LEASING brokers have reason to be optimistic about 2024, despite drops in personal contract hire (PCH) and commercial vehicle contracts, recorded in the BVRLA’s bi-annual report on the leasing broker sector.
In the 12 months to the end of June 2023 the BVRLA broker channel fleet declined by 0.6% to 401,359 vehicles, with the van fleet dropping 3.8% to 97,395, amid ongoing vehicle supply issues.
The PCH fleet declined by 6% to 176,203, and the proportion of new PCH contracts joining the fleet fell 64% to 43%, with consumer spending affected by the cost of living crisis as interest rates and monthly mortgage payments soared.
In contrast, the BCH fleet grew by 10% to 117,617 vehicles, thanks to low benefit-in-kind rates for electric vehicles, which also resulted in the growth of salary sacrifice schemes.
BCH now makes up 39% of the BVRLA broker channel fleet and contributes 54% of new contracts. Battery electric vehicle (BEV) is the predominant fuel type (39%), with a further 16% being plug-in hybrids.
This trend was borne out in the wider new car market, with private sales midway through the year taking a 45.8% market share (down from 53.4% in 2022) and fleet sales accounting for 51.7% of the market.
Similarly, leasing companies reported their BCH car fleet was up 3.5% year-on-year and PCH was down 7% YOY in the BVRLA leasing outlook report – where leasing broker sales played a significant role.
However, industry experts believe consumer demand for PCH will pick up in 2024.
Since the summer our diverse advertising partners have reported improved new car supply across most manufacturers and this has been evidenced in some excellent consumer deals being promoted on Leasing.com. One key difference this year has been how demand differs between the personal and the business leasing market.
Private motorists have increasingly turned back to petrol vehicles for affordability reasons, whereas business drivers are now all in on BEVs. Manufacturers can’t afford for that trend to continue for too much longer in the personal leasing market and we’re expecting further incentives on BEVs to be available throughout 2024, as well as a general increase in demand for PCH as inflationary pressures begin to ease for households.
The role of flexible leasing and subscription models for leasing brokers in 2024
Some consumers and businesses may also turn to flexible leases and subscription models rather than being tied into long contracts. The number of cars funded through subscription grew in 2023, although it still represents a very small proportion of the overall BVRLA broker channel fleet.
Having spoken to a number of fleets companies and brokers, subscription continues to evolve and be a part of their scale strategy in 2024. It is currently being utilised to resolve the gap between order and delivery, with fleets recycling cars under shorter terms to keep consumers mobile, and their new car orders secure.
There is also increasing interest in lease cars being retained for longer periods beyond their initial term, with vehicles being utilised for subscription for up to another 12 months. This additional period provides higher margins under a subscription model as consumers pay more for flexibility, and aftercare costs are low in line with the vehicle’s age.
I think fleets and brokers will recognise the additional opportunity subscription brings to their strategy, and why they are best placed to capitalise on a growing consumer market.
Rod Lloyd (right), the new chair of the BVRLA Leasing Broker Committee, and chief executive officer at the lcv group, believes that, although 2024 will be a “harder year” for brokers due to cost pressures, the overall outlook is positive.
“The outlook for brokers is still good because in times of economic slowdowns customers generally move from purchase products into rental products,” he said.
He suggested that the supply issues which have particularly troubled the van market in 2023 will improve in 2024 thanks to “much stronger” supply of the Ford Transit Custom early in the year, new electric vehicle product from China, and the new Volkswagen Transporter due at the end of Q3.
That should mean that businesses who have opted for six and 12-month contract extensions over the past year switch to new vehicles.
Rod also encouraged brokers to “take heart” from the investments being made in the broker market by large companies – such as the purchase by Mobilize Financial Services in Select Car Leasing.
“That shows the confidence that people have in the broker market and that our sector is the right one to invest in,” he said.
The BVRLA report on the leasing broker fleet can be downloaded here.
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Sarah Tooze has been an automotive journalist for more than 15 years, specialising in the fleet and transport sectors. She has held senior positions at industry-leading B2B titles Fleet News and Smart Transport, and led campaigns championing motorists as consumer editor for online used car marketplace Heycar and motoring advice website HonestJohn.co.uk. In 2017 she won the Newspress Automotive Business Journalist award.
