Leasing companies overcharging drivers on EV deals – new study
Cheaper leasing deals for battery electric vehicles (BEVs) will help more people afford new clean vehicles. Second-hand prices for BEVs are very strong in the UK, reflecting strong consumer trust in clean cars.
Leasing deals for battery electric vehicles (BEVs) are being overpriced, new analysis by T&E of the used car market finds. In the UK, leasing offers for BEVs are on average 51% more expensive than their equivalent petrol model. Leasing an electric VW ID.3 costs approximately £605 a month, whilst the petrol Golf is offered at £376.
In the UK, battery electric cars have the same resale value as diesel and petrol vehicles, the analysis finds. Leasing companies typically charge customers for the expected loss in value of a vehicle over the three to four year lease, so higher lease prices mean they expect BEVs to lose more of their value. But this is no longer the case in the UK.
T&E analysis of 2.7 million used car prices reveals that BEVs depreciate as much as other types of cars in the country. Second hand prices for BEVs are very strong. Resale values for both older and newer electric models are high, the analysis finds. But leasing offers for clean cars don’t reflect these trends and are still too high.
Ralph Palmer, electric fleets lead at T&E UK said: “Today customers are being overcharged by leasing companies if they want to switch to a battery electric car. Leasing firms are too conservative when setting their monthly prices. Their rates reflect the state of play from 5 years ago. With this pricing strategy, their profits are obviously high and consumers are overpaying to go electric.”
The study confirms that BEVs keep more of their value overtime, reflecting consumer confidence in newer models with improved technology. Consumer demand for battery electric cars, new and used, is at an all time high. This is further exacerbated by supply constraints, as used BEVs are hard to come by.
But leasing companies are still not offering the right prices to consumers for battery electric vehicles. Their approach to BEVs is outdated, meaning they penalize consumers with high monthly deals because they still consider BEVs as new and uncertain products. The BEV market is now established in the UK, and entails much fewer investment risks. Cheaper leasing deals will help consumers access affordable new BEVs, whilst also supplying more battery electric vehicles on the second hand market after three to five years of being leased.
Leasing companies – with a fleet of 12 million vehicles in Europe – have an outsized role to play in the transition to electric cars. In 2022, they accounted for 20% of new car registrations in the UK, the study finds. Leasing companies are often owned by banks and car manufacturers, the likes of Lloyds Bank, Société Générale, BNP Paribas, Volkswagen, Renault and BMW. In the UK, the leasing sector is leading the way on electrification, with a BEV uptake of 34.2%. This is much higher than its European counterparts, like France with a 7.5% BEV uptake in the leasing sector. Cheaper monthly leasing deals for BEVs will only boost electrification in the sector further.
Ralph Palmer concludes: “If leasing companies’ prices reflected the realities of the market, more consumers would have access to affordable new BEVs. Higher sales of new battery electric cars will also feed through into more BEVs in the second hand market. This will make electric cars more affordable for families. But car manufacturers also have to ramp up the supply. The zero emissions vehicle mandate – which sets targets for BEV sales for manufacturers and helps provide certainty for manufacturers to make the switch quickly to all electric production – will be key for that, but Ministers keep failing to sign off on the final regulations for consultation.”
Link to study.