The latest Leasing Outlook report from the British Vehicle Rental and Leasing Association (BVRLA) reveals a diverging trend in the demand for new vehicles. 

BVRLA report shows that business contract hire (BCH) demand increased by 7.1% year-on-year.  

In addition, personal contract hire (PCH) demand fell by 7.1% as personal finance deals are impacted by rising costs and diminishing incentives. 

The report indicates that corporate environmental, social, and governance (ESG) strategies and favourable tax policies are fuelling the surge in BCH, which has also seen a 47% increase in demand for salary sacrifice cars.  

The overall BVRLA leasing fleet has grown by 2.4% to 1.9 million vehicles, with both cars and vans experiencing growth, suggesting a positive outlook for leasing companies this year. 

BVRLA said the adoption of cleaner vehicles is being driven by the burgeoning BCH market, with 75% of new BCH fleet additions in Q4 2023 being battery electric vehicles (BEVs) or plug-in hybrids.  

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In contrast, the PCH market is predominantly adding petrol vehicles, with two-thirds of new registrations. 

According to cap hpi’s head of forecast strategy Dylan Setterfield, the government possesses various tools to encourage BEV adoption and meet the Zero Emission Vehicle (ZEV) mandate terms.  

Setterfield suggests that harmonising VAT on public charging could lower electric vehicle (EV) running costs, particularly for those without private parking.  

He also advocates for additional incentives such as toll exemptions or discounted parking charges. 

The BVRLA report has highlighted the uncertainty and financial risks posed by the nascent used EV market.  

However, Auto Trader‘s director of automotive finance, Rachael Jones, points out positive trends, with used cars selling at their fastest pace in a year as of March. 

Leasing companies are exploring second-life leasing and extended contracts to mitigate volatile used values, although these practices are still developing.  

The average contract length for BCH remains unchanged at 40 months.  

A growing focus is on managing asset finance risk through improved vehicle management, with increasing concerns over repair times and costs. 

BVRLA corporate affairs director Toby Poston said: “It is great to see the BVRLA member lease fleet growing, but this growing imbalance between the business and retail segments – particularly for EVs – is a real concern. Benefit-in-kind and salary sacrifice incentives have fast-tracked corporate uptake of electric vehicles and are underpinning our progress towards the ZEV mandate targets.  

“Fleet operators and business drivers cannot bear the weight of the EV transition alone, especially as the mandate targets ratchet up in future years. The spotlight must turn to the private sector. It needs igniting.”