Leasing Outlook September 2024. Credit: BVRLA

Leasing is emerging as a key driver of electric vehicle (EV) adoption, with private motorists beginning to close the gap on businesses, according to the British Vehicle Rental and Leasing Association (BVRLA).

The latest Leasing Outlook report shows that in Q2 2024, battery electric vehicles (BEVs) accounted for 21% of new personal contract hire (PCH) leases, aligning with Zero Emission Vehicle (ZEV) mandate targets. However, the BVRLA has raised concerns that this momentum may be short-lived if the used EV market remains unstable.

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The BVRLA’s leasing fleet expanded by 3% year-on-year, with growth driven by a 4.1% rise in car leasing, while demand for vans stayed flat. Business contract hire (BCH) remains a strong performer, as do salary sacrifice schemes, both of which continue to attract increasing interest. In contrast, private demand for leasing has weakened, with PCH contracts down 13.2% year-on-year due to cost-of-living pressures.

Despite these challenges, BEV demand has grown in both business and personal leasing. Businesses are at the forefront of this shift, with 50% of all new BCH leases in Q2 2024 being BEVs, as companies focus on sustainability targets and benefit from government incentives. The business sector's role in EV adoption remains critical, far outpacing the private sector in its contribution to decarbonisation goals.

Private motorists are now also embracing leasing as a way to access BEVs, with manufacturers offering more models and adjusting prices to meet ZEV requirements.

However, the BVRLA warns that the lack of significant incentives for private EV buyers could slow future growth in this area, especially as leasing companies face new challenges posed by falling used EV values.

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Leasing companies are responding to this volatility by offering more used EV leases and extending initial rental periods, making electric vehicles more affordable for a wider range of customers, including SMEs and private motorists using salary sacrifice schemes. These strategies are seen as crucial for stabilising the market and sustaining the shift towards electric vehicles.

Toby Poston, BVRLA Director of Corporate Affairs, said: “Leasing continues to provide the most effective route for drivers to transition to cleaner vehicles, with private motorists showing signs of catching up to businesses. But the challenges posed by an immature used EV market cannot be ignored. Without further government support, the road to meeting ZEV mandates and the phase-out of internal combustion engines could become much harder to navigate.”