28 October 2021


We spoke to Toby Poston of the British Vehicle Rental and Leasing Association to find out what is happening in company car leasing.

EV leasing grows, but the drop-off in diesel continues

While there has been some distortion of the market due to the continuing semi-conductor shortage, it appears the drop off in demand for diesel continues, while electric vehicles increase in popularity.

Only 15% of new leased vehicles through BVRLA members in the past quarter ran on only diesel – a lower market share than both battery electric and plug-in hybrid vehicles.

What we are seeing is that if somebody really can’t find a way to go electric, they are more likely to choose a petrol, rather than a diesel. Diesel is still an excellent choice for high mileage though, and so in the next year as drivers start to ramp up distances after Covid-19 it will be interesting to see if there is some increase in demand for it,” says Toby Poston, BVRLA Director of Corporate Affairs.

But the real interest is in electric vehicles. Because of the fact the user is protected from much of the risk through leasing, and pays a known quantity every month, leasing – and in particular contract hire - is proving a huge popular funding mechanism for electric cars. Possibly the only thing holding back even higher volumes are the current supply issues and a lack of foresight on the future tax regime.

According to BVRLA figures, in 2014, diesel had an 83% share of the fleet market, with petrol 14% and electric 2%. This year, diesel accounted for 39%, petrol 37% and electric 24%.

Salary Sacrifice has changed to EV only

Despite a lot of excitement about salary sacrifice and its EV potential, the BVRLA’s market data is not yet tracking any significant increase in volumes, although the market share of BEVs has soared to around 70%.

Salary sacrifice is without doubt leading the democratisation of electric cars,” says Toby. “It provides a route into them for employees who might otherwise not have been able to afford one.

Overall numbers of salary sacrifice cars have not increased markedly in the past year, but I think a reason for that may well be that HR have to be heavily involved in setting up these schemes, and for most companies this department has had its hands full managing the many and various demand of Covid-19. Once that all settles down, and HR teams can start planning ahead, it will be really interesting to see where salary sacrifice goes.

Longer consideration times for leasing

As fleets and their drivers are changing to electric, there has been a noticeable shift to longer times spent on the choice of supplier, and choosing a deal.

Previously, when a company car driver might have been choosing a diesel or petrol car, often the consideration process was fairly straight-forward, because running that vehicle was a mostly known quantity: you know how it worked from previous experience. So choices were based on quite small known factors, such the relative efficiency of engines, brand, specification, practicality and then, ultimately, price,” says Toby.

If you were so minded, you could make that choice of car really quite quickly, and your supplier could get you into a new contract as soon as the decision was made.

With electric, there are so many other factors that it has the effect of lengthening the consideration process. For the employers that probably means a lot more work ensuring they have the right suppliers and infrastructure in place, but then also dealing with a lot more questions from employees who are trying to figure out how an electric car fits into their everyday lives.

There are many more questions to ask and some systemic issues to sort, as opposed to previously choosing between two differently-badged diesel estates, for example. They need to look at their overall lifestyle, and accompanying driving needs, where a home charger can be cited, even what energy tariff they are on. And all this takes time.

As a result, leasing companies are having to be far more consultative, over a longer period of time, during the decision-making process.

No change in contract lengths, but an increase in new products

The last year of the pandemic, and the change of working habits for many, has not resulted in a noticeable change in contract lengths.

It might have been expected that companies would be reducing the annual mileage of contracts with more working from home, or putting employees on shorter lifecycles due to less confidence in what might happen over the next few years, but the BVRLA has not seen much movement on this front, with the average terms for fleet contract hire remaining at around 56,000 miles over three years.

There are however, a lot more innovative new funding products on the market.

We have seen quite a few really interesting new products launched, especially those with platform-type offerings that include the monthly vehicle cost, insurance, servicing and other costs - an ‘all in one car subscription service’. With electric, you can see his type of bundled service being popular,” says Toby.

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