Leasing Continues Upward Trajectory Despite Squeezed Margins

The UK’s vehicle leasing sector continues to deliver volume growth in the face of a flatlining national economy, with the BVRLA’s latest Leasing Outlook Report showing an 8% growth in leased vehicles year on year. As the lease fleet edges ever closer to the two-million vehicle mark (1.98m), the growth comes with a warning from the sector that volume growth is at the expense of margins, something expected to worsen in 2026.

Toby Poston, BVRLA Chief Executive, said: “The vehicle leasing sector continues to play a vital role in driving new vehicle registrations and delivering road transport decarbonisation. But any satisfaction from these achievements is tempered by the relentless pressure of compliance costs, cash-strapped customers and rampant EV depreciation.

“Our industry is agile, resilient and innovative, but it needs to work in partnership with the Government. The faltering used EV market and the badly designed and poorly timed eVED regime proposals are two prime examples where we need an urgent policy rethink.”

Consistent with recent trends, the fleet’s growth is being driven by Business Contract Hire – up 7.9% yoy – and Salary Sacrifice, which remains the fastest growing part of the sector. Personal Contract Hire continues to struggle – down 3.7% – as households commit tighter budgets elsewhere. The divergence between the car and van markets continues, with car registrations up 12.5% year on year, while vans have declined by 4.2% over the same period.

A contributing factor seen across all areas to see sustained growth, and absent from those in decline, is the presence of healthy availability of suitable electric vehicles, and financial incentives. Such conditions have contributed to Battery Electric Vehicles accounting for 47% of the total Business Contract Hire car fleet, which has seen average emissions reduce to record lows (40.2g/km). 

The volume of new models and brands within the electric vehicle space has helped to fuel recent growth of Salary Sacrifice, with BVRLA members reporting a rise in lower-rate taxpayers joining schemes as monthly rates become more accessible.

The tight economic landscape is also impacting how people think about their lease terms and renewal periods. Despite three-year leases remaining the benchmark for agreements, contracted mileages are coming down as cheaper monthly rates are sought. The frequency at which longer lease terms are being considered is also up, although this it yet to materialise on a notable level.

Headline figures from January report

• BVRLA leasing fleet grows 8.0% year on year (yoy), to reach 1.98m vehicles
• Car fleet up 12.5%; van fleet down 4.2% yoy
  - Car fleet: 1.51m vehicles
  - LCV fleet: 476,631
• BCH car fleet up 7.9% yoy; Salary Sacrifice up 123% yoy; PCH down 3.7% yoy
  Salary Sacrifice figure reflects both market growth and improved categorisation, following an adjustment in the sample data in line with a broader market data set to ensure accuracy and consistency in reporting
• 65.2% of all new BCH car contracts, and 65.5% of new van contracts, include maintenance
• Used cars account for over 40k lease contracts