The United Kingdom automotive leasing sector is currently navigating a period of significant transition. While the shift toward zero-emission vehicles remains a central pillar of government policy, recent market volatility has prompted urgent calls for intervention. The British Vehicle Rental and Leasing Association (BVRLA) has identified a challenging environment regarding electric vehicle (EV) residual values, describing the current situation as a difficult period for the used car market. For Egon Car Leasing clients, understanding these shifts is essential for making informed decisions about fleet procurement and personal contract hire (PCH) agreements.
Addressing the Residual Value Challenge
Residual values represent the estimated worth of a vehicle at the end of a lease term. These figures are critical because they directly influence the monthly rental costs of a Contract Hire agreement. Recent data indicates that used EV prices have experienced a sharper decline than their internal combustion engine (ICE) counterparts. This trend creates a complex landscape for leasing providers who must balance competitive pricing with the risk of asset depreciation. Industry leaders are now looking toward the Autumn Budget for measures that could stabilise this segment of the market.
Maximising your tax benefits when leasing
The BVRLA has been vocal about the need for targeted support to prevent further market instability. Specifically, the association has called for a temporary reduction in VAT on used EVs and the introduction of a used EV grant. These measures are designed to stimulate demand in the secondary market, which in turn protects the residual values of new vehicles being leased today. For businesses, high residual values translate to more attractive initial rental terms and lower ongoing monthly commitments.
Current Benefit in Kind (BIK) Framework
Benefit in Kind tax remains the single most effective tool for driving EV adoption among corporate fleets. The current certainty provided by the government up to 2028 has allowed many companies to transition their staff into electric models with confidence. However, as we approach the latter half of the decade, the lack of clarity beyond 2028 is beginning to impact long-term fleet planning. Businesses typically operate on three to four year lease cycles, meaning decisions made in 2025 will be affected by tax rates in 2029 and 2030.
| Tax Year | Electric Vehicle BIK Rate | Hybrid (1-50g/km) BIK Rate |
|---|---|---|
| 2024/25 | 2% | 8% - 14% |
| 2025/26 | 3% | 9% - 15% |
| 2026/27 | 4% | 10% - 16% |
| 2027/28 | 5% | 11% - 17% |
Electric company car costs for 2026
Infrastructure and the ZEV Mandate
The Zero Emission Vehicle (ZEV) mandate requires manufacturers to ensure that a specific percentage of their new car sales are zero-emission. In 2024, this target is set at 22 per cent, rising incrementally each year. While manufacturers are striving to meet these quotas through various incentives, the demand from private retail buyers has not yet matched the pace of the mandate. This discrepancy has led to calls for the government to reconsider how it supports private individuals transitioning to electric motoring.
EV charging infrastructure also remains a primary concern for those considering a switch. Although the UK has seen a 37 per cent year-on-year increase in public charging points, the distribution remains uneven across different regions. For Egon Car Leasing customers, we recommend assessing local charging availability before finalising a contract. Reliable home charging remains the most cost-effective way to operate an electric vehicle, though public ultra-rapid hubs are becoming more prevalent along major trunk roads and motorways.
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Strategic Outlook for Business Contract Hire
Business Contract Hire (BCH) continues to be the most popular method for UK firms to acquire new vehicles. This is largely due to the VAT recoverability and the ability to offset rentals against corporation tax. Despite the discussions surrounding a market bloodbath in used values, the new car leasing market remains robust for those who focus on total cost of ownership. EVs still offer significant savings on fuel and National Insurance contributions for employers, even when accounting for the gradual rise in BIK rates.
Operational efficiency is another factor driving the trend toward leasing. By opting for a contract hire agreement, businesses remove the risk of vehicle disposal from their balance sheets. The leasing company takes the risk on the future value of the car. This protection is particularly valuable during periods of technological change, such as the current evolution of battery density and charging speeds. A business can lease a flagship electric saloon today and return it in three years without worrying about how much the next generation of battery tech has devalued their current asset.
Projected UK Public Charging Point Growth
We have observed that lead times for popular EV models are beginning to stabilise. While some premium SUVs still face delays, many volume-market hatchbacks are now available for delivery within 12 to 16 weeks. We suggest that fleet managers begin their renewal conversations at least six months before a current contract expires to ensure they can secure the exact specification required without compromising on brand or range due to stock availability.
Navigating the Road Ahead
As the industry awaits the final details of the Autumn Budget, the focus remains on stability. The automotive sector does not require radical upheaval but rather consistent policy that supports both the new and used markets. For drivers, the current environment offers an opportunity to access high-specification electric vehicles through leasing models that mitigate the risks associated with ownership. Whether you are an individual looking for a Personal Contract Hire deal or a business owner managing a fleet, the emphasis should remain on long-term value and service reliability.
In conclusion, while the term bloodbath has been used to describe the used EV market, the new leasing market continues to offer exceptional opportunities for cost-efficient motoring. By leveraging the tax advantages of electric vehicles and the fixed-cost nature of contract hire, drivers can navigate this period of change with financial certainty. Egon Car Leasing remains committed to providing the expertise required to guide our clients through these trending topics and into their next vehicle with confidence.
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