Electric vehicles continue to underpin growth in the UK vehicle leasing market, even as wider economic conditions remain subdued, according to a company press release issued alongside the BVRLA’s latest Leasing Outlook Report. The association said the total leased fleet grew by 8% year on year to 1.98 million vehicles.

Leasing Outlook Report (January 2026)

The BVRLA said the increase in volumes is being achieved against a backdrop of tightening margins, with higher costs and vehicle depreciation offsetting growth. It warned that profitability pressures are likely to intensify in 2026 if current market conditions persist.

Toby Poston, chief executive of the BVRLA, said the sector remained a significant contributor to new vehicle registrations and lower-emission transport, but noted that progress was being made “in the face of relentless pressure” from compliance costs, constrained customer budgets and depreciation in the electric vehicle market.

He added that policy-related challenges, including conditions in the used EV market and proposals for the electric vehicle excise duty regime, required “an urgent policy rethink”, citing concerns over their design and timing.

Vincent St Claire, managing director at Fleet Assist, highlighted wider considerations for BEV adoption, saying operators “have anticipated the gap in fuel duty needing to be addressed at some time” but warned that “the timing and methodology of a pay per mile tax requires a thorough assessment.” He added that industry confidence must be maintained as BEV ownership involves more than “lower operating costs and Benefit in Kind taxation,” with future concerns about OEMs and garages also relevant.

Growth continued to be led by Business Contract Hire (BCH), with fleet volumes up 7.9% year on year. Salary Sacrifice remained the fastest growing segment, supported by demand for electric vehicles, while Personal Contract Hire (PCH) fell by 3.7% as households reduced discretionary spending. The split between vehicle types widened further, with car volumes up 12.5% year on year, compared with a 4.2% decline in vans.

Dylan Setterfield, head of forecast strategy at cap hpi, said forecasts already suggest a decline in new car sales from 2027 due to the ZEV Mandate, noting that manufacturers will likely discontinue many petrol and diesel models to “maximise the ratio of electric cars registered…to avoid swingeing fines.”

The BVRLA said that areas of sustained growth were characterised by a strong supply of suitable electric vehicles and the availability of financial incentives. Battery electric vehicles now account for 47% of the BCH car fleet, contributing to a reduction in average emissions to 40.2g/km, the lowest level recorded by the association.

Rachael Jones, director of automotive finance at Autotrader, highlighted broader market trends, observing that volumes could accelerate to “approximately 10.03 million,” with the used car segment expected to grow by 3% in 2026, while new car registrations are forecast to rise only 1% to around 2.035 million.

Members reported that the expanding range of electric models and brands had supported growth in Salary Sacrifice schemes, with increased participation from lower-rate taxpayers as monthly lease costs became more accessible.

The report also highlighted changes in customer behaviour in response to economic pressures. While three-year contracts remain standard, contracted mileages are falling as customers seek lower monthly payments. Interest in longer lease terms is increasing, although the BVRLA said this has yet to result in a significant shift in overall agreement lengths.