The UK’s ambitious decarbonisation plans could be derailed as fleet lease rates soar, driven by a growing crisis in the used EV market, according to the British Vehicle Rental and Leasing Association (BVRLA). The organisation has raised concerns that without swift government intervention, the falling value of used EVs will severely undermine both fleet electrification and the broader transition to zero-emission transport.
Over the past two years, the value of used EVs has dropped by a staggering 50%, with further declines expected in the coming years. New data from Oxford Economics predicts that between 2024 and 2030, used EV prices will plummet by an additional 28%. For electric vans, the drop is estimated to be 12%, raising concerns over the viability of electrifying commercial fleets, a crucial component in the UK’s net-zero goals.
While EV depreciation may seem like a boon for second-hand buyers, it’s causing turmoil in the leasing market, which is responsible for 75% of new EV registrations in the UK. As used EV values nosedive, leasing companies are grappling with higher costs, resulting in inflated lease rates for new electric cars. This could deter businesses and private customers from making the switch to electric, a crucial step in the UK’s efforts to phase out petrol engine vehicles by 2030.
Gerry Keaney, chief executive of the BVRLA, warned, “The crisis we are seeing in the used EV market is a direct threat to the Government’s ambitious ZEV mandate and ICE phase-out targets. New EVs are expensive while used EVs are stunningly cheap, but this gap in price is unsustainable.”
The imbalance has left fleet operators and leasing firms bearing the brunt of the financial strain, particularly as confidence in EV residual values dwindles. Oxford Economics forecasts that the combined effect of reduced trust and rising lease costs could lead to nearly 300,000 fewer new EV registrations between 2023 and 2027, a concerning statistic when the UK only recently hit the 300,000 mark for annual EV registrations.
The BVRLA’s call for government action is urgent. They’ve launched the #happyEVafter campaign, urging the government to introduce a suite of measures to bolster the used EV market. These include introducing a 0% Benefit-in-Kind tax rate for used EVs, a targeted Used EV Plug-in Grant, and improved transparency through standardised battery health certificates. The campaign also seeks to dispel common myths surrounding electric vehicles, which may be contributing to the reluctance of consumers to embrace second-hand models.
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For fleet managers, the rising lease costs present a difficult dilemma. As prices climb, many are questioning whether they can afford to meet the Government’s zero-emission vehicle targets. This challenge is compounded by the fact that many fleets were early adopters of EVs, meaning that the wave of vehicles coming off lease will soon flood the second-hand market, further driving down prices.
The BVRLA’s warning comes at a pivotal time for the UK’s car industry. While the government has made significant progress with its ambitious targets, the growing disparity between new and used EV prices risks alienating the very fleets and consumers who are needed to maintain momentum.
John is the Editor and Spokesperson for Electric Car Guide.
With over 20 years of writing experience, he has written for titles such as City AM, FE News and NerdWallet.com, covering various automotive and personal finance topics.
John’s market commentary has been covered by the likes of The Express, The Independent, Yahoo Finance and The Evening Standard.
