Model calculations undertaken as part of this study confirm that wherever lower CO2 technology is cost-effective, payback can be instant (within a month) when the vehicle is leased. However, the resulting increase in attractiveness of lower CO2 models from instant payback has not been quantified.

In addition, companies can be expected to lease (or use finance for) their fleet when the (implicit) interest rate is lower than the company’s discount rate. The availability of leasing may thus make investments into lower CO2 technology viable which would otherwise not have been viable from the company’s perspective. The financial implications of leasing versus purchasing at given discount rates have been explored in detail through a series of model calculations. The cost-effectiveness of actual current eco-models (e.g. Volkswagen’s BlueMotion series) versus standard models, as well as the cost-effectiveness and payback for future lower CO2 models versus 2013 average models, have been compared under leasing and cash purchase. The results indicate that due to the effect of having an interest rate below the discount rate, leasing and other forms of vehicle finance are by definition more cost effective than outright purchase. However, the impact of finance on the overall net gains or losses associated with a lower CO2 technology is low. Consequently, taking account of leasing via this mechanism would not have significantly altered the results of the 2020 Impact Assessment.

The second mechanism is the leasing industry’s expertise in minimising the total costs of ownership (TCO) of vehicles and vehicle fleets. Leasing companies provide consultancy advice to fleet customers to construct car policies that include the most suitable, "fit for purpose" cars and light commercial vehicles for their fleets. Therefore, as long as CO2 reduction technology is cost effective (which previous studies find to be the case – e.g. TNO et al. (2011), Ricardo Energy & Environment et al. (forthcoming)), leasing companies should advise their customers to take it up in order to minimise their costs.

Leasing industry stakeholders have emphasised that national vehicle taxation policies plays an important role for TCO, and ultimately, vehicle choice. Data provided by leasing companies clearly shows that leased vehicle registrations are responsive to national CO2 based car taxation: In France and the UK, leased vehicles across most segments and fuel types have significantly lower CO2 emission ratings than the average new vehicle. However, in both taxation systems, the financial incentives to choose lower CO2 vehicles are generally stronger for company cars than they are for private cars and it is not clear how non-leased company cars facing the same taxation incentives perform in comparison. Not much data is available for Member States in which company car taxation does not provide significant rewards to low CO2-ratings, but anecdotal evidence from Germany suggests that leased vehicles there do not tend to have particularly low CO2 emissions as the impact on TCO is more limited.

In conclusion, leasing may increase the attractiveness of lower CO2 vehicles, on the one hand by enabling instant payback on fuel saving ‘investments’, and on the other by helping operators optimise vehicle choice by enabling them to better take into account the costs and benefits associated with lower CO2 vehicles in the context of CO2-based national vehicle taxation schemes. However, given the available evidence, it has not been possible to quantify the extent to which these factors affect the uptake of lower CO2 vehicles in practice. While the impact of leasing on attractiveness of lower CO2 vehicles cannot be ascertained, the impact on the cost-effectiveness of lower CO2 vehicles is found to be limited. The inclusion of leasing would not significantly affect results of the 2020 Impact Assessment, and would leave the assessment of costs and benefits of future CO2 regulation policies largely unchanged.



Table of contents

1 Introduction and overview ......................................................................................... 7

2 Task 1: Analysis of the EU vehicle leasing market .................................................. 8 2.1 Data collection ................................................................................................................... 8

2.1.1 Overview over data collected ................................................................................... 8 2.1.2 Overview over stakeholder survey and interviews ................................................... 9

2.2 Identification of different types of leasing arrangements ................................................. 11 2.3 Creation of a bespoke dataset ......................................................................................... 14

2.3.1 Overview of data collected...................................................................................... 14 2.4 Characterisation of the European leasing market ........................................................... 14

2.4.1 Temporal variation in leasing levels ....................................................................... 15 2.4.2 Market share of leasing by country ......................................................................... 16 2.4.3 Share of leasing by vehicle segment ...................................................................... 18 2.4.4 Mileage ................................................................................................................... 20

3 Task 2: Explore how vehicle lease prices are calculated .......................................23 3.1 Calculation of lease prices ............................................................................................... 23

3.1.1 Rationale for leasing and its impact on the cost effectiveness of low CO2 technologies .............................................................................................................................. 23 3.1.2 Leasing calculation ................................................................................................. 24 3.1.3 Note on interest rates for leasing contracts and companies’ discount rates .......... 25 3.1.4 Selection of vehicles for example calculations ....................................................... 25 3.1.5 Results for the selected illustrative examples......................................................... 26

3.2 Potential relationship of lease prices with second hand car values ................................ 31

4 Task 3: Analysis of the impact of different leasing approaches on vehicle CO2 performance .......................................................................................................................33

4.1 Empirical analysis ............................................................................................................ 33 4.1.1 Aggregated data from Leaseurope ......................................................................... 33 4.1.2 Data from survey .................................................................................................... 33

4.2 Theoretical analysis ......................................................................................................... 35 4.2.1 Sensitivity analysis .................................................................................................. 41

5 Task 4: Analysis of the economic implications of vehicle leasing in terms of payback considerations for fuel economy improvements ..............................................50

6 Task 5: Illustration of whether taking account leasing would have changed the results of 2020 LDV CO2 regulations Impact Assessment ..............................................54

6.1 Adjustment of Impact Assessment’s analysis to age-dependent vehicle mileage .......... 54 6.2 Taking account of leasing in IA calculations: private perspective ................................... 58

6.2.1 Private costs (additional purchase/lease costs) of moving to a lower CO2 target .. 58 6.2.2 Benefits (fuel cost savings) from moving to a lower CO2 target ............................. 59 6.2.3 Comparison of costs and benefits .......................................................................... 59

6.3 Taking account of leasing in IA calculations: social perspective ..................................... 60 6.3.1 Social costs (additional manufacturing costs) of moving to a lower CO2 target ..... 61 6.3.2 Social benefits (fuel cost savings) and comparison to social costs ........................ 61

6.4 Concluding comments ..................................................................................................... 62

7 Summary and conclusions .......................................................................................64

8 Bibliography ..............................................................................................................66

Appendix 1: Calculation results for Task 2 ......................................................................69

Appendix 2: Calculation results for Task 3 ......................................................................77



Table of figures

Figure 1-1: Estimated number of new leased cars in 2014 by EU Member State, adjusted by used car share (Leaseurope, 2015) ....................................................................................................................... 1 Figure 2-1: Share of operating versus finance leasing contracts across EU Member States ............... 11 Figure 2-2: Share of leasing contracts for which services are included ................................................ 12 Figure 2-3: Distribution of contract lengths amongst MS (and average contract length in months) ..... 13 Figure 2-4: Share of business versus private contracts ........................................................................ 13 Figure 2-5: Estimated number of new leased cars in 2014 by EU Member State, adjusted by used car share ...................................................................................................................................................... 14 Figure 2-6: Estimated number of newly leased LCVs in 2014 by EU Member State............................ 15 Figure 2-7: Number of leased vehicle new contracts over time and their share in overall new registrations (22 MS) (Leaseurope, 2015; ACEA, 2015) ....................................................................... 16 Figure 2-8: Estimated share of passenger car leasing in new registrations across European Member States, based on data from Leaseurope, adjusted by used car share (Leaseurope, 2015; ACEA, 2015) ............................................................................................................................................................... 17 Figure 2-9: Estimated share of LCV leasing in new registrations across European Member States, based on data from Leaseurope (Leaseurope, 2015; ACEA, 2015) ..................................................... 18 Figure 2-10: Comparison of segment shares amongst newly leased cars and overall new registrations in ES, UK, NL, PT and FR (AER, 2015; BVRLA, 2015; VNA, 2014; EEA, 2014) ................................. 19 Figure 2-11: Share of leased vehicles in total new car registrations by segment in ES, UK, NL for 2014 ............................................................................................................................................................... 20 Figure 2-12: Average annual mileage of leased cars and LCVs in kilometres ..................................... 20 Figure 2-13: Range of contract mileage for car and LCV fleets in Q2 2015 (BVRLA, 2015) ................ 21 Figure 2-14: Annual mileage in the Netherlands in 2013 (VNA, 2014) ................................................. 21 Figure 2-15: Average annual mileage in lease period in 2014 in France (km per year) ....................... 22 Figure 3-1: Comparison of TCO for purchasing and leasing Volkswagen Golf diesel variants at different interest rates. Lease parameters: 3 years, 32,187 km per annum, 4% – 9% APR. PV assumption: 10% discount rate. Value at top denotes TCO (sum of components expressed as present value) ..................................................................................................................................................... 27 Figure 3-2: Difference in total cost of ownership between the eco variant and standard variant ......... 29 Figure 3-3: Comparison of TCO for purchasing and leasing Ford Fiesta petrol variants with a 15% discount on the purchase price under leasing. Lease parameters: 3 years, 32,187 km per annum. PV assumption: 10% discount rate. Value at top denotes TCO (sum of components expressed as present value) ..................................................................................................................................................... 30 Figure 3-4: Difference in total cost of ownership between Ford Fiesta eco variant and standard petrol variants under purchase, leasing, and leasing with 15% discount on purchase price .......................... 31 Figure 3-5: Sale vs CAP for fleet & lease vehicles sold at auction. Source: BCA ................................ 32 Figure 4-1: Difference in average CO2 emissions between new registrations of leased diesel cars and total national new registrations of diesel cars by segment in 2014 ....................................................... 34 Figure 4-2: Difference in average CO2 emissions between new registrations of leased petrol (incl. hybrid) cars and total national new registrations of petrol (incl. hybrid) cars by segment in 2014 ........ 34 Figure 4-3: Difference in CO2 emissions between new leased LCVs and national average new registrations of LCVs (all diesel) in 2014 ............................................................................................... 35 Figure 4-4: fuel cost assumptions used in calculations ......................................................................... 36 Figure 4-5: Comparison of TCO between 2013 baseline lower medium diesel car and 2021 target variant for both purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................................................................................ 37 Figure 4-6: Net private cost saving for 2021 lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ................................ 38 Figure 4-7: Net private cost saving for 2025a lower-CO2 vehicles over 2013 baseline for purchase and leasing, 78g fleet average target for cars, 121g fleet average target for LCVs. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................ 38 Figure 4-8: Net private cost saving for 2025b lower-CO2 vehicles over 2013 baseline for purchase and leasing, 68g fleet average target for cars, 105g fleet average target for LCVs. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................ 39 Figure 4-9: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2021 lower-CO2 versions. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ............................................................................................................................................................... 40



Figure 4-10: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2025a lower-CO2 versions. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................................................................................ 40 Figure 4-11: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2025b lower-CO2 versions. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................................................................................ 41 Figure 4-12: Sensitivity: Net private cost saving for 2021 lower CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 16,000 km/year for cars, 24,000 km/year for LCVs, 8% discount rate, 4% APR on the lease .................................................................................................................... 42 Figure 4-13: Sensitivity: Net private cost saving for 2025a lower CO2 vehicles over 2013 baseline for purchase and leasing, 78g fleet average target for cars, 121g fleet average target for LCVs. Assumptions: 16,000 km/year for cars, 24,000 km/year for LCVs, 8% discount rate, 4% APR on the lease ...................................................................................................................................................... 42 Figure 4-14: Net private cost saving for 2025b lower CO2 vehicles over 2013 baseline for purchase and leasing, 68g fleet average target for cars, 105g fleet average target for LCVs. Assumptions: 16,000 km/year for cars, 24,000 km/year for LCVs, 8% discount rate, 4% APR on the lease ............. 43 Figure 4-15: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2021 lower-CO2 versions. Assumptions: 16,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................................................................................ 43 Figure 4-16: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2025a lower-CO2 versions. Assumptions: 16,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................................................................................ 44 Figure 4-17: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2025b lower-CO2 versions. Assumptions: 16,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................................................................................ 44 Figure 4-18: Sensitivity: €0 per g CO2/km saved residual value impact, net private cost saving for 2021 lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ...................................................................................................... 46 Figure 4-19: Sensitivity: €0 per g CO2/km saved residual value impact, net private cost saving for 2025a lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................ 46 Figure 4-20: Sensitivity: €0 per g CO2/km saved residual value impact, net private cost saving for 2025b lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................ 47 Figure 4-21: Sensitivity: €20 per g CO2/km saved residual value impact, net private cost saving for 2021 lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ............................................................................................... 48 Figure 4-22: Sensitivity: €20 per g CO2/km saved residual value impact, net private cost saving for 2025a lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................ 48 Figure 4-23: Sensitivity: €20 per g CO2/km saved residual value impact, net private cost saving for 2025b lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease ................................................................................ 49 Figure 5-1: Illustrative example payback graph for a fuel-saving technology ....................................... 50 Figure 5-2: Payback for 2021 lower CO2 C-segment diesel car over 2013 base model; mileage: 32,000 km per year, 36 month lease ................................................................................................................. 51 Figure 5-3: Payback for 2025a lower CO2 C-segment diesel car over 2013 base model (131g to 80g); mileage: 32,000 km per year, 36 month lease ...................................................................................... 51 Figure 5-4: Payback for 2025b lower CO2 C-segment diesel car over 2013 base model (131g to 70g); mileage: 32,000 km per year, 36 month lease ...................................................................................... 52 Figure 6-1: Average annual car mileage by vehicle age from Ricardo-AEA (2015) study and proposed age-adjusted mileage profile based on average mileage from the Impact Assessment (European Commission, 2012) ................................................................................................................................ 55 Figure 6-2: Average annual van mileage by vehicle age from Ricardo-AEA (2015) study and proposed age-adjusted mileage profile based on average mileage from the Impact Assessment (European Commission, 2012) ................................................................................................................................ 55



Table of tables

Table 2-1: Structure of Leaseurope data for passenger car leases (Leaseurope, 2015) ....................... 8 Table 2-2: Data on the leasing market collected ..................................................................................... 8 Table 2-3: Data on leasing contract parameters collected during the project ......................................... 9 Table 2-4: Completed stakeholder questionnaires received ................................................................. 10 Table 2-5: Overview over stakeholder interviews ................................................................................. 10 Table 2-6: Example of the high-level differences between financial and operating lease types (based on Maxxia (2013)) .................................................................................................................................. 11 Table 3-1. List of vehicles selected for illustrative examples ................................................................ 26 Table 3-2. Monthly leasing costs at different APRs for the Ford Fiesta (eco and standard variants). .. 28 Table 3-3. Difference in monthly leasing costs at different APRs for the Ford Fiesta........................... 28 Table 3-4. Monthly leasing costs at different APRs for the Volkswagen Golf (eco and standard variants). ................................................................................................................................................ 28 Table 3-5. Difference in monthly leasing costs at different APRs for the Volkswagen Golf .................. 29 Table 4-1: Leaseurope data on leased vehicles average test cycle CO2 performance ........................ 33 Table 4-2: CO2 emissions by segment (WLTP) .................................................................................... 36 Table 4-3: comparison of purchase prices, residual values and CO2 savings between the standard and eco models analysed in Task 2 ............................................................................................................. 45 Table 5-1: Monthly net cost savings when leasing lower CO2 vehicles over 2013 baseline (monthly fuel savings minus additional lease payment) .............................................................................................. 52 Table 5-2: Payback period for lower-CO2 technology when vehicle is purchased (in months) ............ 53 Table 6-1: Assumptions on car characteristics used to modify the IA calculations ............................... 56 Table 6-2: Present value of lifetime fuel cost savings for cars: 95g target relative to 130g baseline, social perspective* ................................................................................................................................. 56 Table 6-3: Present value of lifetime fuel cost savings for LCVs: 147g target relative to 175g baseline, social perspective* ................................................................................................................................. 56 Table 6-4: Present value of lifetime fuel cost savings for 95g target relative to 130g baseline, private perspective ............................................................................................................................................ 57 Table 6-5: Present value of lifetime fuel cost savings for LCVs: 147g target relative to 175g baseline, social perspective* ................................................................................................................................. 57 Table 6-6: Additional manufacturer cost and purchase price (€) per car relative to 130g/km target/LCV relative to 175g target, mass-based utility parameter with 60% of 2009 slope (European Commission, 2012, p. 54) ........................................................................................................................................... 58 Table 6-7: Additional capital payments under leasing over baseline .................................................... 58 Table 6-8: Present value of fuel cost savings over lease period (annual mileage: 30,000 km, 8% discount rate) ......................................................................................................................................... 59 Table 6-9: Summary of benefits and costs under leasing and purchase (private perspective) ............ 59 Table 6-10: Additional costs for lower CO2 vehicles relative to 130g baseline, social perspective (4% discount rate, 2% interest on lease loan) .............................................................................................. 61 Table 6-11: Summary of benefits and costs under leasing and purchase (social perspective) ............ 62 Table A1: Comparison of monthly costs. Lease parameters: 3 years, 32,187 km per annum. ............ 70 Table A2: Comparison of monthly costs. Lease parameters: 3 years, 16,093 km per annum. ............ 73 Table A3: Calculation results for 3 year tenure, 32,186 km per annum, 4% APR on lease ................. 77 Table A4: Calculation results for 3 year tenure, 16,093 km per annum, 4% APR on lease ................. 82



1 Introduction and overview

Ricardo Energy & Environment has been commissioned by DG Climate Action (hereafter ‘the Commission’) to provide technical support to the European Commission on “Consideration of light duty vehicle leasing in relation to the cost effectiveness of LDV CO2 regulation” (reference CLIMA.C.2/FRA/2012/0006, hereafter, the ‘project’)..This final report provides a summary of the findings of the work completed during the course of this project.

Previous analysis by the Commission on the attractiveness and benefits of CO2 reductions from cars and LCVs has been carried out assuming that all vehicles are purchased by their operators. Yet in practice, leasing of cars and LCVs in Europe accounts for over 30% of new registrations, of which most are company cars. Given the size of the leasing market in Europe it is important to be able to understand whether consideration of leasing-specific conditions in the overall analysis might affect the outcome.

Task 1 of the project analyses the European market for leased vehicles in some detail. The number of newly leased vehicles across Member States and across different vehicle segment and fuel types is summarised. Moreover, the typical annual mileage of leased vehicles as well as typical leasing contract types and contract lengths are presented.

The remaining project tasks set out to examine the impact of leasing on the attractiveness (and uptake) of lower CO2 technologies among consumers and businesses on the one hand, and its impact on the social costs and benefits of these technologies, and consequently on the costs and benefits of any CO2 regulation legislation, on the other hand.

The following sections provide a summary of the work completed under this project, covering each of the technical tasks specified in the Commission’s Terms of Reference. The report has been structured into five main technical chapters, following this introduction, summarising the work completed:

Task 1: Analysis of the EU vehicle leasing market (Section 2);

Task 2: Explore how vehicle lease prices are calculated (Section 3);

Task 3: Analysis of the impact of different leasing approaches on vehicle CO2 performance (Section 4);

Task 4: Analysis of the economic implications of vehicle leasing in terms of payback considerations for fuel economy improvements (Section 5);

Task 5: Illustration of whether taking account leasing would have changed the results of 2020 LDV CO2 regulations Impact Assessment (Section 6);



2 Task 1: Analysis of the EU vehicle leasing market

The purpose of this task was to highlight how within different Member States different leasing models have developed and how they are likely to develop in future. There are important differences regarding the size and structure of the vehicle leasing market between different EU Member States which relate in part to different business practices (or consumer habits) but also differences in legislation including rules on company car taxation. The following sections summarise the data that was collected as part of the desk research and stakeholder consultation.

2.1 Data collection

2.1.1 Overview over data collected

The aim of this subtask was to gather data, on the one hand on the market for leased cars and LCVs across MS, and on the other on the typical parameters of leasing contracts.

Leaseurope has provided us with market data from most European Member States which it collects from national leasing associations (Leaseurope, 2015). Separate data is provided for passenger cars and LCVs, but no further breakdown into vehicle segments etc. is provided. Some national associations collect data at more detailed levels, including the UK, the Netherlands and Spain from which we data split by vehicle segment. These three countries account for around a third of the total EU leasing market. We are currently in the process of investigating whether any further countries may have data available at segment level.

The data provided by Leaseurope is for 2014 and includes the number (and total value) of new contracts in a year, as well as the number (and total value) of outstanding contracts, which according to Leaseurope is approximately equal to the number of new vehicles, and the overall size of the leased fleet, respectively. These figures are sub-divided by the categories set out in Table 2-1.

Table 2-1: Structure of Leaseurope data for passenger car leases (Leaseurope, 2015)

By Product Type New or Used By Purpose By Original Contract Term

(months) By Level of

Services

Finance Leasing

Operating Leasing

Hire Purchase

New Used Private

Use Business

Use 12 24 36 48 60 >60

With Services

Without Services

For 18 MS For 16 MS For 20 MS For 8 MS For 8 MS

In terms of market trends over time, Leaseurope has been collecting the above data for several years in succession. Leaseurope has shared data on the leasing market across most EU Member States with the project team for the year 2014, as well as aggregated data on the EU market for years 2008 to 2014.

The project team also identified a 2002 project on the European leasing market (Datamonitor, 2003), providing an estimate of the number of company cars leased in Western Europe by type of finance in 2002, thus allowing to track the development of the market in a slightly longer term perspective, over the past 12 years.

The following Table 2-2 and Table 2-3 provide an overview over the data collected for the leasing market and leasing contract parameters, respectively.

Table 2-2: Data on the leasing market collected

Leasing market

Data type Status of data collection/identification

Variation in the share of leasing by/in different Member States, ideally also split by different leasing

Available, collected as part of Leaseurope (2015) survey data



Leasing market


types

Information on the segments covered and their share of the market

Number of leased cars by segment available for ES, UK, NL (AER, 2015; BVRLA, 2015; VNA, 2014) (see section 2.1.4). This represents ~ 34% of the total market covered by the Leaseurope dataset.

Variation in average CO2 performance between leased and non-leased vehicles (or at least the average for the new fleet)

CO2 emission data for each leased vehicle segment and fuel type collected via leasing company survey. Results for UK, FR, EL.

NL, ES and UK associations provide single average CO2 figure of leased fleet (AER, 2015; BVRLA, 2015; VNA, 2014). Leaseurope (n.d.) provides data of average CO2 performance over 8 European MS.

See Task 3.

Trends in the above over time, and expectations for the future

Leaseurope data from 2008-2014

Datamonitor (2003) study as further reference point.

Split between leases to enterprises and private individuals

Available, collected as part of Leaseurope (2015) survey data

Annual mileage of leased vehicles Data on distribution of typical leasing mileage from UK and NL (BVRLA, 2015; VNA, 2014). Further information provided by survey respondents (FR, NL, ES, PT, EL).

Table 2-3: Data on leasing contract parameters collected during the project

Leasing contract parameters


Cost of the vehicle Available for UK, based on FleetNews Car Running Costs tool.

Downpayment Not relevant for company car contracts, typical values may be obtained via web research, but limited relevance for project objective

Length of the contract Distribution available, collected as part of Leaseurope survey data for DE, EE, ES, FI, FR, IT, RO, SI. Also available for UK from BVRLA and as averaged value for NL from VNA

Residual value when contract expires Available for UK, based on FleetNews Car Running Costs tool

APR or money factor on the loan Point estimates available from German survey of 2009 (Autoflotte, 2009), indications through stakeholder interviews.

Servicing, maintenance and repair (SMR), fuel SMR cost estimates available for UK, based on FleetNews (2015) Car Running Costs tool. Share of leasing contracts with SMR included provided by Leaseurope.

Notes: BVRLA = British Vehicle Rental and Leasing Association, VNA = Vereniging van Nederlandse Autoleasemaatschappijen

2.1.2 Overview over stakeholder survey and interviews

Following the project plan, a data collection survey for leasing industry stakeholders was drafted. After reviewing the draft, Leaseurope indicated that it had already collected a large part of the requested



data from national associations anyway, which was later provided to the project team (and is summarised in Section 2.4 below). Based on further feedback from leasing stakeholders during a Leaseurope meeting in Brussels attended by the project team, a shortened questionnaire was developed, focussing on data generally not collected at national level, in particular on the shares of vehicles and their average CO2 performance across different segments and fuel types (Summarised in Task 3, Section 4.1). The project team sent the questionnaire directly to 15 UK fleet and leasing companies whose contacts were provided by the UK industry association BVRLA. Further to a follow-up email, three UK questionnaire responses were received, another three companies responded indicating that they were not interested or unable to participate. Outside of the UK, Leaseurope emailed the questionnaire to its national leasing associations in 25 EU Member States for distribution to member companies, as well as to the European head offices of five pan-European leasing companies. Moreover, Leaseurope indicated that they had followed up with a variety of stakeholders. Following Leaseurope’s request that leasing companies be approached exclusively via the national associations, the project team have not contacted further leasing companies directly.

The following stakeholder contributions from leasing companies were received:

Table 2-4: Completed stakeholder questionnaires received

Member State Stakeholder type

Approx. size of fleet

Data provided at segment level

Interview conducted

France Leasing company six digit figure Yes, 2013-2014 No

Greece Leasing company no information Yes, 2013-2015 TYD

No

Portugal Leasing company four digit figure Only number of vehicles provided at segment level

No

Spain Leasing association

≈ 500,000 Only number of vehicles provided at segment level

No

UK Leasing company five digit figure Yes, 2014 Yes

UK Leasing company five digit figure Yes, 2014 No

UK Leasing company six digit figure No Yes

The following table provides an overview over all the interviews held:

Table 2-5: Overview over stakeholder interviews

Stakeholder type

Approached for interview, number approached directly via Leaseurope in brackets

Interviewed Interview type

Leasing/fleet companies 17 (+ 5) 3 Phone

Leasing associations 3 (+ 25) 2 Face-to-face

Fleet operator associations 1 0 -

Sum 21 (+30) 5



2.2 Identification of different types of leasing arrangements

In this subtask, market data showing the typical parameters amongst leasing arrangements across EU Member States is summarised for passenger cars. LCVs figures on leasing arrangements could not be provided, as no split between different contract types, average contract lengths, or service package is available.

The key difference between operating and financial leasing is in the legal detail of the contract. The following Table 2-4 provides a summary of the main differences. In both cases, the vehicle remains in the ownership of the leasing company but in the case of finance leasing the risks and rewards of ownership are transferred to the lessee. Finance leasing often entails a purchase option for the lessee at the end of the contract period. Operating leasing is essentially a long-term rental agreement and often involve a full-service package including maintenance and insurance. For companies, the balance sheet treatment between operating and finance leasing can vary, with implications for their tax and credit ratings. However, the legal treatment varies by EU Member State.

Table 2-6: Example of the high-level differences between financial and operating lease types (based on Maxxia (2013))

Finance lease Operating lease

Who owns the asset Leasing company Leasing company

Who takes residual value risk Lessee (= user of the asset) Leasing company

Who is responsible for maintenance and repairs

Lessee Leasing company if a maintenance contract is taken. Otherwise lessee.

Length of lease Generally > operating lease Generally < finance lease

Balance sheet treatment Depends on details of lease contract and national accounting rules

Asset not on lessee’s balance sheet

Figure 2-1 presents the share of operating versus financial leasing between 18 different EU Member States (from the Leaseurope survey dataset). It shows a very mixed picture, with the operating lease share amongst Member States ranging between 0% in Romania up to over 90% in the Netherlands. There are no obvious trends between the share of operating versus financial leasing and other country characteristics such as size, region or income.

Figure 2-1: Share of operating versus finance leasing contracts across EU Member States

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Given the distinction between operating and finance leasing concerns the legal contract form, no reliable inference on other characteristics of the leasing market can be drawn. However, a comparison between Figure 2-1 (% share by lease type) and Figure 2-2 (% share including services) shows markets with high shares of operating leasing such as France, Italy and Spain also tend to have fairly high shares of contracts for which services (i.e. vehicle servicing, repair and maintenance) are included. The obvious exception is Romania, where 100% of contracts appear to be financial leases with services included. This may be indicative of definitional issues in the provision of the statistics.

Figure 2-2: Share of leasing contracts for which services are included

Figure 2-3 provides an indication of typical leasing contract lengths among Member States, showing that a 48 month (i.e. four year) contract is the most common in most Member States, with a 41 month weighted average contract length across the 10 Member States for which data is provided. A notable exception is Germany, where the most common contract term is 36 months. Similarly, data provided to the project team by the British leasing association BVRLA suggests that a 25-36 month contract length is the most common leasing contract length in the UK. In the Netherlands, no data on the most common contract length is available, but actual average contract length has been around 39 months over the past years (VNA, 2014).

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Figure 2-3: Distribution of contract lengths amongst MS (and average contract length in months)

Comparing the share of business versus private contracts shows that most leased cars are clearly business/company cars. However, several associations have reported strong growth in private leasing contracts over recent years (BVRLA, 2015; VNA, 2014). As an EU average, around a quarter of leased cars were privately leased in 2014. It was suggested to the project team that private leasing contracts were often used by car manufacturers as a strategy to sell excess production without having to offer substantial discounts on the purchase price as the latter may be more damaging to overall profit margins.

Figure 2-4: Share of business versus private contracts

No data is collected at association level on the extent to which the entity who pays for the vehicle also pays for the fuel. However, the Belgian survey (KPMG, 2012) has addressed this question, finding that around 75% company car users were provided with a fuel card by their company, which most were entitled to use to an unlimited extent inside and outside of Belgium. Only 7% had fuel cards with a fixed monthly budget or mileage limitation. Since those company car users without fuel card may also have their fuel paid for by their company (in a different form), it may be expected that a vast majority of companies paying for the car also pay for fuel. An interview conducted with a company fleet consultant also confirmed that in most cases across Europe the fuel for company cars is also paid for by

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employee’s company, with restrictions sometimes included for holiday/international travel. Occasionally, employees have a budget with a monthly cap - this tends to be more common in Italy, for example.

2.3 Creation of a bespoke dataset

2.3.1 Overview of data collected

As shown in earlier Table 2-2 and Table 2-3, a wide range of data on the leasing market across the majority of EU Member States has been collected, including the total number of leasing contracts over time, the number of contracts split by private and company registrations under operating and financial leases, as well as typical leasing contract lengths. One key parameter that has not been obtained consistently at European level is the average annual mileage over the lease period. This information has been collected only from the British (BVRLA), Dutch (VNA) and Spanish (AER) leasing associations, as well as by individual companies responding to the leasing survey from FR, PT and EL. In summary, we now have available a substantial bespoke dataset, with a small variation in format/coverage from that originally envisaged. This is set out in further detail in the following section 2.4.

2.4 Characterisation of the European leasing market

From the data gathered during the project, a good overview over the number of leased vehicles in Europe can be gained. Figure 2-5 shows that Germany, the UK and France have by far the largest car leasing markets in terms of new vehicles. This data excludes hire purchase and other types of vehicle finance, as these have not been consistently provided for every Member State, and because the project’s focus is on leasing in particular. In total, some 3.5 million new vehicles were leased – a share of 29% of total new car registrations.

Figure 2-5: Estimated number of new leased cars in 2014 by EU Member State, adjusted by used car share

* PL data from PVRLA (2015)

Figure 2-6 shows that France, Germany and the UK also have the largest leasing market for LCVs in terms of new vehicles. For a number of Member States (France, UK, Sweden and Belgium) a breakdown by vehicle type (LCV <3.5t or HGV >3.5t) was not available. In these cases, the number of newly leased LCVs was estimated based on the average share of LCVs (66%) in the total number of leased LCVs and HGVs for the rest of the dataset. In addition to this, data for France and the Netherlands was obtained from two different national leasing associations, therefore there may be a degree of double-counting in these Member States (France: ASF and FNLV, Netherlands: VNA and NVL). Due to these two factors, there is particular uncertainty surrounding the data for France, which

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unknown



appears to have a significantly larger leasing market than other countries analysed. It should also be noted that some vehicles which are registered as LCVs in France may have been registered as cars in other Member States, possibly as a consequence of taxation policies. While on average across the EU, 11% of all cars and vans are registered as LCVs, for France, this figure is 17% (ACEA, 2015).

In total, for the 18 Member States analysed, 674,000 new LCVs were leased in 2014 – a share of 47% of total new LCV registrations.

Figure 2-6: Estimated number of newly leased LCVs in 2014 by EU Member State

Notes: an asterisk next to a Member State indicates that the share of newly leased LCVs has been estimated by the project team, as a breakdown by vehicle type (LCV <3.5t or HGV >3.5t) was not available

2.4.1 Temporal variation in leasing levels

In order to understand change in the market over time data was gathered for the period between 2008 and 2014. Data was obtained for 22 Member States for passenger cars and for 18 Member States for commercial vehicles.

Between 2009 and 2014, the number of passenger cars leased each year has risen from around 4.5 million in 2009, to around 6.5 million in 2014, which is equivalent to an average annual increase of almost 9% per year. The number of passenger car leases shown in this chart is higher than that shown in Figure 2-5 because hire purchase and used vehicle leasing are included in this chart.

A different trend is observed for commercial vehicles: in 2009 a dip in leases was observed, followed by a gradual recovery between 2009 and 2011. This observation may be explained by the recession. It is likely that a similar dip in the registration of cars would have been observable. After 2011 the number of new contracts for commercial vehicles has remained relatively constant. It should be noted that the data for commercial vehicles includes LCVs <3.5 t and HCVs >3.5 t, rather than just LCVs.

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FR* DE UK* IT NL DK SE* AT PT BE* RO CZ SK EE FI ES SI EL

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Operatingleasing



Figure 2-7: Number of leased vehicle new contracts over time and their share in overall new registrations (22 MS) (Leaseurope, 2015; ACEA, 2015)

Notes: Passenger car data is for the following Member States: AT, BE, BG, CZ, DE, DK, EE, EL, ES, FI, FR , IT, LV, NL, NO, PL, PT, RO, SE, SI, SK, UK. Commercial vehicle data is for the following Member States: AT, BE, CH, CZ, DE, DK, EE, ES, FI, FR, IT, NL, PT, RO, SE, SI, SK, UK.

Includes leasing contracts for both new and used vehicles as well as hire purchase. Leasing market penetration figures are therefore higher compared to Figure 2-8 and Figure 2-9 below.

The 2014 results were also compared to an estimate of leased passenger car fleet size in 2002 (Datamonitor, 2003). The size of the Western European fleet in 2002 was estimated to consist of 5.1 million operating lease vehicles and 5.4 million financial lease vehicles. Assuming an average tenure of 41 months (see Figure 2-3), this would mean an average of 3.1 million new leases per year (23% of overall new registrations in 2002). However, the definition of leased vehicles in those figures does not include private leases which have grown substantially in recent years. Overall new leases in Western Europe in 2014 for cars according to Leaseurope were around 3.7 million in total and 2.7 million without private leases. Consequently, based on this comparison, the market size for leased company cars in 2002 appears to have been similar to that in 2014. While the figures suggest that numbers were in fact higher in 2002, given the differences in definitions and uncertainties about the fleet renewal rate, it cannot be said with certainty whether the market in 2014 was larger or smaller than it was 12 years earlier, for the number of vehicles supplied.

2.4.2 Market share of leasing by country

In terms of the current (2014) share of leased cars in new registrations, most Member States tend to have shares slightly above or slightly below 30%. Exceptions include Spain, Italy, Poland and the Czech Republic, which have shares significantly below this - at around 15%, while in Greece the share may be as low as 1%. In the Netherlands and Estonia shares are significantly higher, at over 42% and 69%, respectively. As such, the Netherlands has one of the highest shares of leasing amongst the EU’s larger economies.

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Figure 2-8: Estimated share of passenger car leasing in new registrations across European Member States, based on data from Leaseurope, adjusted by used car share (Leaseurope, 2015; ACEA, 2015)

Note: * Polish estimate based on data from PVRLA (2015)

For LCVs a different picture was seen for the share of leased vehicles in new registrations (see Figure 2-9), compared with passenger cars (Figure 2-8). On average, the share is higher for LCVs, with many Member States in the 40-50% range (compared to around 30% for passenger cars). The Czech Republic, United Kingdom, Slovenia, Belgium and Finland have slightly lower shares (15-25%), while Greece and Spain are significantly lower at around 1%. France, the Netherlands and Denmark have higher than average shares (91%, 80% and 79% respectively). However, it should be noted that the data for France and the Netherlands was provided by two different national leasing associations, with the possibility that some double-counting could have occurred (see notes below Figure 2-9).

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Figure 2-9: Estimated share of LCV leasing in new registrations across European Member States, based on data from Leaseurope (Leaseurope, 2015; ACEA, 2015)

Notes: * For a number of countries (BE, FR, SE, UK) the data provided was not broken down into LCVs (<3.5 t) and HCVs (>3.5 t). In these cases the number of LCVs was estimated based on the EU average LCV share from the rest of the dataset (66%). This data is shown separately on the graph as ‘% Finance leasing estimate’ and ‘% Operating leasing estimate’. Data in the category ‘unknown’ indicates that the number of leases were not broken down by leasing type (finance or operating lease). In addition to this, data for France and the Netherlands was provided by two different national leasing associations. Although the leasing associations aim to avoid double-counting, there is the possibility that this may have occurred to some extent.

2.4.3 Share of leasing by vehicle segment

Data on the share of vehicles by segment has been identified and collected at national level for Spain, the UK and the Netherlands only. This represents ~34% of the total leasing market. Survey responses from Portugal and France also provide information on segment shares for one major leasing company from each country. While the pattern in the segment distribution appears broadly comparable (lower medium is the most important segment), there are some notable differences. The UK has a very low share of leased cars in the mini segment and a comparably high share in the upper medium and executive segments, which combined account for 36% of new leased cars, whereas in the other Member States, they only account for between 16% (France) and 25% (Netherlands). A variety of drivers are likely to cause these differences. These include taxation policies, the country’s economic situation and income levels, as well as the overall composition of the vehicle fleet.

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Figure 2-10: Comparison of segment shares amongst newly leased cars and overall new registrations in ES, UK, NL, PT and FR (AER, 2015; BVRLA, 2015; VNA, 2014; EEA, 2014)

Notes: Segment splits for leased vehicles are based on aggregated data provided by national leasing associations, except for PT and FR where segment splits are based on data from survey respondents. “Other” includes SUV, luxury and sports segments.

An important difference between countries can be observed when the share of new leased vehicles amongst total new registrations in a given segment is compared between countries (Figure 2-10). It shows that there is a disproportionate share of leased vehicles among the upper vehicle segments in all five countries, however the spike in the share of leased cars in the upper segments is much less pronounced in Spain and Portugal.

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Figure 2-11: Share of leased vehicles in total new car registrations by segment in ES, UK, NL for 2014

Notes: “Other (NL only)” includes SUV, luxury and sports segments, which are not provided as separate categories in the NL data.

2.4.4 Mileage

In terms of typical mileage for leased vehicles across Member States, data has been provided by UK, Dutch and Spanish leasing associations. In addition, leasing companies from France, Portugal and Greece have also provided data on the typical mileage within their fleets. Figure 2-12 provides a summary of the estimates, suggesting that typical annual mileage for both leased cars and LCVs is around 30,000 km.

Figure 2-12: Average annual mileage of leased cars and LCVs in kilometres

Notes: * data from single leasing companies

Some more detailed estimates are presented below.

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UK data provides an indication of the distribution of contract mileage in fleets, showing that around 50% of leased cars and LCVs travel less than 24,000 km annually, and that vehicles travelling less than 16,000 per year form the largest amongst the six mileage brackets (Figure 2-13). Depending on whether average mileage in each mileage bracket tends towards the middle or the top of the bracket these figures suggest an overall average of between some 26,000 and 30,000 km per year for cars and some 27,000 km to 31,000 km for LCVs.

Figure 2-13: Range of contract mileage for car and LCV fleets in Q2 2015 (BVRLA, 2015)

The average annual mileage travelled in Dutch leased cars was slightly higher, at around 33,500 km in 2013. This compares to an average car mileage across both leased and owned cars of some 13,000 km (Statistics Netherlands, 2015). The data also provides an indication of variations in average leasing mileage driven by fuel type (Figure 2-10). These values have remained broadly stable since 2008, with the exception of a slight decrease in annual average mileage for diesel cars. Average annual mileage of leased LCVs is around 33,000 km, very similar to the average leased car.

Figure 2-14: Annual mileage in the Netherlands in 2013 (VNA, 2014)

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Data from a French company responding to the leasing questionnaire shows that average annual mileage generally increases with vehicle segment size (Figure 2-15). Upper medium segment vehicles feature the highest average annual mileage across both operational and finance leases.

Figure 2-15: Average annual mileage in lease period in 2014 in France (km per year)

Note: Based on leasing company response to stakeholder survey

It should be noted that all the data collected are subject to a fair degree of uncertainty. The data provided by Leaseurope are aggregates from different national associations who may not represent the entire market in their countries. Also, in some Member States where there are two national associations that are members of Leaseurope (e.g. BE, NL, FR, UK) there is also a risk of double-counting, although Leaseurope seeks to make adjustments accordingly.

Moreover, as previously mentioned, the focus has been on collecting data on leased vehicles rather than including broader types of vehicle finance beyond leasing, in which case the number of affected vehicles would be substantially larger.

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3 Task 2: Explore how vehicle lease prices are calculated

3.1 Calculation of lease prices

3.1.1 Rationale for leasing and its impact on the cost effectiveness of low CO2 technologies

As was shown in Task 1 (Section 2), most leasing occurs in the form of company car leasing, rather than private leasing. The rest of this report therefore focuses primarily on the company car leasing perspective.

Leasing can be an option for companies to take assets off balance sheet (as discussed in Task 1), which can be a factor in the decision of whether to lease or to buy (Ricardo-AEA, 2014). Depending on national legislation, leasing can also have different tax advantages, for example by helping companies declare lower taxable profits (leasing.de, 2013; HMRC, 2015). In general, these aspects, while making leasing attractive to companies under given circumstances, would not significantly impact on the cost effectiveness of choosing a low CO2 technology. The following paragraphs outline further rationales for leasing which may also affect the CO2 emissions of the vehicles chosen.

3.1.1.1 Provision of comprehensive fleet (or mobility) management services

Stakeholders have emphasised that an important element of the business model of leasing/fleet companies is that of providing fleet management services. These include dealing with the wider administrative requirements around a fleet, such as ensuring servicing, maintenance and repair, vehicle insurance, fuel payment schemes via fuel cards, etc. In many cases, leasing providers manage both leased and owned vehicles; large companies often operate fleets consisting of both. The industry seeks to expand on the comprehensiveness of its services, for example by increasingly covering risks (e.g. around residual value, breakdowns) and aiming towards providing pay-per-use mobility, rather than just vehicle finance, which may entail optimising the size of the vehicle fleet and providing a variety of transport modes which may include bicycles or public transport passes. By taking this comprehensive approach, leasing providers can help firms minimise their total costs for mobility at any given level of service.

An important aspect of managing total costs for mobility is understanding post-tax total costs of vehicle ownership. Leasing companies have emphasised that one of their key strengths is the ability to show customers the total, post-tax, costs (although generally excluding fuel costs) of leasing a given vehicle model. This is potentially relevant to the uptake of CO2-reducing technologies as taxation regimes across Member States tend to have a strong impact on CO2 performance of new vehicles (T&E, 2014). During a meeting at Leaseurope, stakeholders emphasised the importance of these cross-country variations in taxation on the average CO2 performance of cars in their fleets. Any CO2 based taxation levels, incentives or discounts for low carbon vehicles can generally be expected to apply equally to leasing and buying arrangements, thus not skewing the attractiveness of low CO2 technologies under either arrangement. However, the ability of leasing companies to comprehensively factor taxation into vehicle fleet cost calculations may ultimately lead to greater uptake of low CO2 technologies under leasing, if the technologies help reduce overall costs. Data on leased vehicles’ CO2 ratings from the UK and France analysed in Task 3 suggests this may be the case.

An exception would be a situation, where these rules are not equally applied. For example, in the UK a 100% first year allowance is available for businesses purchasing low CO2 cars (from 2015 onwards cars with emissions below 75g CO2/km are eligible, before 2015 the threshold was 95g) (OLEV, 2014). This means that the whole cost of the car can be written off against taxable profits in the year of acquisition, thereby increasing the attractiveness of cars below the CO2 threshold to businesses. This allowance used to be available for both leased and bought vehicles. However, from 2013 onwards, rental and hire companies were excluded from the scheme. Therefore, currently the 100% first year allowance reduces the attractiveness of sub-75g CO2/km company cars under leasing relative to buying. Nonetheless, a stakeholder interview with a UK leasing company has suggested that this unequal treatment has not had a large impact on demand for sub-75g CO2/km leased cars, as the benefits of leasing tend to exceed those offered by the 100% first year allowance.



It is beyond the scope of this project to assess the tax situation across all Member States in order to comprehensively take into account taxation policies which may distort the attractiveness of low CO2 technologies in favour of either leasing or buying arrangements, as in the above example.

The following sections demonstrate how leasing rates are calculated, and explore several example calculations to demonstrate potential variations in the cost-effectiveness between purchasing and leasing from a private perspective. The analysis focuses purely on the impact of providing finance. While leasing companies’ capabilities of factoring vehicle taxation into total cost of ownership calculations may support the uptake of low CO2 vehicles if these are favoured by the taxation regime, it is not possible to quantify such effects in the cost-effectiveness calculations.

3.1.1.2 Provision of discounts over standard market prices

Leasing companies argue that they are able to obtain substantial discounts on the products and services they provide and can therefore offer attractive packages to their customers. Purchase prices are lower for leasing companies. Leasing companies can also provide discounted maintenance and insurance contracts to their customers, aided by their internal market knowledge, use of generic parts and economies of scale. According to Leaseurope, is it reasonable to expect large leasing companies to obtain an average discount on both parts and labour costs in the region of 20%, while also managing the process of SMR very closely, ensuring the correct manufacturer recommended labour times are adhered to. Knowledge of used car markets in Europe also helps leasing companies achieve high prices when selling vehicles. Used vehicles are traded across EU Member States, so particular vehicles are sold in those markets in which they are most demanded (and their residual value is highest). This can be relevant for reducing the high levels of depreciation which alternatively fuelled vehicles often experience in the used car market.

Most of these discounts (and strategies of obtaining high resale value) are not specific to low CO2 vehicles. However, to the extent that leasing companies are able to achieve discounts on the price premium of lower CO2 vehicle technology, this can make vehicles using such technology more attractive. This possibility is explored in section 3.1.5.2.

3.1.1.3 Provision of finance

Leasing companies are often owned by banks; their core service is providing vehicle finance. The role of finance is potentially relevant to the attractiveness of lower CO2 vehicle technology. It is the key focus of the following sections of the report.

3.1.2 Leasing calculation

Monthly lease payments can be thought of as an annuity, i.e. a series of equal payments to pay back a loan. The standard formula for determining a regular annuity payment P is given by Equation 1.

Equation 1. Annuity payment formula

𝑃 = 𝑟(𝑃𝑉)

1 − (1 + 𝑟)−𝑁

P = Monthly lease payment; PV = Present value of the loan; r = Monthly interest rate (= APR/12); N = Lease term (months)

In the case of a car lease, the loan amount reflects the depreciation of the vehicle over the contract period. More precisely, the present value (PV) of the loan can be calculated by subtracting the discounted residual value from the purchase price, as shown by Equation 2.

Equation 2. Present value of the loan

𝑃𝑉 = 𝐶 − 𝐹

(1 + 𝑟)𝑁

C = Net capitalised cost (= Capitalised cost – down payment); F = Residual value



Substituting Equation 2 into Equation 1 leads to a formula (Equation 3) in which all variables required to calculate monthly leasing prices can be entered.

Equation 3. Calculation of monthly lease payments

𝑃 =𝐶𝑟(1 + 𝑟)𝑁 − 𝐹𝑟

(1 + 𝑟)𝑁 − 1

Additional cost elements such as service, maintenance and repairs (SMR), and insurance may also be added to monthly lease payments if these elements are included in the leasing package (Equation 4).

Equation 4. Monthly lease payment including monthly SMR and insurance payments

𝑃 =𝐶𝑟(1 + 𝑟)𝑁 − 𝐹𝑟

(1 + 𝑟)𝑁 − 1+ 𝑆𝑀𝑅 + 𝐼𝑛𝑠

SMR = monthly service, maintenance and repair charge; Ins = monthly insurance payments

In order to compare leasing to outright purchase, the present value (PV) of the monthly payments (i.e. the discounted sum of all payments over the lease period at t=0) can be used and compared to outright purchase of a vehicle minus PV of the residual value. In addition, the PVs for monthly fuel and SMR payments can be added to the PV for the capital component in order to calculate a measure of total cost of ownership (TCO).

3.1.3 Note on interest rates for leasing contracts and companies’ discount rates

A key factor in the calculation of vehicle lease prices is the interest rate. Our research and stakeholder input have shown that interest rates on leasing contracts (expressed as APR) can be variable across Member States. An interview with a fleet management consultant suggested that typical APRs for enterprises in Western Europe might be around 2%-6%, whereas in Eastern Europe APRs can be expected to be at least 8%-9%. Therefore, one of our example calculations uses an APR of 4%, representative of a Western European country; another uses an APR of 9%, representative of an Eastern European country. Unfortunately, since APR is a particularly sensitive parameter, the leasing organisation stakeholders consulted have been unwilling to provide specific/detailed information on current/typical values used.

In order to compare leasing and purchase decisions, the present value of each option is calculated, where future cash flows are discounted at the company’s opportunity cost of capital. There are differing views on how to measure the opportunity cost of capital when deciding between leasing and purchasing, with some advocating the cost of borrowing and others the company’s weighted average cost of capital (WACC) (JLL, 2015). In the present case, the objective is to compare the costs of vehicle finance generally with those of vehicle purchase. Therefore, discounting at the weighted average cost of capital (WACC) is appropriate. WACC is a company-specific parameter which is not always straightforward to calculate and is also not readily obtainable. Consequently, the applicable discount rate will tend to vary between companies. According to one of the leasing company stakeholders interviewed, most clients typically have WACCs between 8% and 12%. In the following examples, the base assumption is a company with a discount rate of 10%.

It is reasonable to assume that the discount rate will always be higher than the APR that a company is willing to pay on a lease – otherwise the lease would not be sufficiently attractive. Therefore, by definition, leasing can be expected to be more cost-effective than purchasing to those who undertake it.

3.1.4 Selection of vehicles for example calculations

To illustrate how leasing costs are calculated, a number of examples are presented in the following section. As agreed with the Commission, illustrative examples are presented here for:

4 car segments and 2 LCV segments;

Within each segment, an eco-model is compared against a standard comparator model;



Within the C-segment, other fuel types/propulsion technologies are also compared.

For each vehicle segment, the best-selling vehicle in Europe was selected for comparison, based on 2010 – 2014 vehicle sales data (Ricardo Energy & Environment et al., forthcoming; Left-Lane.com, 2015). In the project inception report, CNG was suggested as a further fuel type for comparison among C-segment vehicles. However, since it has not been possible to identify residual value data for the CNG vehicle illustrative example (VW Golf TGI), the percentage depreciation from the petrol equivalent was applied to estimate the CNG car’s residual value. For E-segment cars, the second best-selling vehicle was chosen for comparison as data could not be identified for a suitable eco-model of the best-selling vehicle in this segment (BMW 5 series). The list of models selected for each segment is shown in Table 3-1. For a full list of model variants please refer to Box 1 in Appendix 1.

The purchase prices/capitalised cost assumptions underlying the following calculations are the UK list prices (“P11D value”). The fuel consumption values are the NEDC test cycle values of these vehicles. It should be noted that, in real life, the capital cost element is likely to usually be substantially lower, as car manufacturers offer substantial discounts on their vehicles, especially to fleet customers, while the fuel cost element is likely to be substantially higher. Company cars registered in 2014 are estimated to have around 45% higher real-world fuel consumption (ICCT, 2015a). However, when comparing the performance between two vehicles (such as an eco-model and a standard model, as in the examples below) the difference is unlikely to be as substantial. It is not clear to what extent manufacturers offer discounts on the price premium charged for an eco-model. Regarding real-world performance between eco and standard models, a survey of real-life performance by a fleet services company of their Belgian vehicles finds that the percentage increase in real-world versus test cycle consumption is slightly greater for eco models compared to the standard variants (44% versus 41%). The absolute difference in fuel consumption between eco and standard models increases from 0.5l/100 km to 0.59l/100 km, i.e. by only 18%.

Table 3-1. List of vehicles selected for illustrative examples

B-segment

Ford Fiesta

C-segment

Volkswagen Golf

D-segment

BMW 3 series

E-segment

Mercedes-Benz E-Class

Car-derived LCV

Renault Kangoo

Large LCV

Ford Transit

Standard petrol Standard diesel Standard diesel Standard diesel Standard diesel Standard diesel

Eco petrol Eco diesel Eco diesel Eco diesel Eco diesel Eco diesel

Standard petrol

Eco petrol

PHEV

BEV

3.1.5 Results for the selected illustrative examples

The illustrative example calculations in this section aim to show how the cost of leasing vehicles varies, as variations in the leasing parameters are taken into account. In particular, the following factors are explored:

The difference in total cost of ownership between purchasing and leasing vehicles (at equal purchase costs)

The cost effectiveness of leasing low CO2 vehicles

Example calculations in this section are primarily shown for the Volkswagen Golf. Examples for other vehicle segments are shown in Appendix 1.

Figure 3-1 shows the total cost of ownership (TCO) for an eco-diesel and a comparable standard diesel Volkswagen Golf. The calculation is carried out for a company with an assumed WACC (and hence discount rate) of 10%. The TCO is made up of the following cost elements:



PV of the capital component. For leased vehicles, this is the PV of the total lease payments throughout the duration of the lease period. In this case, the lease period is three years. For purchased vehicles, PV is calculated over the same time period as purchase price minus PV of residual value at the end of the time period. Purchase costs and residual value has been estimated based on the outputs of FleetNews (2015). These estimates are inclusive of VAT.

PV of fuel cost. Monthly fuel costs were calculated assuming a fuel price of €1.35 per litre1 and, in this example, an annual mileage of 32,187 km (20,000 miles).

PV of service, maintenance and repairs (SMR). FleetNews (2015) provided the total SMR cost over the duration of the lease period. Constant monthly payments were assumed over the duration of the leasing period and the PV was calculated.

Figure 3-1: Comparison of TCO for purchasing and leasing Volkswagen Golf diesel variants at different interest rates. Lease parameters: 3 years, 32,187 km per annum, 4% – 9% APR. PV assumption: 10% discount rate. Value at top denotes TCO (sum of components expressed as present value)

3.1.5.1 Difference in costs between two vehicles at different APRs

Comparison of leasing costs for different vehicles as leasing parameters vary is a key part of this study. Recall from Equation 2 that the present value of the loan (which determines the level of the monthly lease payments) is purchase cost minus discounted residual value. Consequently, the higher the residual value of a car, the lower the present value of the loan, and the lower the relative lease payments. When the interest rate increases, the residual value is more heavily discounted, leading to increased present values and thus higher relative lease payments. The lease payment premium for an eco-model (i.e. monthly paymentEco - monthly paymentStandard) will also increase with the interest rate when its residual value is higher than that of a standard model. However, when the residual value of the standard model exceeds that of the eco-model, the lease payment premium will decrease when

1 According to the DG Energy Market Observatory (European Commission, 2015), average European Petrol prices in 2015 with taxes and duties included, were €1.40 for petrol and €1.23 for diesel, respectively. The average fuel price of €1.35 used here constitutes a rough approximation of these real-world average values.

€22,312€19,293

€21,814 €23,013€20,040

€22,522

€4,293

€4,293

€4,293€3,839

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(Diesel)

PurchaseVolkswagen

Golf(Diesel, Eco)

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PV of capital component PV of fuel cost PV of SMR



interest rates go up, as the present value of the standard model is affected more in absolute terms by the increased rate than that of the eco-model.

These effects are demonstrated by the two following examples for the Ford Fiesta and the Volkswagen Golf. Table 3-2 compares the difference in leasing costs between the standard petrol and eco petrol Ford Fiesta at two APRs (4% and 9%).

Table 3-2. Monthly leasing costs at different APRs for the Ford Fiesta (eco and standard variants).

Standard Fiesta (4% APR)

Eco Fiesta (4% APR)

Standard Fiesta (9% APR)

Eco Fiesta (9% APR)

Net capitalised cost € 18,500 € 19,200 € 18,500 € 19,200

Residual value € 6,000 € 6,100 € 6,000 € 6,100

Monthly depreciation cost € 347 € 364 € 347 € 364

Monthly interest € 41 € 42 € 92 € 95

Total monthly cost € 388 € 406 € 438 € 458

Notes: Lease parameters: 3 years, 32,187 km per annum. Purchase price and residual value levels informed by FleetNews (2015)

The difference in total monthly leasing cost between the eco petrol Ford Fiesta and the standard petrol Ford Fiesta at an APR of 4% is €18. This is made up of a €17 difference in depreciation costs and a €1 difference in interest costs. At an APR of 9%, the difference in total monthly leasing cost between the eco model and the standard model increases to €20. As Table 3-3 shows, this is due to the increased interest payments. Depreciation (i.e. net capitalised cost minus residual value) is by definition unaffected by a change in interest rates. The higher interest payments for the eco model are due to the higher average value of the eco model over the course of the lease term.

Table 3-3. Difference in monthly leasing costs at different APRs for the Ford Fiesta

4% 9%

Difference in monthly depreciation cost (Eco - Standard) € 17 € 17

Difference in monthly interest cost (Eco - Standard) € 1 € 3

Difference in total monthly leasing cost (Eco - Standard) € 18 € 20

Table 3-4 compares the difference in leasing costs between the eco diesel and standard diesel Volkswagen Golf at two APRs (4% and 9%). In this example, the residual value of the eco model is lower (despite the higher initial cost).

Table 3-4. Monthly leasing costs at different APRs for the Volkswagen Golf (eco and standard variants).

Standard Golf (4% APR)

Eco Golf (4% APR)

Standard Golf (9% APR)

Eco Golf (9% APR)

Net capitalised cost € 29,600 € 29,700 € 29,600 € 29,700

Residual value € 9,700 € 8,900 € 9,700 € 8,900

Monthly depreciation cost € 553 € 578 € 553 € 578

Monthly interest € 66 € 65 € 147 € 144

Total monthly cost € 619 € 643 € 699 € 722

Notes: Lease parameters: 3 years, 32,187 km per annum. Purchase price and residual value levels informed by FleetNews (2015)



As a consequence of this, the difference in monthly leasing cost decreases when interest rates go up (Table 3-5).

Table 3-5. Difference in monthly leasing costs at different APRs for the Volkswagen Golf

4% 9%

Difference in monthly depreciation cost (Eco - Standard) € 25 € 25

Difference in monthly interest cost (Eco - Standard) -€ 1 -€ 2

Difference in total monthly leasing cost (Eco - Standard) € 24 € 23

Figure 3-2 summarises the difference in total cost of ownership (including fuel and SMR costs) between eco and standard variants for the Ford Fiesta (eco petrol and standard petrol) and the Volkswagen Golf (eco diesel and standard diesel) at the two APRs discussed above (4% and 9%). The difference in TCO for purchased vehicles is also shown for comparison. For the Fiesta, the eco variant is less expensive in terms of TCO under the given conditions, whereas TCO for the eco-Golf is slightly higher than for the standard Golf. Note also that for the Golf, the increase in TCO for the eco-model is in fact higher when the interest rate is 4% compared to when it is 9%. This is because, as illustrated in the examples above, the average value of the vehicle over the lease period, on which the interest is paid, is lower in the case of the eco-variant of the Golf due to a lower forecast resale value.

During our consultation, some stakeholders have suggested that eco-models tend to have better resale values compared to standard vehicles, a finding that is also underpinned by the preliminary results of the used car research for DG CLIMA, (Service Request 7), where it has been found that per 1 gCO2/km reduction resale value increases by some €5, for vehicles younger than 5 years, other things equal. The significantly lower residual value forecast by the FleetNews tool therefore appears inconsistent with these more general findings.

Figure 3-2: Difference in total cost of ownership between the eco variant and standard variant

Notes: Difference in total cost of ownership = (TCO of eco variant – TCO of standard model) at different APRs for a 3 year lease, 32,187 km per annum. The equivalent purchase option is shown for comparison.

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PurchaseVolkswagen

Golf(Diesel)

Lease (4%APR)

VolkswagenGolf

(Diesel)

Lease (9%APR)

VolkswagenGolf

(Diesel)

Diffe

rence in T

CO



3.1.5.2 Impact of a discount on the purchase price for leased vehicles

As previously mentioned, leasing companies emphasise that they are able to provide attractive deals to their customers in part by procuring vehicles at substantially lower prices than what their customers would pay if purchasing the vehicle themselves. (Moreover, a full-service leasing package may effectively entail substantial discounts on SMR and insurance costs.) To the extent that leasing companies receive discounts on the price premiums charged for low CO2 technologies, these discounts would increase the cost effectiveness of the technology to the customer. Figure 3-3 shows the impact of a 15% discount on the list price for the standard and the eco petrol variants of the Ford Fiesta under leasing. TCO over the lease period falls substantially, as depreciation (purchase price minus residual value) is reduced. Moreover, the overall cost savings from choosing the eco model over the standard model increase by up to 30%, depending on APR level (Figure 3-4). However, it should be kept in mind that discounts on price premiums for optional equipment through leasing may also make CO2-increasing vehicle equipment, such as larger engines, more attractive to customers.

Figure 3-3: Comparison of TCO for purchasing and leasing Ford Fiesta petrol variants with a 15% discount on the purchase price under leasing. Lease parameters: 3 years, 32,187 km per annum. PV assumption: 10% discount rate. Value at top denotes TCO (sum of components expressed as present value)

Notes: insurance costs of €80/month have also been included in this example. To illustrate further cost savings obtainable from leasing in practice a 30% discount on SMR costs has been applied. This latter discount affects the price differential between purchasing and leasing a given car model. It does not affect the cost differences between the standard and the eco model.

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discount,Lease (9%APR) (eco)

To

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PV of capital component PV of fuel cost PV of SMR



Figure 3-4: Difference in total cost of ownership between Ford Fiesta eco variant and standard petrol variants under purchase, leasing, and leasing with 15% discount on purchase price

3.2 Potential relationship of lease prices with second hand car values

As shown in the previous subsection, setting leasing rates requires making an assumption on residual value after the lease (i.e. the second-hand car price minus any transaction cost). The higher the residual value, the lower the leasing rates. If the residual value risk lies with the lessee (a defining characteristic of a financial lease), an artificially high residual value might be estimated in order to be able to offer lower leasing rates. In that case, the lessee may be liable for losses when the vehicle is sold for below its forecast residual value and/or face an increased risk of being charged for any minor damages in order to allow for the leasing company to recoup a profit from the contract (Autoflotte, 2015).

Fleet operating leasing contracts typically resemble a rental scheme and do not entail a purchase option at the end of the lease. The customer is offered a monthly rate over a set contract period; residual value estimates (as well as the leasing company’s purchase price or APR on the loan) are not disclosed to the customer. Leasing companies therefore have an incentive to forecast residual values as accurately as possible for their own planning. During stakeholder interviews for this project, leasing companies suggested that they determine residual values by purchasing data from one or several forecasting companies and make their own adjustments to this data. Averaged across the fleet, residual value forecasts are generally very accurate. The most significant source of error are wider market trends. For example, following the low number of newly registered vehicles in the early 2010s, market prices for used vehicles have tended to increase in recent years, leading to windfall gains for leasing companies. In the UK, this trend appears to be reversing as manufacturers ‘supply-push’ new vehicles into the market. Moreover, the resale prices achieved depend on the channel through which these are sold. Leasing companies tend to sell their vehicles through a variety of channels, including auctions, dealer networks and online sales platforms.

There is limited quantitative data to systematically check for differences between residual values and actual second hand prices. One source of data is BCA auctioning reports which compare used car prices achieved at auctions against ‘CAP clean’, the predicted residual value for a car in good condition by the forecasting company CAP. Figure 3-5 shows the percentage of ‘CAP clean’ achieved

-€ 394

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Purchase Lease (4% APR) Lease (9% APR) 15% purchaseprice discount,Lease (4% APR)

(standard)

15% purchaseprice discount,Lease (9% APR)

(standard)



for fleet & lease cars at auctions between June 2013 and November 2015. It shows that there are regular seasonal fluctuations within a window that has reliably remained between around 95% and 99%. It should be noted that leasing industry stakeholders have commented that auction sales account for a fairly small proportion of overall sales of leased vehicles across Europe. However, it can be expected that the prices at which vehicles are sold to dealers and dealer networks follow similar patterns to the prices achieved at auctions (while being higher overall).

Figure 3-5: Sale vs CAP for fleet & lease vehicles sold at auction. Source: BCA

90%

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4 Task 3: Analysis of the impact of different leasing approaches on vehicle CO2 performance

4.1 Empirical analysis

4.1.1 Aggregated data from Leaseurope

Leaseurope has collected sample data from 8 EU Member States (see Table 4-1) showing that the test cycle emissions of newly leased vehicles are on average lower than for the average newly registered vehicles across these 8 Member States. According to Leaseurope, the sample covers around 15% of all newly leased vehicles in these Member States, which in turn account for over 90% of the leasing market in Europe. The data for average new registrations is taken from ICCT (2015), whose data differ slightly from the averages calculated from the EU CO2 monitoring data (EEA, 2014).

Table 4-1: Leaseurope data on leased vehicles average test cycle CO2 performance

Leasing firms’

new registrations Total new registrations

8 MS 8 MS EU27* (ICCT) EU27* (EEA)

2008 152 g/km 154 g/km 154 g/km 154 g/km

2009 146 g/km 147 g/km 147 g/km 146 g/km

2010 141 g/km 142 g/km 143 g/km 140 g/km

2011 134 g/km 137 g/km 138 g/km 136 g/km

2012 129 g/km 132 g/km 133 g/km 132 g/km

2013 123 g/km 126 g/km 127g/km * 127 g/km *

Notes: * EU28 for 2013. The 8 Member States for which newly leased cars’ data was sampled are BE, DE, ES, FR, IT, NL, PL, UK

4.1.2 Data from survey

Four leasing companies across Europe provided data on the CO2 performance of their vehicles by segment, one from France, one from Greece and two from the UK. Figure 4-1 and Figure 4-2 compare the CO2 performance of the vehicles against country averages. The figures show that in the UK and France the CO2 emissions of vehicles in most segments are mostly below the Member State average of newly registered vehicles of the same segment and fuel type. For Greece, the result is more mixed, with leased vehicles of some segments above and others below average. Since the Greek data did not include the share or number of vehicles in each segment in the total, it was not possible to calculate the deviation in CO2 emissions from country average across all car types.

Across most segments, leased vehicles in the UK tend to be further below national average than leased vehicles in France. In France, the bonus-malus system of acquisition grants or charges already strongly incentivises the purchasing or leasing of low-CO2 vehicles (ACEA, 2015a), leading to a very low national average for CO2 amongst new registrations (113g in FR, compared to 125g in UK, for 2014). Moreover, in the UK, in addition to CO2-based annual vehicle ownership taxes, company car taxation for employees is heavily dependent on CO2 emissions, thus providing an extra incentive for employees to choose low CO2 vehicles (Harding, 2014). France also imposes annual vehicle ownership taxes for company cars based on CO2 emissions (ACEA, 2015a).

Of the two UK companies providing detailed emissions data, a company specialising in salary sacrifice, which allows employees to lease a car (typically for private use) through their company, reported lower CO2 emissions in each segment than the other company which specialises in wider company car leasing and fleet management. The results suggest that salary sacrifice employees are more responsive to the given incentives than companies.



Figure 4-1: Difference in average CO2 emissions between new registrations of leased diesel cars and total national new registrations of diesel cars by segment in 2014

Note: leased share in diesel cars: ~50% in FR and UK. Therefore, the difference in CO2 emissions between leased and non-leased cars is larger than the difference between leased and total new diesel cars shown here.

Figure 4-2: Difference in average CO2 emissions between new registrations of leased petrol (incl. hybrid) cars and total national new registrations of petrol (incl. hybrid) cars by segment in 2014

Note: leasing share in petrol cars: ~5% in FR and ~20% in UK. Therefore, the difference in CO2 emissions between leased and non-leased cars is slightly larger than the difference between leased and total new petrol cars shown here.

For LCVs, CO2 emissions of leased vehicles are also below average for both France and the UK. The vastly lower values for leased vehicles in the UK suggests that the composition between small and large LCVs for leased fleets may be skewed in favour of small vehicles, compared to the national average. However, more disaggregated data for LCVs has not been collected in the surveys. Therefore, the hypothesis cannot be further explored.

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Figure 4-3: Difference in CO2 emissions between new leased LCVs and national average new registrations of LCVs (all diesel) in 2014

4.2 Theoretical analysis

It was agreed with the European Commission that cost-effectiveness of low CO2 technologies would be assessed in terms of comparing technology costs and fuel savings from our other recent project work (Service Request 4, SR4) for DG CLIMA (Ricardo Energy & Environment et al., forthcoming), rather than the market prices and fuel savings of eco-models and standard models on the market as in Task 2. Specifically, the following procedure was undertaken:

Use purchase price and residual values from the standard (non-eco) vehicles identified in Task 2 for attributing standard purchase prices to vehicles in each segment. This also entails using the standard mileage and use period (32,000 km, 36 months) from Task 2.

Use the baseline/average 2013 WLTP vehicle CO2 emissions per km identified in the SR4 project (Table 4-2)

For comparator models, add technology costs and CO2 emission reductions based on the SR4 cost-curves

o Use cost-curves for 2021 to estimate costs of achieving % reductions in CO2 emissions consistent with the 95g car fleet average target vs the 2013 EEA baseline average (~25%) for cars, and the 147gCO2/km target for LCVs (~15%). It should be noted that a uniform percentage reduction across all vehicle segments and fuel types as applied here may not be the least cost approach which could only be identified in a comprehensive assessment.

o Use cost-curves for 2025 to estimate costs for achieving fleet average % reductions consistent with car CO2 targets of 78g (2025a) and 68g (2025b) as well as similar targeted reductions for LCVs. Values for LCVs were set at 121g (2025a) and 105g (2025b), resulting from the application of the same percentage reductions between 2021 and 2025 from cars to LCVs (i.e. 78g/95g x 147g and 68g/95g x 147g).

o In the SR4 project, cost curves for 2021 and 2025 were calculated based on the WLTP driving cycle. Therefore, the above percentage reductions are applied to the calculated WLTP 2013 baseline values for the different car and LCV segments, see Table 4-2.

o For the alternative powertrain versions (BEV, PHEV and CNG vehicle), cost curves were calculated relative to a conventional vehicle, and comparisons are made to a conventional diesel car of the same year.

Adjust residual values using the preliminary results from the used car research, (Service Request 7), where it has been found that per 1 gCO2/km reduction resale value increases by

-40%

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some €5 for used cars younger than 5 years, other things equal. Residual values for the alternative powertrain models (BEV, PHEV, CNG) are assumed to remain at 2013 baseline levels and not change with CO2 tailpipe emissions.

Conduct all calculations from a private perspective – a lifetime social cost analysis is undertaken as part of this study’s Task 5.

Table 4-2: CO2 emissions by segment (WLTP)

2013 2021 2025a 2025b

Petrol ICE/ HEV

(gCO2/km)

Diesel ICE/ HEV

(gCO2/km)

Petrol ICE/ HEV

(gCO2/km)

Diesel ICE/ HEV

(gCO2/km)

Petrol ICE/ HEV

(gCO2/km)

Diesel ICE/ HEV

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Petrol ICE/ HEV

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Small Car 123 110 92 82 75 67 66 58

Lower Medium Car

142 131 106 98 87 80 76 70

Upper Medium Car

162 144 121 107 99 88 86 77

Large Car 200 183 149 136 122 112 106 97

Small LCV 138 111 117 94 96 77 84 67

Large LCV 216 224 183 190 150 156 131 136

Notes: 2013 baseline emissions from Ricardo Energy & Environment et al. (forthcoming)

All calculations draw on the following energy cost assumptions:

Figure 4-4: fuel cost assumptions used in calculations

Private Social (excl. taxes and duties)

Petrol and Diesel €1.35 per litre2 €0.55 per litre 3

Electricity €0.20 per kWh4 €0.10 per kWh5

CNG €1.10 per kg6 €0.60 per kg7

As discussed in Task 2 (Section 3.1.4), real-world fuel consumption is substantially higher on average compared to NEDC test cycle fuel consumption. The WLTP test cycle values used in this section are on average around 6% above the NEDC values for identical vehicles, whereas a measured figure for real-world fuel savings over test cycle fuel savings between eco variants and standard variants of cars is 18% (Section 3.1.4). However, in recent years the percentage gap between NEDC test cycle and real-world emissions has been growing, thus undermining real-world fuel savings. For example, for 2009 registrations of company cars, the gap between test cycles and real-world emissions was only 20%, increasing to 45% by 2014 (ICCT, 2015a). It can be expected for this gap to further grow up to 2021 and 2025. Real world fuel savings could therefore actually be lower than in the calculations below.

Analogous to the 2020 car and van CO2 Impact Assessment and its background study (TNO et al., 2011), a private discount rate of 8% is used. 4% APR is selected to reflect a typical European leasing

2 According to the DG Energy Market Observatory (European Commission, 2015), average European Petrol prices in 2015 with taxes and duties included, were €1.40 for petrol and €1.23 for diesel, respectively. The average fuel price of €1.35 used here constitutes a rough approximation of these real-world average values. 3 According to the DG Energy Market Observatory (European Commission, 2015), average European Petrol prices in 2015 without taxes and duties were €0.52 and average Diesel prices were €0.53. 4 Rounded figure based on average European household electricity prices (European Commission, 2015a) 5 Rounded figure based on average European industry electricity prices (excl. taxes) (European Commission, 2015a) 6 Rounded figures based on average German CNG filling station prices 7 Rounded figure based on average European industry gas prices (European Commission, 2015b)



interest rate. Using the SR4 cost-curve assumptions (incl. VAT) and an annual mileage of 32,000 km, the 2021 lower-CO2 versions of the cars and LCVs analysed are generally cost-effective, i.e. the fuel savings over the 3 year use period more than compensate the higher capital costs. Figure 4-5 illustrates this for the example of the lower medium diesel car. The figure also shows that under the given parameters, leasing is more cost-effective than purchasing. As discussed in Task 2, the reason is that the interest rate on the loan is set at a lower level than the discount rate, which means that by definition using one’s own capital to purchase the car is less cost effective than using the loan.

Figure 4-5: Comparison of TCO between 2013 baseline lower medium diesel car and 2021 target variant for both purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

Figure 4-6 summarises the net cost savings from choosing the lower-CO2 vehicle variant for all conventional car and LCV models analysed, under both purchase and leasing. Selecting the 2021 lower CO2 variant generally leads to cost savings with present values of between €300 and €1,800 for cars. When comparing purchase and leasing across the vehicle models, leasing entails slightly higher net savings. However, the difference is generally small, typically below €100 over the three-year use period. For LCVs, a similar picture emerges, with expected fuel savings from the 2021 lower-CO2 variants leading to net cost savings of over €1,000. Since the estimated difference in capital cost between the baseline and the 2021 vehicle variants for LCVs are assumed to be minimal (despite significant fuel savings), there is barely any difference to the net savings when comparing outright purchase and leasing.

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Figure 4-6: Net private cost saving for 2021 lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

For 2025, net savings over the baseline for the 2025a set of targets are smaller compared to the 2021 target for all conventionally fuelled cars, but slightly larger for the LCVs.

Figure 4-7: Net private cost saving for 2025a lower-CO2 vehicles over 2013 baseline for purchase and leasing, 78g fleet average target for cars, 121g fleet average target for LCVs. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

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Figure 4-8: Net private cost saving for 2025b lower-CO2 vehicles over 2013 baseline for purchase and leasing, 68g fleet average target for cars, 105g fleet average target for LCVs. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

For the analysis of alternative powertrains, percentage fuel savings have also been applied to the CNG model. The cost curves for 2021 and 2025 BEV, PHEV and CNG cars have been calculated as increases relative to a 2013 petrol baseline vehicle. Costs for BEVs and PHEVs exclude the subsidies available for the purchase of electric vehicles in various EU Member States.

The following figures compare the costs of the alternative powertrain cars to those of a diesel car of the same (lower medium) segment and model year (i.e. 2021 alternative powertrain cars are compared to 2021 diesel cars, and so on). Figure 4-9 shows that under these assumptions the additional cost of a BEV relative to a diesel version falls by some €2,500 between 2013 and 2021. However, in 2021, the BEV still remains around €5,000 more expensive than the diesel version. (The cost curves on which this result is based assume that the battery size of BEVs has grown, too.) The PHEV experiences more drastic cost reductions relative to the diesel comparator vehicle between 2013 and 2021 (≈ € 8,000). This is largely attributable to the high list price of the Golf GTE, on which the 2013 baseline PHEV is modelled, whereas the 2021 version is modelled in terms of cost premium relative to a comparable petrol vehicle.

The CNG car is the only car out of the three alternative powertrains which is privately cost effective relative to a diesel car under the given assumptions in 2021.

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Figure 4-9: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2021 lower-CO2 versions. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

Under the 2025a scenario, net private cost savings for all alternative powertrains increase, as the costs of the diesel comparator vehicle increases while the cost premium over conventional vehicles decreases (Figure 4-10), leading to BEV and PHEV becoming less than €1,000 more expensive than the diesel vehicle (without subsidy).

Figure 4-10: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2025a lower-CO2 versions. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

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Net private cost savings for all three alternative powertrains compared to a conventional diesel car are positive under the 2025b assumption, with the 68g fleet average target further increasing the price of conventional vehicles (Figure 4-11).

Figure 4-11: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2025b lower-CO2 versions. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

4.2.1 Sensitivity analysis

In this section, mileage and residual value assumptions are varied in order to explore the impacts on the cost effectiveness of lower CO2 vehicle variants.

4.2.1.1 Sensitivities on mileage

If the assumed mileage of leased cars is reduced from 32,000 km per year to 16,000 km per year, cost effectiveness is substantially reduced. The lower medium petrol car is no longer cost-effective as a 2021 lower CO2 variant, resulting in additional costs of around €500 (present value). For the small car, choosing the 2021 lower CO2 variant is no longer associated with substantial cost savings, with the present value of cost savings near zero (Figure 4-12). For LCVs, when mileage is reduced from 32,000 km per year to 24,000 km, choosing the 2021 lower-CO2 version remains cost-effective, with cost savings of around €1,000 for the small LCV and €2,000 for the large LCV. The residual values which the analysis draws on (FleetNews, 2015) are not available for 16,000 km (10,000 miles) of annual mileage for LCVs (or for 24,000 km (15,000 miles) of annual mileage for cars).

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Figure 4-12: Sensitivity: Net private cost saving for 2021 lower CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 16,000 km/year for cars, 24,000 km/year for LCVs, 8% discount rate, 4% APR on the lease

In 2025, under variant a, (78g fleet average for cars, 121g for LCVs), all cars become more expensive than under the 2013 baseline, with net private mostly around -€500. The LCVs, however, remain cheaper than under the 2013 baseline.

Figure 4-13: Sensitivity: Net private cost saving for 2025a lower CO2 vehicles over 2013 baseline for purchase and leasing, 78g fleet average target for cars, 121g fleet average target for LCVs. Assumptions: 16,000 km/year for cars, 24,000 km/year for LCVs, 8% discount rate, 4% APR on the lease

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Under variant 2025b, (68g fleet average for cars, 105g for LCVs), all cars become at least €2,000 more expensive to own over 3 years than under the 2013 baseline. The large LCV, however, remains cheaper than under the 2013 baseline while the overall cost for the small LCV remains about the same.

Figure 4-14: Net private cost saving for 2025b lower CO2 vehicles over 2013 baseline for purchase and leasing, 68g fleet average target for cars, 105g fleet average target for LCVs. Assumptions: 16,000 km/year for cars, 24,000 km/year for LCVs, 8% discount rate, 4% APR on the lease

Figure 4-15: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2021 lower-CO2 versions. Assumptions: 16,000 km/year, 8% discount rate, 4% APR on the lease

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Figure 4-16: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2025a lower-CO2 versions. Assumptions: 16,000 km/year, 8% discount rate, 4% APR on the lease

Figure 4-17: Net private cost saving over diesel version of lower medium car, for 2013 baseline vehicles and 2025b lower-CO2 versions. Assumptions: 16,000 km/year, 8% discount rate, 4% APR on the lease

4.2.1.2 Sensitivities on residual value

Following the preliminary results of the draft SR7 analysis on used car prices, in the above analysis it is assumed that for every 1 gCO2/km reduction resale value increases by some €5 for used cars younger than 5 years. This is slightly different from the used car residual value forecasts used for the

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analysis in Task 2, which reveals variations of between €35 and €-81 of residual value change per gCO2 reduction between the sample of standard car models and similar eco-variants (Table 4-3).

Overall, there is little publically available analysis on the issue of residual value impacts of lower CO2 models. One article from the UK suggests that residual value impact is very limited (BusinessCar, 2010). A list of average used car prices on the German market indicates that eco-variants tend to sell for slightly more than similar standard variants (ADAC, 2015). However, it should be noted that these are market average prices which are also affected by other characteristics (e.g. mileage) for which averages may differ between eco and standard models.

Table 4-3: comparison of purchase prices, residual values and CO2 savings between the standard and eco models analysed in Task 2

Segment (fuel type) Purchase price (eco – standard)

Residual value (eco – standard)

CO2 saving (standard – eco)

Δ residual value per gCO2 saved

B – segment (petrol) € 675.00 € 101.25 23 €4.40

C - segment (petrol) -€ 756.00 -€ 742.50 21 -€35.36

C - segment (diesel) € 175.50 -€ 810.00 10 -€81.00

D - segment (diesel) € 2,430.00 € 675.00 9 €75.00

E - segment (diesel) € 4,131.00 € 287.55 22 €13.07

Car-derived LCV (diesel) € 337.50 € 313.20 9 €34.80

Large LCV (diesel) € 270.00 € 2.70 8 €0.34

Given this inconclusive picture, two sensitivities on residual value are explored. No comparisons to alternative powertrains are included, as only the baseline vehicles would be affected by the altered residual value assumption.

The first sensitivity explores the assumption that residual value of the lower-CO2 variant will be exactly equal to that of the standard variant (regardless of any initial difference in purchase cost). The results show that under this assumption, the 2021 lower-CO2 variants are mostly still cost-effective (Figure 4-18). Notably, for the petrol variant of the lower medium car, choosing the 2021 variant is now slightly negative. The picture for the two 2025 cost scenarios does not change substantially compared to the default assumption of a €5 per g CO2/km saved residual value impact.



Figure 4-18: Sensitivity: €0 per g CO2/km saved residual value impact, net private cost saving for 2021 lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

Figure 4-19: Sensitivity: €0 per g CO2/km saved residual value impact, net private cost saving for 2025a lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

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Figure 4-20: Sensitivity: €0 per g CO2/km saved residual value impact, net private cost saving for 2025b lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

The second sensitivity explores the assumption that the additional residual value of the lower-CO2 variant will be €20 per gCO2/km saved. This figure is close to the average impact of CO2 on resale value identified across all used car models (regardless of age) in Service Request 7. Under this assumption, all 2021 and 2025a vehicle variants remain privately cost-effective compared to 2013 (Figure 4-21). Under the 2025b scenario, the cost impact for most cars is fairly neutral compared to 2013. Only ownership/leasing of the lower medium petrol vehicle becomes around €2,000 more expensive, whereas the LCVs remain substantially cheaper.

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Figure 4-21: Sensitivity: €20 per g CO2/km saved residual value impact, net private cost saving for 2021 lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

Figure 4-22: Sensitivity: €20 per g CO2/km saved residual value impact, net private cost saving for 2025a lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

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Figure 4-23: Sensitivity: €20 per g CO2/km saved residual value impact, net private cost saving for 2025b lower-CO2 vehicles over 2013 baseline for purchase and leasing. Assumptions: 32,000 km/year, 8% discount rate, 4% APR on the lease

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5 Task 4: Analysis of the economic implications of vehicle leasing in terms of payback considerations for fuel economy improvements

While Task 3 examines cost-effectiveness of different leasing approaches, this task focuses on the analysis of payback periods for fuel-saving ‘investments’ for a range of illustrative examples. At the initial planning states, it was envisaged that this analysis would also compare leasing to ‘purchase with finance’. However, as the analysis of leasing as undertaken here is equal to the analysis of a purchase with finance and resale after three years, separate analysis for finance is unnecessary.

Figure 5-1 illustrates how a fuel saving technology that costs €400 extra upfront would pay back in fuel savings after around month 18 of operation (intersection of dashed line and black line). In contrast, leasing offers instant payback, this is shown in the chart as the additional leasing rates being consistently below the monthly levels of fuel saving (slope of the black line is steeper than slope of the grey line). However, by around month 24, the sum of additional leasing payments will have exceeded the additional purchase cost, making leasing the more expensive overall option (net of any discounting) (intersection of dashed and grey line).

Figure 5-1: Illustrative example payback graph for a fuel-saving technology

Notes: Additional fuel saving = Fuel saving (over baseline vehicle) when a vehicle with fuel saving technology is leased or purchased, Additional lease payment = Increase in lease payments (over baseline vehicle) when a vehicle with fuel-saving technology is leased, Additional purchase cost = Increase in upfront purchase cost (over baseline vehicle) when a vehicle with fuel-saving technology is purchased

The following payback graphs and tables illustrate the situation for vehicles analysed in Task 3, with the same parameters used in Task 3, private perspective (36 month lease, 4% APR). Since payback is merely an indicator of the attractiveness to vehicle users of ‘investing’ into fuel saving technology, the analysis is only undertaken from the private perspective.

Where the 2021 lower CO2 variants are cost-effective, additional monthly fuel savings will therefore exceed additional monthly lease payments. Thus the results of the payback analysis reflect those of



the cost-effectiveness analysis undertaken in Task 3. As in Task 3, it should be noted that the assumed fuel cost savings are based on the fuel consumption figures under the WLTP test cycle.

Figure 5-2 shows the example of the C-segment diesel vehicles at 32,000 km per year, for which additional fuel savings far exceed additional lease payment. If the vehicle was purchased, payback would occur after around 17 months.

Figure 5-2: Payback for 2021 lower CO2 C-segment diesel car over 2013 base model; mileage: 32,000 km per year, 36 month lease

In the case of the 2025a scenario, where CO2 emissions are reduced by some 39%, payback is only after around 32 months (Figure 5-3).

Figure 5-3: Payback for 2025a lower CO2 C-segment diesel car over 2013 base model (131g to 80g); mileage: 32,000 km per year, 36 month lease

Under the more ambitious 2025b scenario (emission reductions of 47% over 2013 levels), reductions are no longer cost effective from a private perspective under the given assumptions, as was also identified in Task 3. Figure 5-4 confirms that under those circumstances, the additional leasing costs

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exceed fuel savings. When buying, the additional purchase costs are only paid back by month 49, i.e. after 4 years (without discounting).

Figure 5-4: Payback for 2025b lower CO2 C-segment diesel car over 2013 base model (131g to 70g); mileage: 32,000 km per year, 36 month lease

Table 5-1 summarises the monthly net cost savings of choosing the lower CO2 variants under a 36 month leasing contract for all vehicles analysed.

Table 5-1: Monthly net cost savings when leasing lower CO2 vehicles over 2013 baseline (monthly fuel savings minus additional lease payment)

Reduction scenario

Annual mileage

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Small Van (Diesel)

Large Van (Diesel)

2021 32,000 km € 24 € 11 € 35 € 41 € 55 € 36 € 71

16,000 km € 0 -€ 17 € 12 € 16 € 23 € 30* € 60*

2025a 32,000 km € 18 -€ 17 € 14 € 30 € 33 € 36 € 95

16,000 km -€ 19 -€ 59 -€ 21 -€ 8 -€ 16 € 24* € 72*

2025b 32,000 km -€ 32 -€ 94 -€ 31 -€ 14 -€ 22 € 14 € 76

16,000 km -€ 77 -€ 46 -€ 73 -€ 60 -€ 81 -€ 1* € 46*

Note: *lower-bound annual mileage for LCVs is 24,000 km (not 16,000 km)

Table 5-2 summarises the payback period for the CO2-reducing investment when the vehicle is purchased, i.e. the time (in months) until cumulative fuel savings exceed the additional upfront costs for the 2021 lower CO2 variants over the 2013 baseline.

0 €

500 €

1,000 €

1,500 €

2,000 €

2,500 €

3,000 €

3,500 €

4,000 €

4,500 €

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38

Co

sts

/sa

vin

gs (

€)




AdditionalFuel Saving



Table 5-2: Payback period for lower-CO2 technology when vehicle is purchased (in months)

Reduction scenario

Annual mileage

Small Car (Petrol)

Lower Medium Car (Petrol)

Lower Medium Car (Diesel)

Upper Medium Car (Diesel)

Large Car (Diesel)

Small Van (Diesel)

Large Van (Diesel)

2021 32,000 km 25 35 17 15 14 n/a n/a

16,000 km 49 70 34 31 27 n/a n/a

2025a 32,000 km 30 45 32 25 27 n/a n/a

16,000 km 59 89 63 50 54 n/a n/a

2025b 32,000 km 49 68 49 42 43 n/a n/a

16,000 km 98 67 98 84 87 n/a n/a

Note: no payback period in the van models, as 2021 lower-CO2 versions already assumed to have lower capital cost than 2013 baseline versions.



6 Task 5: Illustration of whether taking account leasing would have changed the results of 2020 LDV CO2 regulations Impact Assessment

The aim of Task 5 was to provide an assessment of the impact that changes to the calculation techniques – i.e. taking account of vehicle leasing schemes – would have had on the cost-effectiveness of the 2020/21 targets for the car and van CO2 Regulations. It was originally planned to first replicate the calculations undertaken as part of the Impact Assessment to arrive at the same results. The capital costs and fuel savings for relevant vehicle lease models would then be calculated in an analogous way, and aggregated from vehicle-level to EU fleet level.

In the inception meeting it was agreed that most parameters, including technology costs (i.e. using the same/original cost curves, and not the new ones developed by Ricardo Energy & Environment), fuel prices and fleet composition, should remain as in the Impact Assessment study. However, aside from introducing assumptions on leasing, the project team was asked to carry out a sensitivity using vehicle age-dependent mileage data (from the recent Ricardo-AEA study) rather than a fixed annual mileage over the vehicle lifetime, as the latter assumption leads to an upward bias on CO2 abatement costs.

The project team has been able to examine the effect of taking into account leasing on the results of the Impact Assessment while also introducing age-dependent mileage data. However, given a lack of data in the Impact Assessment document (European Commission, 2012) and the related technical background study (TNO et al., 2011), it was not possible to replicate the exact calculations. However, given the results presented, it has been possible to estimate some of the inputs assumptions and modify these to reflect analogous inputs under the assumption of age-dependent vehicle mileage, as well as leasing.

The following sections provide a summary of the work completed, including:

Step 1: Identify/estimate the level of fuel and fuel cost savings used in the IA calculations and modify the calculations to reflect the age-dependent vehicle mileage profiles developed in Ricardo-AEA (2015).

Step 2: Identify/estimate additional capital cost assumptions used in the IA calculations and modify these to reflect costs under leasing.

Step 3: Identify/estimate the level of fuel and fuel cost savings used in the IA calculations. Modify these to reflect the mileage profile of leased vehicles to reflect costs under leasing.

Step 2 and step 3 are performed from both private and social perspectives.

Conclusions from the analysis and recommendations for future IA work.

6.1 Adjustment of Impact Assessment’s analysis to age-dependent vehicle mileage

The Impact Assessment (European Commission, 2012) detailed an average annual mileage of 14,000km and 16,000km for petrol and diesel passenger cars, respectively, over a 13 year vehicle lifetime. More recent work for the Commission on LDV mileage by Ricardo-AEA (2015) has shown declining average annual mileage with increasing vehicle age. This project found an average annual mileage over 13 years of 11,493 km and 16,133 km for petrol and diesel passenger cars, respectively. (An ongoing study for the European Commission on second hand vehicles has found these to have average annual mileages of some 13,000 km for petrol and 19,000 km for diesel over 14 years from analysis of an alternative data source.)

An analysis of the potential impact of age-related mileage on the outcome of the Impact Assessment was therefore conducted for this project. As such, to maintain both the annual mileages found in the Impact Assessment and the decline in mileage with age, a factor was applied to annual mileages in Ricardo-AEA (2015) to adjust for the impact of age-related annual mileage. The adjustments maintain



the original IA’s assumption of 14,000 km and 16,000 km average annual mileage over the lifetime of the petrol and diesel cars. The resulting mileage profiles are presented in Figure 6-1 below.

Figure 6-1: Average annual car mileage by vehicle age from Ricardo-AEA (2015) study and proposed age-adjusted mileage profile based on average mileage from the Impact Assessment (European Commission, 2012)

An analogous procedure was undertaken to estimate age-adjusted annual mileage for LCVs. The original impact assessment assumption sets an average mileage of 23,500 km whereas the average mileage over 13 years in the Ricardo-AEA (2015) study was 17,250 km.

Figure 6-2: Average annual van mileage by vehicle age from Ricardo-AEA (2015) study and proposed age-adjusted mileage profile based on average mileage from the Impact Assessment (European Commission, 2012)

The impact assessment summarises the estimated effect of the regulations on fuel consumption and fuel cost in terms of ‘lifetime net present value of fuel cost savings’. Since the impact assessment does not specify the exact vehicle fuel consumption parameters used, these need to be estimated

0

5,000

10,000

15,000

20,000

25,000

30,000

1 2 3 4 5 6 7 8 9 10 11 12 13

Mile

ag

e (

km

)

Year of use

Ricardo-AEA study(Diesel)

Age-adjusted IAmileage (Diesel)

ImpactAssessment(Diesel)

ImpactAssessment(Petrol)

Age-adjusted IAmileage (Petrol)

Ricardo-AEA study(Petrol)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

1 2 3 4 5 6 7 8 9 10 11 12 13

Mile

ag

e (

km

)

Year of use

ImpactAssessment

ImpactAssessment, age-adjusted mileage

Ricardo-AEAstudy



based on the lifetime NPV of fuel cost savings, discount rate and fuel prices, before the impact under the new mileage profile can be worked out.

We first convert from lifetime NPV of fuel cost savings to annual fuel cost savings, using the discount rates specified in the Impact Assessment (8% private, 4% social). Assumptions on annual fuel savings by fuel type are not directly stated in the Impact Assessment (or its supporting documentation), but can be derived, making the following assumptions:

Table 6-1: Assumptions on car characteristics used to modify the IA calculations

Diesel share in new car registrations 52%

Difference between average EU petrol and diesel fuel duties per litre € 0.13

Average EU VAT 20%

Sources: ACEA (2015) for 2010 diesel share, SULTAN model for weighted average fuel duties in the EU

On the basis of these parameters, we can derive separate estimates of the assumed fuel savings (in l/100km) for petrol and diesel vehicles.

Using these fuel consumption reduction estimates in combination with the age-dependent mileage profile illustrated in Figure 6-1, it is possible to calculate the level of fuel cost savings for each year of the vehicle lifetime, and summarise these in revised lifetime NPV of fuel cost savings figures. Results under the social perspective, with fuel prices before tax and 4% discount rate are summarised in Table 6-2, which shows that NPVs are 3.1% higher under the age-dependent mileage assumption.

Table 6-2: Present value of lifetime fuel cost savings for cars: 95g target relative to 130g baseline, social perspective*

Lifetime NPV of fuel cost savings for cars

Oil price scenario ($/barrel) 90 100 110 120 130 140

NPVs for constant annual mileage

Original IA value (€) 1,695 1,893 2,091 2,290 2,488 2,687

Diesel car estimate (€) 771 835 903 1,089 1,170 1,294

Petrol car estimate (€) 2,696 3,039 3,379 3,591 3,916 4,196

NPVs for age-dependent mileage

Diesel cars mileage-adjusted estimate (€)

808 876 946 1,142 1,226 1,356

Petrol cars mileage-adjusted estimate (€)

2,766 3,118 3,467 3,684 4,018 4,305

All cars mileage-adjusted estimate (€)

1,748 1,952 2,156 2,362 2,566 2,772

Notes: * social perspective excludes fuel duty and VAT.

For LCVs, the difference in NPV of lifetime fuel savings between the original Impact Assessment and the age-dependent mileage assumption is 7.7% (Table 6-3).

Table 6-3: Present value of lifetime fuel cost savings for LCVs: 147g target relative to 175g baseline, social perspective*

Lifetime NPV of fuel cost savings for LCVs



90 100 110 120 130 140


Mileage-adjusted estimate (€) 2,367 2,636 2,906 3,177 3,447 3,716

Notes: * social perspective excludes fuel duty and VAT.

Table 6-4 provides analogous figures under the private perspective with fuel prices after tax and 8% discount rate. Private fuel prices by oil price scenario have not been provided in the documentation around the Impact Assessment and have thus been estimated based on the NPV of overall lifetime fuel cost savings, the annual fuel savings by fuel type derived earlier, as well as a price differential based on the difference in price before tax and the difference in average European fuel duties. Under this perspective, NPVs are 6% higher under the age-dependent mileage assumption.

Table 6-4: Present value of lifetime fuel cost savings for 95g target relative to 130g baseline, private perspective

Lifetime NPV of fuel cost savings


Diesel price (€/l) € 1.43 € 1.52 € 1.62 € 1.73 € 1.83 € 1.92

Petrol price (€/l) € 1.50 € 1.59 € 1.69 € 1.79 € 1.88 € 1.98

NPVs for constant annual mileage


Diesel car estimate (€) 1,180 1,229 1,285 1,508 1,580 1,711

Petrol car estimate (€) 4,772 5,108 5,435 5,581 5,892 6,138

NPVs for age-dependent mileage

Diesel cars mileage-adjusted estimate (€)

1,292 1,346 1,407 1,651 1,731 1,874

Petrol cars mileage-adjusted estimate (€)

5,012 5,365 5,709 5,862 6,189 6,447

All cars mileage-adjusted estimate (€)

3,078 3,275 3,472 3,673 3,871 4,069

Notes: * private perspective includes fuel duty and VAT.

For LCVs, the increase in MPV under age-dependent mileage is 15% (Table 6-5).

Table 6-5: Present value of lifetime fuel cost savings for LCVs: 147g target relative to 175g baseline, social perspective*

Lifetime NPV of fuel cost savings for LCVs

90 100 110 120 130 140


Mileage-adjusted estimate (€) 3,871 4,147 4,424 4,700 4,977 5,254



6.2 Taking account of leasing in IA calculations: private perspective

6.2.1 Private costs (additional purchase/lease costs) of moving to a lower CO2 target

In order to compare purchase and leasing of a vehicle, we make an adjustment for the parameters used in the Impact Assessment to the equivalent ones for a typical leasing contract (i.e. vehicle usage period from lifetime to typical length of a leasing contract, typical annual mileage to typical mileage in a leasing contract).

The present value of fuel cost savings over that usage period will then be calculated and compared to the present value of the additional capital cost. In order to estimate the additional capital costs we will take the estimates of additional manufacturer cost from the Impact Assessment (see European Commission (2012)) and calculate the present value of the capital component under leasing (taking into account residual value at the end of the usage period). This is analogous to the procedure in Task 3, where additional manufacturer costs are taken from our analysis for Service Request 4 on the costs and performance of CO2 reducing technologies for LDVs up to 2030 (Ricardo Energy & Environment et al., forthcoming).

Table 6-6: Additional manufacturer cost and purchase price (€) per car relative to 130g/km target/LCV relative to 175g target, mass-based utility parameter with 60% of 2009 slope (European Commission, 2012, p. 54)

Additional manufacturer cost Additional purchase price

Small car Med. car Large car LCV Small car Med. car Large car LCV

Diesel €865 €1,118 €1,634 €457 € 1,068 € 1,381 € 2,018 € 564

Petrol €1,150 €1,308 €1,577 - € 1,420 € 1,615 € 1,948 -

Notes: Additional purchase price calculated based on price-to-manufacturing cost factor of 1.235 (assumption from Impact Assessment)

As the Impact Assessment does not provide details on the assumed split between small, medium and large cars, these have been taken from the SR4 study, with which average additional manufacturing costs of € 1,222 and € 1,119 for average diesel and petrol cars, respectively, were calculated.

Under the assumption of a €5 increase in residual value per gCO2 saved relative to the baseline vehicle (as used in Task 3), the residual value of the diesel vehicle increases by around €180 and that of the petrol vehicles by €200. Since there is an increase not only in the purchase cost of the vehicle, but also in the residual value that is redeemed after the end of the lease, the present value of additional lease payments is lower than the additional purchase cost (see Table 6-7).

Moreover, the present value of additional lease payments is also lower than the additional capital cost if the vehicle were purchased and sold after the same period as the length of the lease (see also Table 6-7). This is due to the effect of applying an APR on the lease loan lower than the discount rate, as was discussed in Task 3.

Table 6-7: Additional capital payments under leasing over baseline

Leasing contract length

APR Discount rate

Additional purchase cost

Additional residual value

Additional lease payments (PV)

For comparison: additional capital cost under purchase (PV)

Diesel 36 months 4% 8% €1,222 €86 €1,080 €1,155

Petrol 36 months 4% 8% €1,218 €340 €864 €951

Van 36 months 4% 8% €457 €166 €291 €326



6.2.2 Benefits (fuel cost savings) from moving to a lower CO2 target

It is assumed that over the 36 month lease period, vehicles run an annual average mileage of 30,000 km. The present value of the fuel savings can then be compared to the present value of the additional leasing costs. Table 6-8 summarises the fuel savings over the lease period.

Table 6-8: Present value of fuel cost savings over lease period (annual mileage: 30,000 km, 8% discount rate)

PV of fuel cost savings over lease period


Diesel € 721 € 752 € 786 € 922 € 966 € 1,046

Petrol € 3,334 € 3,569 € 3,797 € 3,900 € 4,117 € 4,288

LCVs € 1,400 € 1,500 € 1,600 € 1,700 € 1,800 € 1,900

6.2.3 Comparison of costs and benefits

A potential way of comparing the attractiveness of the lower-CO2 vehicle under each option is via the benefit/cost ratio (BCR). The cost of a lower-CO2 vehicle for purchase and lifetime use is assumed equal to the additional manufacturing cost, as provided in Table 6-6. The cost under the leasing contract is given in the form of the PV of the additional lease payments, as provided in Table 6-7. These benefits and costs are summarised, along with the resulting BCRs, in Table 6-9.

As is shown, under purchase and lifetime tenure, the benefit/cost ratio is larger and thus a lower-CO2 vehicle is more attractive. With leasing, under the given assumption of a €5 increase in residual value per gCO2 saved relative to the baseline vehicle, the remaining lifetime fuel savings are not fully reflected in the increased residual value. The ‘investment’ into fuel-saving technology under leasing is thus less attractive compared to lifetime tenure. However, when compared to a 5 year tenure (a scenario which was also analysed in the Impact Assessment), or outright purchase under an equivalent 36 month tenure period and annual mileage, leasing is more attractive.

Table 6-9: Summary of benefits and costs under leasing and purchase (private perspective)

Summary of benefits and costs under leasing and purchase (private perspective)

Oil price scenario ($/barrel)

90 100 110 120 130 140

Purchase and lifetime tenure (standard mileage)

Lifetime fuel cost saving

Cars € 2,904 € 3,091 € 3,277 € 3,463 € 3,650 € 3,836

LCVs € 3,363 € 3,603 € 3,843 € 4,083 € 4,324 € 4,564

Additional capital cost

Cars € 1,507

LCVs € 564

Benefit/cost ratio

Cars 1.93 2.05 2.17 2.30 2.42 2.54

LCVs 5.96 6.38 6.81 7.23 7.66 8.09

Purchase and 5 year tenure (standard mileage)

5 year Cars € 1,467 € 1,561 € 1,655 € 1,749 € 1,844 € 1,938

LCVs € 1,699 € 1,820 € 1,941 € 2,063 € 2,184 € 2,306


Cars € 1,507

LCVs € 564

Benefit/cost ratio

Cars 0.97 1.04 1.10 1.16 1.22 1.29

LCVs 3.01 3.22 3.44 3.65 3.87 4.09



Summary of benefits and costs under leasing and purchase (private perspective)

Oil price scenario ($/barrel)

90 100 110 120 130 140

Leasing (36 months, 30,000 km p.a.)

Fuel cost saving over lease period

Cars € 1,975 € 2,104 € 2,231 € 2,351 € 2,478 € 2,602

LCVs € 1,400 € 1,500 € 1,600 € 1,700 € 1,800 € 1,900

Additional lease cost

Cars € 1,247

LCVs € 393

Benefit/cost ratio

Cars 1.58 1.69 1.79 1.89 1.99 2.09

LCVs 3.56 3.82 4.07 4.33 4.58 4.84

Purchase (36 month tenure, 30,000 km p.a.)

Fuel cost saving over tenure period

Cars € 1,975 € 2,104 € 2,231 € 2,351 € 2,478 € 2,602

LCVs € 1,400 € 1,500 € 1,600 € 1,700 € 1,800 € 1,900


Cars € 1,344

LCVs € 433

Benefit/cost ratio

Cars 1.47 1.57 1.66 1.75 1.84 1.94

LCVs 3.23 3.46 3.69 3.92 4.15 4.38

Notes: standard mileage = mileage from Impact Assessment, as shown in Figure 6-1

The results of Table 6-9 already indicate that, if the above leasing assumptions were included in the Impact Assessment, overall benefit/cost ratio would be lower than without. However, this is due to the introduction of the assumption of a three year vehicle tenure after which the vehicle is sold, rather than leasing per se.

6.3 Taking account of leasing in IA calculations: social perspective

In this social perspective, a fuel price of €0.55 per litre is assumed and the additional costs for the 2021 low CO2 vehicles are calculated exclusive of VAT. As in the 2020 car and van CO2 Impact Assessment and its background study (TNO et al., 2011), a social discount rate of 4% is applied and external costs from CO2 emissions, etc. are not quantified.8

Setting the ‘right’ social discount rate is a contentious issue, especially within debates on the economics of climate change (Zhuang et al., 2007). From a social perspective, the discount rate should reflect the opportunity cost of funds allocated to public investment (Zhuang et al., 2007). This implies that, in the present calculation, the investment in CO2 saving technology is treated as if it were a public investment. Consequently, in the case of leasing, the interest rate on the loan should also be treated as if it were equivalent to the rate for public borrowing. At the time of writing, interest rates paid for 10-year Eurozone government bonds stood at around below 0.5% (FT.com, 2016). Given that bond yields have generally tended to be at an all-time low and tend to be higher in non-Eurozone Member States, a rate of 2% is set as ‘social’ interest rate. Since this is lower than the applied discount rate of 4%, leasing remains slightly more cost-effective than purchase. However, it should be noted that this comparison of social cost-effectiveness under purchase and leasing is somewhat artificial. A case could also be made for social discount and interest rate to be set at the same level, representing the opportunity cost of public investment.

8 Including environmental costs of CO2 emissions (or any other external costs) into the social cost calculation would increase the cost effectiveness of the low CO2 technologies. However, quantification of external costs of CO2 emissions is difficult, with a wide range of estimates provided in the literature: a meta-analysis of the social cost of carbon has revealed estimates ranging between US$1.8 and $654 per tonne of CO2 (Tol, 2007). The range of estimates for marginal abatement costs, which often tend to be used in social cost-benefit analysis instead of social cost is slightly narrower but the approach is similarly contentious (Bowen, 2011).



6.3.1 Social costs (additional manufacturing costs) of moving to a lower CO2 target

Recall from Task 2 that the leasing rate is an annuity of the purchase cost of the vehicle minus the present value of the residual value (Equation 5). However, from a social cost perspective, the residual value is not relevant, as it is simply a transfer payment from the first owner to the second owner. Therefore, in order to determine the capital costs associated with leasing from a social perspective, we add the present value of the residual value to the present value of the lease payments in order to purge the calculation of the residual value element (Equation 6).

Equation 5. Lease payment

𝑃 =𝐶𝑟(1 + 𝑟)𝑁 − 𝐹𝑟

(1 + 𝑟)𝑁 − 1

P = lease payment; C = capitalised cost; F = residual value; r = monthly interest rate; N = length of lease (months)

Equation 6. Present value of vehicle cost under leasing, social perspective

𝑃𝑉 = 𝑃 ∗ (1 + 𝑑)𝑁 − 1

𝑑(1 + 𝑑)𝑁+

𝐹

(1 + 𝑑)𝑁

PV = present value; P = lease payment from Equation 5; d = monthly discount rate

From a social perspective, the capitalised cost used to determine the additional lease payment for a lower CO2 vehicle, which is also the additional vehicle cost under outright purchase, is the additional manufacturing cost without any taxes or mark-up, as given in Table 6-6. Table 6-10 provides the results for additional vehicle cost under leasing and under purchase, as well as a weighted average, based on the estimates of leasing shares across Europe from Task 1. The analysis shows that the costs when leasing is taken into account are reduced by under 2% for diesel cars and under 1% for petrol cars.

Table 6-10: Additional costs for lower CO2 vehicles relative to 130g baseline, social perspective (4% discount rate, 2% interest on lease loan)

Cars LCVs

Additional vehicle cost under purchase € 1,221 € 457

Additional vehicle cost under leasing € 1,140 € 422

Weighted average € 1,195 € 452

Notes: presumed leasing shares to calculate weighted average: 50% for diesel cars, 15% for petrol cars, 41% for LCVs

6.3.2 Social benefits (fuel cost savings) and comparison to social costs

In order to calculate fuel cost savings with leasing included, we create two separate mileage profiles for each vehicle type, one for leased vehicles and another for non-leased vehicles. The combined average of the mileage profiles is equal to the average annual mileages in the Impact Assessment. Under the leased vehicles’ mileage profile, annual mileage for the duration of the lease is set equal to the average annual mileage of leased vehicles, 30,000 km. After the end of the lease, the mileage profile follows the standard mileage profile of vehicles of the same age, as set out in Figure 6-1 and Figure 6-2. The mileage profile for non-leased vehicles is a scaled version of the mileage profile of Figure 6-1 or Figure 6-2, balancing out the increases or decreases in average lifetime mileage for leased vehicles compared to all vehicles. For example, if leased diesel cars, which account for 50% of all diesel cars, had an annual mileage of 1,000 km above the average for all diesel cars (16,000 km), the mileage profile for non-leased vehicles would be scaled in a way that results in an annual average



mileage of 1,000 km below the average for all diesel cars, in order to maintain the combined average of leased and non-leased diesel cars at 16,000 km.

The results, as summarised in Table 6-11, show that there is very little difference between the present value of lifetime fuel cost savings under age-dependent mileage and under additional inclusion of leased vehicles, as mileage across all vehicles remains equal, and only its distribution by age is slightly modified.

Table 6-11: Summary of benefits and costs under leasing and purchase (social perspective)


Original Impact Assessment values (standard mileage)

Lifetime fuel cost saving Cars € 1,695 € 1,893 € 2,091 € 2,290 € 2,488 € 2,687

LCVs € 2,198 € 2,448 € 2,699 € 2,950 € 3,201 € 3,451

Additional capital cost Cars € 1,221

LCVs € 457

Benefit/cost ratio Cars 1.39 1.55 1.71 1.88 2.04 2.20

LCVs 4.81 5.36 5.91 6.46 7.00 7.55

Modified Impact Assessment values (age-dependent mileage)


LCVs € 2,367 € 2,636 € 2,906 € 3,177 € 3,447 € 3,716


LCVs € 457


LCVs 5.18 5.77 6.36 6.95 7.54 8.13

Modified Impact Assessment values (age-dependent mileage and inclusion of leased vehicles)


LCVs € 2,351 € 2,619 € 2,887 € 3,156 € 3,424 € 3,692


LCVs € 452


LCVs 5.21 5.80 6.39 6.99 7.58 8.17

Notes: standard mileage = mileage from Impact Assessment, as shown in Figure 6-1

6.4 Concluding comments

The analysis of whether taking account of leasing would have changed the results of the 2020 impact assessment suggests that there are two potential impacts: one is the impact of selling a vehicle after three years of use, the other is the impact on the present value of the additional capital costs.

The first impact, which equally affects other new vehicles which are sold on the used car market before their end of life, is significant: analysis of the used car market shows that future fuel savings are only incompletely reflected in the resale value of the car. Including this impact significantly reduces the benefit/cost ratio for lower CO2 vehicles from a private perspective, makes purchase or leasing of a lower-CO2 vehicle less attractive to the customer, compared to lifetime tenure. The other impact, namely a beneficial financing arrangement which effectively reduces the present value of the additional capital costs associated with a lower CO2 vehicle is far less significant and only improves the benefit/cost ratio slightly.

From a social perspective, the ‘negative’ impact of future fuel savings not being reflected in resale value is irrelevant, as the focus is on the costs and benefits to society, including all vehicle users over



the vehicle’s lifetime. However, the ‘positive’ impact of a beneficial financing arrangement on average only reduces the capital costs of the lower CO2 vehicles by 1-2%.

It can therefore be concluded that taking account of leasing via the two leasing impacts examined makes the result slightly more attractive but not enough to significantly change the results of the analysis in the Impact Assessment.



7 Summary and conclusions

The objective of the present project has been to examine the role of leasing in relation to lower CO2 vehicle technologies: on the one hand its impact on the attractiveness (and uptake) of these technologies among consumers and businesses and on the other hand its impact on the social costs and benefits of these technologies, and consequently on the costs and benefits of any CO2 regulation legislation.

The overall findings of the project can be summarised in two potential mechanisms by which the decision to lease a vehicle could affect the attractiveness and cost-effectiveness of lower CO2 technologies.

The first potential mechanism, is the role of finance (as opposed to cash) in funding the ‘investment’ into the CO2 saving technology. Finance can improve the attractiveness of the ‘investment’ by providing instant payback: If the technology is cost-effective and funded in the form of an addition to the monthly lease payment; the level of the monthly fuel cost savings will exceed that of the extra lease payment. This can make investing into the technology more attractive than having to wait several years before the accumulated fuel cost savings start exceeding the initial upfront investment. The calculations undertaken in Section 5 confirm that wherever lower CO2 technology is cost-effective, payback can be instant (within a month) when the vehicle is leased. However, the resulting increase in attractiveness of lower CO2 models from instant payback has not been quantified.

In addition, companies can be expected to lease (or use finance for) their fleet when the (implicit) interest rate is lower than the company’s discount rate. The availability of leasing may thus make investments into lower CO2 technology viable which would otherwise not have been viable from the company’s perspective. The financial implications of leasing versus purchasing at given discount rates have been explored in detail through a series of model calculations. The cost-effectiveness of actual current eco-models versus standard models (Section 3), as well as the cost-effectiveness and payback for future lower CO2 models versus 2013 average models (Section 4.2), have been compared under leasing and cash purchase. The results indicate that due to the effect of having an interest rate below the discount rate, leasing and other forms of vehicle finance are by definition more cost effective than outright purchase. However, the impact of finance on the overall net gains or losses associated with a lower CO2 technology is low. Consequently, taking account of leasing via this mechanism would not have significantly altered the results of the Impact Assessment underpinning the 2020 CO2 emission targets (Section 6).

The second mechanism is the leasing industry’s expertise in minimising the total costs of ownership (TCO) of vehicles and vehicle fleets. This has been discussed in Section 3.1.1. Leasing companies provide consultancy advice to fleet customers to construct car policies that include the most suitable, "fit for purpose" cars and light commercial vehicles for their fleets. Therefore, as long as CO2 reduction technology is cost effective, leasing companies should advise their customers to take it up in order to minimise their costs.

Leasing industry stakeholders have emphasised that national vehicle taxation policies play an important role for TCO, and ultimately, vehicle choice. Data provided by leasing companies, and discussed in Section 4.1, clearly shows that leased vehicle registrations are responsive to national CO2 based car taxation. In France and the UK, leased vehicles across most segments and fuel types have significantly lower CO2 emission ratings than the average new vehicle. However, in both taxation systems, the financial incentives to choose lower CO2 vehicles are generally stronger for company cars than they are for private cars and it is not clear how non-leased company cars facing the same taxation incentives perform in comparison. Not much data is available for Member States in which company car taxation does not provide significant rewards to low CO2-ratings, but anecdotal evidence from Germany suggests that leased vehicles there do not tend to have particularly low CO2 emissions as the impact on TCO is more limited.

In conclusion, leasing may increase the attractiveness of lower CO2 vehicles, on the one hand by enabling instant payback on fuel saving ‘investments’, and on the other by helping operators optimise vehicle choice by enabling them to better take into account the costs and benefits associated with lower CO2 vehicles in the context of CO2-based national vehicle taxation schemes. However, given the available evidence, it has not been possible to quantify the extent to which these factors affect the uptake of lower CO2 vehicles in practice. While the impact of leasing on attractiveness of lower CO2



vehicles cannot be ascertained, the impact on the cost-effectiveness of lower CO2 vehicles is found to be limited. The inclusion of leasing would not significantly affect results of the Impact Assessment underpinning the 2020 CO2 emission targets, and would leave the assessment of costs and benefits of future CO2 regulation policies largely unchanged.



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Appendix 1: Calculation results for Task 2

Box 1. List of all model variants selected for illustrative examples in this study

B- segment

Standard petrol: Fiesta Hatch 5Dr 1.25 82 €6 Zetec 16MY, 122 gCO2/km, 5.2 l/100km

Eco petrol: Fiesta Hatch 5Dr 1.0 80 SS €6 Zetec 16MY, 99 gCO2/km, 4.3 l/100km

C-segment

Standard diesel: Golf Hatch 5Dr 1.6TDI BMT 110 SS Match 16MY, 99 gCO2/km, 3.8 l/100km

Eco diesel: Golf Hatch 5Dr 1.6TDI BMT 110 SS BlueMotion 6Spd 16MY, 89 gCO2/km, 3.4 l/100km

Standard petrol: Golf Hatch 5Dr 1.4TSI BMT 125 SS Match 6Spd 16MY, 120 gCO2/km, 5.2 l/100km

Eco petrol: Golf Hatch 5Dr 1.0TSI BMT 115 SS Match BlueMotion 6Spd 16MY, 99 gCO2/km, 4.3 l/100km

PHEV: Golf Hatch 5Dr 1.4h TSI 204 SS GTE DSG Auto6 16MY, 39 gCO2/km, 1.7 l/100km, 11.9 kWhel/100km

BEV: Golf Hatch 5Dr 0.0Elec 115 e-Golf Auto 16MY, 0 gCO2/km, 12.7 kWhel/100km

D-segment

Standard diesel: 3 Series 318 Saloon 2.0d 150 SS SE 6 16MY, 111 gCO2/km, 4.2 l/100km

Eco diesel: 3 Series 320 Saloon 2.0d 163 SS EffDynamicsPlus 6 16MY, 102 gCO2/km, 3.9 l/100km

E-segment

Standard diesel: E Class E250 Saloon 2.1CDi 204 SS SE 7GT+ 16MY, 129 gCO2/km, 4.9 l/100km

Eco diesel (hybrid): E Class E300 Saloon 2.1CDi BluTEC 231 SS SE 7GT+ 16MY, 107 gCO2/km, 4.1 l/100km

Car-derived van

Standard diesel: Kangoo ML19 1.5dCi 75 DPF €5 Business Van 15MY, 119 gCO2/km, 4.6 l/100km

Eco diesel: Kangoo ML19 1.5dCi ENERGY 75 DPF SS €5 Business Van 15MY, 110 gCO2/km, 4.2 l/100km

Large van

Standard diesel: Transit 350 L3 RWD 2.2TDCi 100 DPF €5 Van MRf 6Spd 16MY, 218 gCO2/km, 8.3 l/100km

Eco diesel: Transit 350 L3 RWD 2.2TDCi 100 DPF SS €5 Van MRf 6Spd 16MY, 210 gCO2/km, 8.0 l/100km



Table A1: Comparison of monthly costs. Lease parameters: 3 years, 32,187 km per annum.

Purchase Ford Fiesta (Petrol)

Lease (4% APR) Ford Fiesta (Petrol)


Purchase Ford Fiesta (Petrol, Eco)

Lease (4% APR) Ford Fiesta (Petrol, Eco)


Purchase/Lease N/A 36 36 N/A 36 36

Lease term (months) N/A 4% 9% N/A 4% 9%

APR 18,500 18,500 18,500 19,200 19,200 19,200

Initial vehicle value (€) 18,500 0 0 19,200 0 0

Upfront purchase cost (€)

6,000 6,000 6,000 6,100 6,100 6,100

Residual value (€) 0 388 439 0 406 458

Monthly lease payment (€)

188 188 188 156 156 156

Monthly fuel costs (€) 0 0 0 0 0 0

Monthly electricity costs (€)

56 56 56 56 56 56

Average monthly SMR cost (€)

245 633 683 212 618 670

Total monthly cost (€) N/A 36 36 N/A 36 36

Purchase Volkswagen Golf (Petrol)

Lease (4% APR) Volkswagen Golf (Petrol)


Purchase Volkswagen Golf (Petrol, Eco)

Lease (4% APR) Volkswagen Golf (Petrol, Eco)

Lease (9% APR) Volkswagen Golf (Petrol, Eco)

Purchase/Lease Purchase Lease Lease Purchase Lease Lease

Lease term (months) N/A 36 36 N/A 36 36

APR N/A 4% 9% N/A 4% 9%

Initial vehicle value (€) 28,200 28,200 28,200 27,500 27,500 27,500

Upfront purchase cost (€) 28,200 0 0 27,500 0 0

Residual value (€) 9,000 9,000 9,000 8,300 8,300 8,300

Monthly lease payment (€) 0 596 672 0 593 667


Monthly electricity costs (€) 0 0 0 0 0 0

Average monthly SMR cost (€) 59 59 59 59 59 59

Total monthly cost (€) 248 843 920 215 808 882

Purchase Lease (4% Lease (9% Purchase Lease (4% Lease (9%



Volkswagen Golf (Diesel)

APR) Volkswagen Golf (Diesel)

APR) Volkswagen Golf (Diesel)

Volkswagen Golf (Diesel, Eco)

APR) Volkswagen Golf (Diesel, Eco)

APR) Volkswagen Golf (Diesel, Eco)



APR N/A 4% 9% N/A 4% 9%



Residual value (€) 9,700 9,700 9,700 8,900 8,900 8,900






Purchase BMW 3 Series (Diesel)

Lease (4% APR) BMW 3 Series (Diesel)


Purchase BMW 3 Series (Diesel, Eco)

Lease (4% APR) BMW 3 Series (Diesel, Eco)

Lease (9% APR) BMW 3 Series (Diesel, Eco)



APR N/A 4% 9% N/A 4% 9%



Residual value (€) 13,500 13,500 13,500 14,200 14,200 14,200





Total monthly cost (€) 244 1,032 1,139 220 1,060 1,174

Purchase Mercedes-

Lease (4% APR)

Lease (9% APR)

Purchase Mercedes-

Lease (4% APR)

Lease (9% APR)



Benz E Class (Diesel)

Mercedes-Benz E Class (Diesel)

Mercedes-Benz E Class (Diesel)

Benz E Class (Diesel/Hybrid)

Mercedes-Benz E Class (Diesel/Hybrid)

Mercedes-Benz E Class (Diesel/Hybrid)



APR N/A 4% 9% N/A 4% 9%



Residual value (€) 16,800 16,800 16,800 17,100 17,100 17,100

Monthly lease payment (€) 0 1,046 1,184 0 1,162 1,310





Purchase Renault Kangoo (Diesel)

Lease (4% APR) Renault Kangoo (Diesel)


Purchase Renault Kangoo (Diesel, Eco)

Lease (4% APR) Renault Kangoo (Diesel, Eco)

Lease (9% APR) Renault Kangoo (Diesel, Eco)



APR N/A 4% 9% N/A 4% 9%



Residual value (€) 4,000 4,000 4,000 4,000 4,000 4,000






Purchase Ford Transit

Lease (4% APR) Ford Transit


Purchase Ford Transit





(Diesel) (Diesel) (Diesel) (Diesel, Eco) (Diesel, Eco) (Diesel, Eco)



APR N/A 4% 9% N/A 4% 9%



Residual value (€) 8,900 8,900 8,900 8,900 8,900 8,900






Table A2: Comparison of monthly costs. Lease parameters: 3 years, 16,093 km per annum.

Purchase Ford Fiesta (Petrol)



Purchase Ford Fiesta (Petrol, Eco)





APR N/A 4% 9% N/A 4% 9%



Residual value (€) 7,300 7,300 7,300 7,400 7,400 7,400






Purchase Volkswagen Golf (Petrol)



Purchase Volkswagen Golf (Petrol, Eco)

Lease (4% APR) Volkswagen Golf (Petrol,

Lease (9% APR) Volkswagen Golf (Petrol,



Eco) Eco)



APR N/A 4% 9% N/A 4% 9%



Residual value (€) 10,900 10,900 10,900 10,000 10,000 10,000






Purchase Volkswagen Golf (Diesel)

Lease (4% APR) Volkswagen Golf (Diesel)

Lease (9% APR) Volkswagen Golf (Diesel)

Purchase Volkswagen Golf (Diesel, Eco)

Lease (4% APR) Volkswagen Golf (Diesel, Eco)

Lease (9% APR) Volkswagen Golf (Diesel, Eco)



APR N/A 4% 9% N/A 4% 9%



Residual value (€) 11,300 11,300 11,300 10,400 10,400 10,400






Purchase BMW 3 Series (Diesel)



Purchase BMW 3 Series (Diesel, Eco)

Lease (4% APR) BMW 3 Series (Diesel,

Lease (9% APR) BMW 3 Series (Diesel,



Eco) Eco)



APR N/A 4% 9% N/A 4% 9%



Residual value (€) 15,800 15,800 15,800 16,600 16,600 16,600





Total monthly cost (€) 123 850 961 111 888 1,006

Purchase Mercedes-Benz E Class (Diesel)

Lease (4% APR) Mercedes-Benz E Class (Diesel)

Lease (9% APR) Mercedes-Benz E Class (Diesel)

Purchase Mercedes-Benz E Class (Diesel/Hybrid)

Lease (4% APR) Mercedes-Benz E Class (Diesel/Hybrid)

Lease (9% APR) Mercedes-Benz E Class (Diesel/Hybrid)



APR N/A 4% 9% N/A 4% 9%



Residual value (€) 20,400 20,400 20,400 20,700 20,700 20,700

Monthly lease payment (€) 0 952 1,096 0 1,068 1,222





Purchase Renault Kangoo (Diesel)



Purchase Renault Kangoo (Diesel, Eco)

Lease (4% APR) Renault Kangoo (Diesel,

Lease (9% APR) Renault Kangoo (Diesel,



Eco) Eco)



APR N/A 4% 9% N/A 4% 9%



Residual value (€) 4,100 4,100 4,100 4,100 4,100 4,100






Purchase Ford Transit (Diesel)

Lease (4% APR) Ford Transit (Diesel)

Lease (9% APR) Ford Transit (Diesel)

Purchase Ford Transit (Diesel, Eco)

Lease (4% APR) Ford Transit (Diesel, Eco)

Lease (9% APR) Ford Transit (Diesel, Eco)



APR N/A 4% 9% N/A 4% 9%



Residual value (€) 9,200 9,200 9,200 9,200 9,200 9,200








Appendix 2: Calculation results for Task 3

Table A3: Calculation results for 3 year tenure, 32,186 km per annum, 4% APR on lease

Purchase Small Car (2013, 123gCO2) (Petrol)

Purchase Small Car (2021, 92gCO2) (Petrol, Eco)



Lease (4% APR) Small Car (2013, 123gCO2) (Petrol)

Lease (4% APR) Small Car (2021, 92gCO2) (Petrol, Eco)



Purchase/Lease Purchase Purchase Purchase Purchase Lease Lease Lease Lease

Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%

Initial vehicle value (€)

18,549 19,743 20,721 22,866 18,549 19,743 20,721 22,866


18,549 19,743 20,721 22,866 0 0 0 0

Residual value (€) 6,041 6,500 6,418 6,370 6,041 6,500 6,418 6,370


0 0 0 0 399 423 454 520

Monthly fuel costs (€)

189 141 116 101 189 141 116 101


0 0 0 0 0 0 0 0


56 56 56 56 56 56 56 56

Total monthly cost (€)

245 197 172 157 644 620 626 677

continued on next page…



Purchase Lower Medium Car (2013, 142gCO2) (Petrol)

Purchase Lower Medium Car (2021, 106gCO2) (Petrol, Eco)



Lease (4% APR) Lower Medium Car (2013, 142gCO2) (Petrol)

Lease (4% APR) Lower Medium Car (2021, 106gCO2) (Petrol, Eco)




Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


28,215 30,151 31,980 35,093 28,215 30,151 31,980 35,093


28,215 30,151 31,980 35,093 0 0 0 0

Residual value (€) 9,011 9,539 9,445 9,389 9,011 9,539 9,445 9,389


0 0 0 0 611 656 713 807


217 162 133 116 217 162 133 116


0 0 0 0 0 0 0 0


59 59 59 59 59 59 59 59


277 221 192 175 888 877 905 982

Purchase Lower Medium Car (2013, 131gCO2) (Diesel)

Purchase Lower Medium Car (2021, 98gCO2) (Diesel, Eco)



Lease (4% APR) Lower Medium Car (2013, 131gCO2) (Diesel)

Lease (4% APR) Lower Medium Car (2021, 98gCO2) (Diesel, Eco)




Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


29,572 30,358 31,789 33,717 29,572 30,358 31,789 33,717


29,572 30,358 31,789 33,717 0 0 0 0

Residual value (€) 9,686 10,175 10,087 10,036 9,686 10,175 10,087 10,036


0 0 0 0 634 645 690 749


181 135 110 96 181 135 110 96


0 0 0 0 0 0 0 0


52 52 52 52 52 52 52 52


233 187 163 149 868 832 853 898

Purchase Lower Medium Car (2013, 0gCO2) (Electric)




Lease (4% APR) Lower Medium Car (2013, 0gCO2)






(Electric) (Electric) (Electric) (Electric)


Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


42,215 38,132 35,122 35,122 42,215 38,132 35,122 35,122


42,215 38,132 35,122 35,122 0 0 0 0

Residual value (€) 11,003 11,003 11,003 11,003 11,003 11,003 11,003 11,003


0 0 0 0 979 857 767 767


0 0 0 0 0 0 0 0


63 61 59 59 63 61 59 59


39 39 39 39 39 39 39 39


103 100 99 99 1,081 957 865 865

Purchase Lower Medium Car (2013, 44gCO2) (Petrol/Electric)




Lease (4% APR) Lower Medium Car (2013, 44gCO2) (Petrol/Electric)





Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


45,527 37,774 34,926 34,926 45,527 37,774 34,926 34,926


45,527 37,774 34,926 34,926 0 0 0 0

Residual value (€) 14,681 14,681 14,681 14,681 14,681 14,681 14,681 14,681


0 0 0 0 983 751 666 666


68 68 68 68 68 68 68 68


51 49 48 48 51 49 48 48


105 105 105 105 105 105 105 105


224 222 221 221 1,207 972 887 887

Purchase Lower Medium Car (2013, 109gCO2)




Lease (4% APR) Lower Medium Car (2013,






(CNG) (CNG) (CNG) (CNG) 109gCO2) (CNG)

81gCO2) (CNG)

58gCO2) (CNG)

58gCO2) (CNG)


Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


33,097 30,356 29,969 29,969 33,097 30,356 29,969 29,969


33,097 30,356 29,969 29,969 0 0 0 0

Residual value (€) 10,570 10,570 10,570 10,570 10,570 10,570 10,570 10,570


0 0 0 0 717 635 624 624


120 89 64 64 120 89 64 64


0 0 0 0 0 0 0 0


59 59 59 59 59 59 59 59


179 148 123 123 896 783 746 746

Purchase Upper Medium Car (2013, 144gCO2) (Diesel)

Purchase Upper Medium Car (2021, 107gCO2) (Diesel, Eco)



Lease (4% APR) Upper Medium Car (2013, 144gCO2) (Diesel)

Lease (4% APR) Upper Medium Car (2021, 107gCO2) (Diesel, Eco)




Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


38,651 39,427 40,588 42,539 38,651 39,427 40,588 42,539


38,651 39,427 40,588 42,539 0 0 0 0

Residual value (€) 13,500 14,036 13,940 13,884 13,500 14,036 13,940 13,884


0 0 0 0 808 817 854 914


198 148 121 106 198 148 121 106


0 0 0 0 0 0 0 0


92 92 92 92 92 92 92 92


291 240 213 198 1,098 1,057 1,068 1,112



Purchase Large Car (2013, 183gCO2) (Diesel)

Purchase Large Car (2021, 136gCO2) (Diesel, Eco)



Lease (4% APR) Large Car (2013, 183gCO2) (Diesel)

Lease (4% APR) Large Car (2021, 136gCO2) (Diesel, Eco)




Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


50,443 51,327 53,081 55,543 50,443 51,327 53,081 55,543


50,443 51,327 53,081 55,543 0 0 0 0

Residual value (€) 16,833 17,514 17,392 17,320 16,833 17,514 17,392 17,320


0 0 0 0 1,074 1,083 1,139 1,214


252 187 154 134 252 187 154 134


0 0 0 0 0 0 0 0


119 119 119 119 119 119 119 119


371 307 273 253 1,445 1,390 1,412 1,467

Purchase Small Van (2013, 111gCO2) (Diesel)

Purchase Small Van (2021, 94gCO2) (Diesel, Eco)



Lease (4% APR) Small Van (2013, 111gCO2) (Diesel)

Lease (4% APR) Small Van (2021, 94gCO2) (Diesel, Eco)




Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


18,489 18,473 19,177 20,311 18,489 18,473 19,177 20,311


18,489 18,473 19,177 20,311 0 0 0 0

Residual value (€) 3,982 4,453 4,369 4,319 3,982 4,453 4,369 4,319


0 0 0 0 450 438 461 496


153 130 107 93 153 130 107 93


0 0 0 0 0 0 0 0


62 62 62 62 62 62 62 62


215 192 168 155 665 629 629 651



Purchase Large Van (2013, 224gCO2) (Diesel)

Purchase Large Van (2021, 190gCO2) (Diesel, Eco)



Lease (4% APR) Large Van (2013, 224gCO2) (Diesel)

Lease (4% APR) Large Van (2021, 190gCO2) (Diesel, Eco)




Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


36,579 36,574 37,198 38,675 36,579 36,574 37,198 38,675


36,579 36,574 37,198 38,675 0 0 0 0

Residual value (€) 8,942 9,892 9,722 9,622 8,942 9,892 9,722 9,622


0 0 0 0 863 839 862 909


308 262 215 187 308 262 215 187


0 0 0 0 0 0 0 0


79 79 79 79 79 79 79 79


387 340 293 266 1,250 1,179 1,155 1,174

Table A4: Calculation results for 3 year tenure, 16,093 km per annum, 4% APR on lease

Purchase Small Car (2013, 123gCO2) (Petrol)




Lease (4% APR) Small Car (2013, 123gCO2) (Petrol)





Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


18,549 19,743 20,721 22,866 18,549 19,743 20,721 22,866


18,549 19,743 20,721 22,866 0 0 0 0

Residual value (€) 7,310 7,769 7,687 7,639 7,310 7,769 7,687 7,639


0 0 0 0 366 390 421 487


94 70 58 50 94 70 58 50


0 0 0 0 0 0 0 0


23 23 23 23 23 23 23 23


118 94 81 74 484 484 502 560



Purchase Lower Medium Car (2013, 142gCO2) (Petrol)




Lease (4% APR) Lower Medium Car (2013, 142gCO2) (Petrol)





Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


28,215 30,151 31,980 35,093 28,215 30,151 31,980 35,093


28,215 30,151 31,980 35,093 0 0 0 0

Residual value (€) 10,904 11,432 11,337 11,282 10,904 11,432 11,337 11,282


0 0 0 0 562 607 664 758


109 81 66 58 109 81 66 58


0 0 0 0 0 0 0 0


25 25 25 25 25 25 25 25


134 106 92 83 696 713 756 842

Purchase Lower Medium Car (2013, 131gCO2) (Diesel)



Purchase Lower Medium Car (2013, 109gCO2) (CNG)

Lease (4% APR) Lower Medium Car (2013, 131gCO2) (Diesel)



Lease (4% APR) Lower Medium Car (2013, 109gCO2) (CNG)


Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


29,572 30,358 31,789 33,097 29,572 30,358 31,789 33,097


29,572 30,358 31,789 33,097 0 0 0 0

Residual value (€) 11,333 11,822 11,734 12,791 11,333 11,822 11,734 12,791


0 0 0 0 592 603 648 660


90 67 55 60 90 67 55 60


0 0 0 0 0 0 0 0


19 19 19 25 19 19 19 25


109 86 74 85 701 689 722 745







Lease (4% APR) Lower Medium Car (2013, 0gCO2) (Electric)





Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


42,215 38,132 35,122 35,122 42,215 38,132 35,122 35,122


42,215 38,132 35,122 35,122 0 0 0 0

Residual value (€) 13,314 13,314 13,314 13,314 13,314 13,314 13,314 13,314


0 0 0 0 919 797 707 707


0 0 0 0 0 0 0 0


32 30 30 30 32 30 30 30


20 20 20 20 20 20 20 20


52 51 50 50 971 848 757 757










Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


45,527 37,774 34,926 34,926 45,527 37,774 34,926 34,926


45,527 37,774 34,926 34,926 0 0 0 0

Residual value (€) 17,177 17,177 17,177 17,177 17,177 17,177 17,177 17,177


0 0 0 0 918 686 601 601


34 34 34 34 34 34 34 34


26 24 24 24 26 24 24 24


43 43 43 43 43 43 43 43


103 102 102 102 1,021 788 703 703












Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


33,097 30,356 29,969 29,969 33,097 30,356 29,969 29,969


33,097 30,356 29,969 29,969 0 0 0 0

Residual value (€) 12,791 12,791 12,791 12,791 12,791 12,791 12,791 12,791


0 0 0 0 660 578 566 566


60 45 32 32 60 45 32 32


0 0 0 0 0 0 0 0


25 25 25 25 25 25 25 25


85 70 57 57 745 648 623 623

Purchase Upper Medium Car (2013, 144gCO2) (Diesel)




Lease (4% APR) Upper Medium Car (2013, 144gCO2) (Diesel)





Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


38,651 39,427 40,588 42,539 38,651 39,427 40,588 42,539


38,651 39,427 40,588 42,539 0 0 0 0

Residual value (€) 15,795 16,331 16,235 16,179 15,795 16,331 16,235 16,179


0 0 0 0 748 758 795 855


99 74 61 53 99 74 61 53


0 0 0 0 0 0 0 0


47 47 47 47 47 47 47 47


146 121 108 100 894 878 902 954



Purchase Large Car (2013, 183gCO2) (Diesel)




Lease (4% APR) Large Car (2013, 183gCO2) (Diesel)





Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


50,443 51,327 53,081 55,543 50,443 51,327 53,081 55,543


50,443 51,327 53,081 55,543 0 0 0 0

Residual value (€) 20,367 21,048 20,926 20,855 20,367 21,048 20,926 20,855


0 0 0 0 983 992 1,047 1,123


126 94 77 67 126 94 77 67


0 0 0 0 0 0 0 0


66 66 66 66 66 66 66 66


192 159 143 133 1,174 1,151 1,190 1,256

Purchase Small Van (2013, 111gCO2) (Diesel)




Lease (4% APR) Small Van (2013, 111gCO2) (Diesel)





Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


18,489 18,473 19,177 20,311 18,489 18,473 19,177 20,311


18,489 18,473 19,177 20,311 0 0 0 0

Residual value (€) 4,140 4,611 4,527 4,477 4,140 4,611 4,527 4,477


0 0 0 0 446 434 457 492


115 97 80 70 115 97 80 70


0 0 0 0 0 0 0 0


48 48 48 48 48 48 48 48


163 146 128 118 609 579 585 610



Purchase Large Van (2013, 224gCO2) (Diesel)




Lease (4% APR) Large Van (2013, 224gCO2) (Diesel)





Lease term (months)

N/A N/A N/A N/A 36 36 36 36

APR N/A N/A N/A N/A 4% 4% 4% 4%


36,579 36,574 37,198 38,675 36,579 36,574 37,198 38,675


36,579 36,574 37,198 38,675 0 0 0 0

Residual value (€) 9,211 10,161 9,991 9,891 9,211 10,161 9,991 9,891


0 0 0 0 856 832 855 902


231 196 161 140 231 196 161 140


0 0 0 0 0 0 0 0


49 49 49 49 49 49 49 49


280 245 210 189 1,136 1,077 1,065 1,091



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Consideration of light duty vehicle leasing in relation to the cost effectiveness of LDV CO2

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