What is the difference between PCH and BCH?

Personal Contract Hire (PCH) is a leasing agreement for private individuals, while Business Contract Hire (BCH) is designed for limited companies, sole traders, and partnerships. The main difference lies in tax treatment, as businesses can often reclaim 50 percent of the VAT on the monthly finance payments and 100 percent of the VAT on maintenance packages.

How much has the UK leasing fleet grown recently?

The UK leasing fleet grew by 9.6 percent year on year to reach a record 2.14 million vehicles in Q2 2026. This growth was led by the car sector, which saw a 12.8 percent increase, significantly outperforming the van sector which grew by just 0.4 percent.

Why is salary sacrifice for cars becoming so popular?

Salary sacrifice is popular because it allows employees to pay for a car lease using their pre-tax income, reducing their Income Tax and National Insurance contributions. This makes new electric vehicles substantially more affordable, leading to the 51 percent growth seen in this sector during 2026.

Are electric vehicles cheaper to lease than petrol cars?

While the monthly rental for an electric vehicle may be higher than an equivalent petrol car, the total cost of ownership is often lower. This is due to significantly lower Benefit-in-Kind (BiK) tax rates for employees and lower running costs. In many salary sacrifice arrangements, a premium electric car can cost the driver less per month than a mid-range petrol vehicle.

What are the Current Trends in the UK Vehicle Leasing Market?

What is the Current State of the UK Vehicle Leasing Market?

The UK vehicle leasing fleet reached a record high of 2,144,743 vehicles in the second quarter of 2026. This represents a 9.6 percent increase compared to the same period in 2025. Vehicle leasing is a financial arrangement where a customer pays a fixed monthly fee to use a car or van for a set period, typically between two and four years, without owning the asset.

Surpassed the 2 million vehicle milestone

The market is currently characterised by a significant surge in private demand while the commercial van sector remains relatively flat. Total car fleet numbers grew by 12.8 percent year on year, reaching 1,697,422 units. This growth is largely supported by the rapid adoption of electric vehicles and the expansion of benefit in kind tax incentives for employees.

2.14M

Total UK Leasing Fleet Q2 2026

51%

Year-on-Year Salary Sacrifice Growth

19.6%

Personal Contract Hire Increase

What is Driving the Growth in Personal Car Leasing?

Private demand is the primary engine for market expansion, with Personal Contract Hire (PCH) and salary sacrifice schemes seeing the highest uptake. Personal Contract Hire is a long term rental agreement for individuals who want to drive a new car without the risks of depreciation or the commitment of ownership.

Salary sacrifice for cars is a contractual arrangement where an employee gives up a portion of their gross salary in exchange for a non-cash benefit, specifically a leased vehicle. Because the deduction happens before tax, it significantly reduces the cost of driving a new electric car. According to the BVRLA Q2 2026 report, the salary sacrifice sector grew by 51 percent, highlighting its role as a mainstream method for vehicle acquisition.

Fixed Monthly Costs
Leasing provides price certainty with maintenance and road tax often included in the single monthly payment.
EV Accessibility
Electric vehicles are more affordable through leasing due to lower Benefit-in-Kind tax rates and salary sacrifice savings.
Regular Upgrades
Drivers can access the latest vehicle technology and safety features every two to four years without selling an old car.

How is the Transition to Electric Vehicles Progressing?

The shift towards Battery Electric Vehicles (BEVs) is accelerating within the leasing sector more rapidly than the retail market. High upfront purchase prices for electric cars make leasing a more attractive entry point for both businesses and private individuals.

Data from the Society of Motor Manufacturers and Traders (SMMT) indicates that fleet and business registrations continue to lead the electric transition. In 2024 and 2025, over 75 percent of new BEV registrations were attributed to fleets and businesses. This trend is expected to continue as the UK moves toward the 2030 deadline for ending the sale of new petrol and diesel cars.

UK Leasing Sector Performance Data based on BVRLA Q2 2026 Statistics
Sector	Year-on-Year Change (Q2 2026)	Total Units
Total Leasing Fleet	+9.6%	2,144,743
Car Leasing Fleet	+12.8%	1,697,422
Salary Sacrifice	+51.0%	Approx. 180,000
Van Leasing Fleet	+0.4%	447,321

Why are Light Commercial Vehicle Numbers Stagnating?

Managing residual value risks

The van leasing sector, or Light Commercial Vehicle (LCV) market, grew by only 0.4 percent in Q2 2026, reaching 447,321 units. This stagnation is caused by a combination of high interest rates and uncertainty regarding electric van performance for long distance logistics.

Businesses are keeping their existing diesel vans for longer periods to avoid the higher costs of new lease contracts. While car leasing is thriving through tax efficient schemes, the commercial sector requires more robust infrastructure and financial incentives to trigger a similar boom in electric van adoption.

Our Take

At Egon Car Leasing, we are observing a specific trend where businesses are prioritising quick delivery of stock vehicles over bespoke factory orders. This shift suggests that operational readiness is currently more valuable to UK companies than exact optional specifications. We recommend that clients looking to manage residual value risks focus on high specification electric models which currently hold their value better in the secondary market.

What is the Forecast for the UK Leasing Market in 2027?

The UK vehicle leasing fleet is forecast to grow by a further 4 percent, reaching 2.22 million vehicles by the second quarter of 2027. This growth will be underpinned by the continued expansion of the salary sacrifice sector and a gradual recovery in the van market as inflation stabilises.