Leasing companies have raised concerns about used values for high-value plug-in hybrid and electric cars, following a period where they accounted for almost two-thirds of business contract hire (BCH) deliveries.
In its latest Quarterly Leasing Report, the British Vehicle Rental and Leasing Association (BVRLA) said its BCH fleet had grown to 779,064 cars in Q3 2022 – a 3.8% year-on-year increase, but still 50,000 fewer than in the first quarter of 2020.
However, demand for plug-in company cars is booming since tax incentives were renewed in April 2020, with drivers typically paying 90% less benefit in kind than they would on an equivalent petrol or diesel car.
The savings are significant: a 40% income taxpayer in BMW’s £120,000 flagship BMW iX M60 electric SUV would pay £79 benefit in kind per month, while a 20% taxpayer in a £28,000 BMW 116d SE diesel would pay £139.
The BVRLA’s data shows 41% of BCH deliveries were electric and 20% were plug-in hybrids, while diesel has fallen steeply from an 80% share in 2015 to just 8% in Q3 2022.
Low company car tax has also boosted demand for salary sacrifice schemes, where 86% of new deliveries were electric, 8% were plug-in hybrid and volumes increased by 20.5% year on year – albeit only to a modest 37,000 vehicles.
That trend is expected to continue, with members noting that fleets are increasingly basing decisions on whole-life costs instead of lease prices and company car tax advantages remaining until at least April 2028.
However, there are concerns about residual values as 2022’s influx of electric cars reaches the used market. Second owners don’t benefit from company car tax savings and electric cars will be liable for vehicle excise duty from April 2025 – factors that help offset higher list prices when they are new.
Members suggested a used plug-in car grant, battery health certification and more public charge points to reassure buyers but added that electric vehicles’ high reliability and low maintenance costs made them ideal for second leases. With long waits for factory orders, 2.7% of BCH agreements, and growing, are for used cars.
Semiconductor-related production shortfalls have left fleets facing extended delivery times, increased list prices and rising interest rates, while adapting to increased home working.
New BCH agreements averaged 45,887 miles and 38 months in Q3 2022, compared with pre-pandemic norms of 60,000 miles and 36 months, reflecting government data that shows business and commuting mileage declined by 34% between 2019 and 2021.
“Vehicle supply remains the number one issue [for members],” said BVRLA chief executive Gerry Keaney. “The lack of price protection from vehicle manufacturers is being compounded by delivery times extending [and] leasing companies are often unable to give their customers accurate costs before tyres have hit Tarmac.”