Which TCO calculation method is most advantageous to calculate my mobility budget?

Since 1 January 2024, two calculation methods have been accepted by the government to calculate the total cost of ownership (TCO) for the federal mobility budget. The actual cost formula and the flat-rate value formula. This article will help explain both formulas. In this article, a TCO calculation is made using both formulas. This for both purchasing a company car and leasing a company car. Remember that the mobility budget is always calculated on the basis of TCO 2, or the full TCO.

Information

The car used as a reference in this example is a Volkswagen ID.4 52kWh 125kW Pure.  The catalogue value of the car is 44,990 euros (Excl. VAT). In the example, the employer pays a charging station to the employee worth 2,500 euros and an annual parking and carwash cost worth 240 euros. The fuel cost is 2,072.24 euros per year.  

If the Volkswagen is purchased, the following average actual annual costs are also used:

• Repair & maintenance: 834.94 euros
• Winter tyres: 220.25 euros
• Insurance: 942.34 euros
• Taxes: 340.22 euros
• Assistance & replacement car: 212.04 euro
• Technical inspection: 28.92 euros

The above costs are based on data from our customers. With an operating lease, these costs are included in the lease price. The operating lease is calculated for a 60-month contract with 30,000 kilometres annually.

The notional company has a tax rate of 25 per cent, and uses the flat rate method (35 per cent) for VAT deductibility. The calculation is made for the year 2024.

Actual cost formula

Purchase

When purchasing, 20 per cent of the total price (with options and discounts, but excluding VAT) must be used as the annual reference price. This is because the government assumes a five-year depreciation period. In this example, this means an annual purchase cost of 7,104 euros.

Since the Volkswagen is an electric car, the minimum Co2 contributions, of 383.88 euros, will be charged. Tax deductibility is 100 per cent with electric cars. Which means no corporate tax has to be paid. On the Benefit In Kind, the employer does pay another corporate tax of 160 euros. There is also the aforementioned fuel cost and other actual costs. The non-deductible VAT on this is 1530.49 euros. This is calculated using the flat-rate method, and taking into account that no VAT is paid on insurance and taxes.

This gives an annual TCO 2 of €14,569.32.

Operational lease

The difference between purchase and operational lease in the actual cost formula, on the one hand, lies in the calculation of the price of the company car itself. This is because an operational lease uses the monthly lease cost, rather than 20 per cent of the total purchase price. Through a leasing dealer online, the monthly lease cost is estimated at €686 per month (€8,232 per year).

On the other hand, most other annual costs are included in the lease price. So these no longer need to be included separately, otherwise there is double counting. Only the cost for the charging station and the parking and carwash cost still have to be included. This makes the non-deductible VAT €1,507.54.

This makes for a TCO 2 of 13,095.66 euros.

Lump-sum value formula

The lump-sum value formula uses a fuel formula established by the government. The fuel formula depends on the employee's commuting distance or the average of the job category. The average commuting distance in Belgium is 20 km (HRSquare, 2023). This distance is used in the example. The fuel cost then comes to EUR 1,820 annually.

Purchase

To determine the total price of the company car, the lump-sum value formula uses 35 per cent of the list price of the company car (incl. VAT). The government states that all costs are contained in this calculation. This with the exception of the Co2 contribution and the fuel cost. Using the formulas (See article "How to officially calculate the TCO for your mobility budget?") of the government, there are the following annual costs:

• Company car price: 10,564.28 euros
• Fuel: 1,820 euros
• Co2 contribution: 383.88 euros

The TCO 2 for the Volkswagen here is 12,768.16 euros.

Operational lease

The operational lease in the lump-sum value formula is calculated the same as in the actual cost formula. A lease cost of €686 per month is also used here plus the cost of the charging station and parking and carwash charges. Corporation tax on the Benefit In Kind should also be included here.

Only the fuel costs will be calculated according to the established formula. This therefore amounts to €1,820. Due to the difference in the fuel cost, the non-deductible VAT is also different compared to the other calculation method. This is €1,473.11.

The TCO 2 in this case is 12,808.99 euros.

Conclusion

In the example, the actual cost formula is the most expensive, and thus along employer lines the least advantageous. There is a 14 per cent price difference between the lowest and the highest mobility budget. The question now is is the lump-sum value formula for purchasing a company car always the most advantageous now?

Which formula will be most advantageous depends on situation to situation. Some factors affecting TCO:

• If you have many/high additional costs (expensive charging station, lots of maintenance etc.), the actual cost method will come out higher than the lump-sum value formula. Similarly, this will have had its impact in this example. This is because the lump-sum value formula (purchase) assumes that all costs are contained in 35 per cent of the list value. This may then be an underestimated simplified way of working.
• The above may also explain the difference between the purchase option and the operational lease option. If there are more (unexpected) other costs with a purchased company car, this will mean a bigger difference from what is included as standard in the lease price.
• The actual cost formula (purchase) does not take into account the residual value of the company car. This is not described in the law, and is therefore not taken into account. Should this be taken into account, the cost of this TCO will decrease.
• If employees make many private journeys with the company car, the actual cost formula may be higher than the lump-sum value formula. This is because the standard value formula always uses 6,000 private kilometres. With the actual cost formula, this will be higher in most cases.
• On the other hand, the difference in the fuel cost calculation can have the opposite effect. Actual fuel costs are often reimbursed at CREG rates. This is lower than the established reimbursement of 0.13 cents/km in the lump-sum value formula.
• Working from home can also have an impact on the result. If more work is done from home, the actual cost for fuel will be lower. In the lump-sum value formula, fuel is calculated by default on the basis of 200 working days in the office. Nowadays, there are fewer and fewer commuters.

The lump-sum value formula, both for purchase and lease, seems to be a good formula to calculate the TCO for the mobility budget. It generally gives a good approximation of the total actual cost of the company car. Likewise, the formula is much easier to handle than the actual cost formula.