Despite the landslide in used EV values, brokers are taking positive steps to create a new market for used EV leasing
THERE is no denying that leasing companies have been having a hard time with residual values (RVs) on electric vehicles (EVs).
Earlier this year, BVRLA CEO Gerry Keaney went as far as suggesting the used EV market was “close to failure”.
But is the tide finally turning?
At the end of July, cap hpi reported it had been the strongest month for used electric cars this year and in August there was an increased desirability for used EVs among dealers with improved auction conversion rates, indicating a growing acceptance in the market.
The latest Auto Trader research in August shows used EVs recording their highest ever market share at 2.3%.
“Used EVs are currently selling at their fastest rate in eight months, while those aged 3-5-years-old, which are now broadly at price parity with their petrol counterparts, are the fastest selling segment of the used car market, and by some margin. Clearly, when the price is right, buyers are eager to make the switch.”
Opportunities with used EV leasing
A number of forward-thinking brokers are already offering used EV leasing products. Best Volume Broker 2024 Nationwide Vehicle Contracts, for instance, offers used leases to personal contract hire (PCH) customers and will extend this to business users later this year.
Overall, since launching the used lease programme in December 2023 the mix of EVs contracted has averaged at circa 16%, with some months peaking as high as 40%, depending on supply and pricing.
Keith Hawes, Director of Nationwide Vehicle Contracts, says that supply has been “cut back severely” this year due to RV drops, refurbishment costs and the “additional hurdles” from manufacturers’ “aggressive discounting” on new EVs to move stock and meet the quota under the ZEV mandate.
However, he is expecting the reintroduction of certain EV models later this year and anticipates new suppliers coming into the used lease market specifically with EVs leading the way.
Thom Groot, CEO of The Electric Car Scheme, which has offered used electric cars through salary sacrifice since 2022, is also optimistic about market supply.
More than a third of The Electric Car Scheme’s orders came from used car leasing in Q2 – ahead of expectations – and Thom believes there is a “a lot of potential in the used market”.December 200
“We would expect every car supplier to want to enter this market as the used car market is eight times larger than the new car market; and with EVs having significantly longer lifetimes (lower maintenance requirements, longer warranties, limited battery degradation), our view is that any savvy lease company will go into this space.”
loveelectric expands reloved product
EV leasing broker loveelectric – winner of our Best EV Broker 2024 – has had a partnership in place with leasing giant Lex Autolease since October 2023 and it has developed “innovative tech solutions” to support this, according to CEO Steve Tigar.
Its Live Vehicle Stock API distributes cars across multiple sales channels simultaneously, preventing double selling and “ensuring a seamless experience”, Steve says.
Loveelectric’s reloved product was originally designed to mitigate risks for businesses using salary sacrifice arrangements and targeted those earning at least £35,000 annually.
However, leases are now offered to individuals earning £25,000 or more and this summer it began offering used EVs via business contract hire.
Any vehicle which has had a prior owner, including vehicles which may have only a few miles on the clock but have been previously registered, are available through reloved and a wide range of manufacturers, including Hyundai, MG, Porsche, Tesla, Vauxhall, Volkswagen, and Volvo, consistently feature.
Customers can choose between 12 or 36-month lease terms, with mileage options ranging from 5,000 to 15,000 miles per annum.
Used EVs now account for just under 50% of Loveelectric’s total signed orders and Steve has high expectations about future growth.
“Given the strong growth we’ve already seen, we’re forecasting a substantial increase in the uptake of used electric vehicles. By 2025, we anticipate re-leasing tens of thousands of used EVs through the marketplace. This growth is driven by several factors, including the rising demand for more affordable electric vehicle options, increased consumer confidence in the longevity and reliability of EV batteries, and our expanded partnerships, such as the one with Lex Autolease. These developments position us to scale our operations significantly, making used EVs a central part of our business strategy.”
Customer experience and incentives key to take-up
Brokers who want to be successful in the used EV market must focus on vehicle condition.
“The key to playing in the used EV market is customer experience. Ensuring the car is brought up to a great standard before leasing it out, ensuring the delivery is done to the highest standard and the car arrives clean. This is where we still see issues from those getting it wrong vs those who are getting it right.”
Government support is also seen as imperative by many, including Nationwide Vehicle Contracts.
“To promote take-up it is incumbent on government to help the industry in not only securing stability in the used EV market but it is also vitally important is to provide incentives for private buyers and lessees to adopt an EV rather than just focus on corporates and public sector employees through generous tax benefits.”
It’s certainly something that the BVRLA is campaigning for. Gerry Keaney, BVRLA Chief executive said: “The ZEV mandate timetable and 2030 Phase Out target for cars present a major risk unless we see much greater government support to stimulate new and used EV demand and better charging infrastructure.”
But one way of building this stimulus is through brokers delivering used EVs via leasing schemes. As long as new EV discounts don’t muddy the price differential, it’s an excellent way to make electric cars more attainable to both private and business customers, while smoothing out the RV drop over a secondary lease cycle protects the investment of the funders.
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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.
