Total Cost of Ownership

The lease price depends on the model, the lease period and the mileage. In this example, we have chosen to compare three very similar vehicles of the same make, with the drive as the main distinguishing factor. 

It is crucial for businesses to take into account not just the lease amount excluding VAT, but the non-recoverable VAT as well, as they can only reclaim part of the VAT costs. The tax authorities offer various VAT regimes, the most common being based on a fixed rate: only 35% of the VAT can be recovered, while the remaining 65% is treated as a cost. This is usually stated on the lease offer as ‘lease price including 65% non-recoverable VAT’. 

Fuel and electricity costs form a significant part of the TCO. Depending on the number of kilometres per month and consumption, these costs can vary greatly. Four crucial factors come into play here: 

• The vehicle’s consumption: expressed in kWh/100 km (electric) or l/100 km (fuel) according to the manufacturer’s specifications. This is the consumption of a vehicle driven according to a recognised test cycle (the WLTP cycle). 
  
  

• The consumption factor: the consumption figure from the test cycle often differs from the actual consumption in practice. To ensure a realistic cost estimate, we assume that the consumption is approximately 15-35% higher than the test values. 
  
  

• Fuel¹ and electricity prices: changing fuel prices generally reflect oil prices and tend to differ only slightly between the various petrol stations and suppliers.  With electric charging, the difference can be much greater.  The charging location is an important cost factor, as the price per kWh depends to a significant extent on where the car is charged: 
  
  

  • Home Charging Services: ± €0.35/kWh - source: VREG, Feb. 2025 

  • Charging at work: ± €0.28/kWh - source: VREG, Feb. 2025 

  • Public charging: ± €0.44/kWh – average AC charging price, Q4 2024 

  • Fast charging: ± €0.68/kWh – average DC charging price, Q4 2024 

With a typical charging mix of 40% at home, 40% at work, 15% public and 5% fast charging, the average charging cost works out at around €0.37/kWh. 

• The split between fuel and electricity consumption (for plug-in hybrids). For plug-in hybrids (PHEVs), it is crucial to use the right consumption figure when calculating costs. The official consumption values of 1 to 3 l/100 km are based on an optimised test cycle in which a lot of electric driving takes place. Road tests show that PHEVs are only driven electrically 15-25% of the time. This means that fuel consumption is considerably higher, usually somewhere between 6 and 8 l/100 km. This must be taken into account for a realistic estimate of the actual costs. 

The investment and management costs of charging infrastructure depend heavily on the chosen charging policy. With electric vehicles, it is possible to charge not just for the electricity costs, but for the costs of installing and managing the charging points. 

In our example, the home charging infrastructure is included in the lease price, providing a more realistic picture of the total cost of use and enabling a proper comparison to be made between electric cars and vehicles that run on fossil fuels. 

Tax breaks have played a crucial role in the rise of electric vehicles in recent years. For employers, there are five important tax considerations: 

The taxes themselves: 

• Vehicle registration tax (BIV/TMC) and road tax. These costs are often included in the lease price, as is the case in this example. 
  
  

The solidarity contribution: 

• This is a monthly social security contribution that employers pay for company cars that are also used privately. It is determined on the basis of the vehicle’s carbon emissions and fuel type. 

• Since 2023, the minimum carbon contribution has increased significantly, and an annual indexation formula applies to fuel vehicles until 2027. The purpose of these measures is to further discourage the use of conventional vehicles and incentivise businesses to go electric.  
  
  

Disallowed costs: 

• Part of the vehicle costs is disallowed for the calculation of taxable profit.  
  
  

Tax deductibility: 

• Almost all costs (including VAT and taxes) can be deducted from the taxable amount based on the vehicle’s carbon emissions. 

• This tax break will be phased out by 2028 for contracts starting on or after 1/07/2023 for conventional cars (petrol, diesel and CNG). For plug-in hybrids, this decrease in tax deductibility has recently been modified by a decision of the new federal government, As a result, for 2026 the possibility of full deductibility for vehicles with this drive type will return. However, this does depend on the vehicle’s carbon emissions.  
  
  

Benefit in kind (employees only) 

• A benefit in kind is a taxable benefit for employees who are also allowed to use a company car privately. The tax authorities regard this as an additional form of remuneration, which is subject to tax. The calculation depends on the vehicle’s catalogue value, carbon emissions and age. The tax on the benefit in kind has to be paid by the employee, so it does not have to be included in TCO calculations. 

To make all this clearer, we would like to give an example, showing the TCO of three similar vehicles of the same make, each with a different propulsion system. The analysis has been performed for a 7-year operating lease with a use of 20,000 km per year. We will show the different TCO elements for each vehicle. The TCO is indicated by a yellow line: this shows the total cash-out costs (the sum of the coloured bars) minus the tax impact. 

The graph provides a simulation of the changing tax treatment per year from 2025 onwards (due in particular to the solidarity contribution and the tax deduction). It makes it clear that fuel vehicles will be a lot more expensive from 2025 onwards due to the changed tax treatment. Both the decrease in the tax deduction and the increase in the solidarity contribution mean that the TCO will rise by no less than 29% in 5 years. 

 

This impact will apply to a lesser extent to PHEVs due to the recent change to the tax deduction, and they are still eligible for a limited solidarity contribution. From 2028, though, this maximum deduction will gradually drop back down to 0% in 2030.  

For electric vehicles, the TCO has already been more advantageous than that of comparable alternatives in recent years. This difference is set to increase in the years ahead, making the business case for an electric vehicle even more attractive.