Leasing providers and their fleet customers are playing a central role in the UK’s shift toward battery electric vehicles, which now make up 48% of the business contract hire (BCH) car fleet, according to the latest Leasing Outlook report.
This shift, however, is placing strain on financial performance. Leasing firms report a 36% drop in confidence around future margins, largely due to ongoing losses tied to electric vehicle residual values.
At the same time, the overall leasing fleet has exceeded two million vehicles for the first time. This milestone has been reached despite mounting pressure on profitability, as economic challenges and EV depreciation continue to reshape the market, the BVRLA notes.
The report highlights that the combined car and van leasing fleet grew by 12.9% year-on-year, reaching 2,079,575 vehicles.
Over the same period, the wider automotive market saw new car registrations rise by 3.5% and van registrations decline by 10%. Mirroring recent quarters, growth has been driven by the car market, with the car fleet up 15% year-on-year, while vans increased by 6.8%. Established trends for business and personal customers also continued. Business contract hire (BCH) is up 10%, while salary sacrifice rose by 125%. In contrast, personal contract hire (PCH) declined by 4.3% as household budgets remain under pressure.
Economic conditions are also shaping customer behaviour. Leasing companies are seeing more businesses and consumers extend existing contracts to delay replacement cycles and better manage costs. As a result, vehicles are staying in fleets longer, signalling a more cautious stance on long-term financial commitments.
Toby Poston, BVRLA Chief Executive said: “Crossing the two million vehicle milestone is a significant achievement for the leasing sector and underlines the strength of demand for its flexible, low-risk model. However, this growth is being delivered against a backdrop of real financial strain.
“Persistent pressure on electric vehicle residual values, combined with wider economic uncertainty and global unrest, means margins are being squeezed like never before. Sustained progress will depend on greater market stability and clear, consistent policy signals from Government.”
Despite these pressures, the sector continues to adapt to structural change across vehicles, technology and customer demand. The Leasing Outlook Report also features commentary from Fleet Assist, cap hpi, and Autotrader, providing insights across vehicle repair trends, LCV values and market stability
Looking ahead, the sector expects continued growth in BCH and salary sacrifice, alongside rising demand for used leasing on electric cars. That optimism is offset by expectations of sustained pressure on margins as cost inflation, residual value risk and economic uncertainty persist.
