THE BVRLA leasing broker fleet shrunk by 2.95% to 390,898 vehicles in 2023, according to the trade body’s bi-annual report on the sector.
Vans experienced the biggest decline (3.6%) year-on-year (YoY) in 2023 to 95,977 units while cars dropped 2.7% to 294,921. The latter was due to a reduction in personal contract hire (PCH), which represented 57% of the broker channel fleet in 2023, down from 61% in 2022.
In contrast, business contract hire (BCH) for cars grew 9% YoY with the number of new additions increasing by 7% during the same period. Some of this growth can be attributed to salary sacrifice, the BVRLA says.
This trend was mirrored in the latest BVRLA Leasing Outlook report, which showed a 7.1% YoY increase for BCH, with salary sacrifice schemes surging by 47% over the same period.
Some brokers report exceeding these figures. AFL, which predominantly sells BCH, says that it saw growth of 13% from the previous year, for example, while Gofor continues to win salary sacrifice accounts.
“The 47% year-on-year growth in salary sacrifice is certainly a trajectory we recognise. Indeed, it’s one we’ve surpassed within our own business over the last 12 to 18 months.”
Nationwide Vehicle Contracts has seen an increase in its BCH mix which Director Keith Hawes believes could be due to corporate customers renewing ageing vehicles that they had previously extended and an increased take-up of battery electric vehicles (BEVs) to take advantage of the low benefit-in-kind (BIK) rates.
Many PCH customers, on the other hand, were extending their contracts at the same or lower rentals for up to 12 months rather than taking out a new, higher lease rate and additional upfront rental.
“The increasing imbalance between BCH and PCH demand is having a material impact on leasing brokers. In response, the sector has been pragmatic in its pursuit of alternative opportunities. By embracing the popularity of salary sacrifice, brokers are growing the BCH fleet and making electric vehicles more accessible to new sectors,” commented Toby Poston, BVRLA Director of Corporate Affairs.
“Being agile and entrepreneurial at their core, brokers are finding ways to succeed in an ever-changing market.”
It's a positive start to 2024 for brokers
Brokers report a favourable start to 2024, with Patrick Fagan, Business Development Director at AFL citing an “incremental” increase in BCH in Q1.
Nationwide Vehicle Contracts, meanwhile, has seen growth in both BCH and PCH in the first three months of the year compared to Q1 2023.
“Overall volume of new contracts delivered has grown by 24%, with PCH up 28% and BCH up 12%. This is likely due to availability of more OEM competitive deals and increased availability. Many of these (cars) were ordered in Q4 2023 and so represents a trend that we have experienced over the past six months. Furthermore, the mix of deliveries in Q1 2024 for PCH has increased by around four percentage points. Current order take remains strong across the board for both PCH and BCH.”
The growth of salary sacrifice is also set to continue.
“We believe the next 12 months will be crucial for capitalising on the demand in the salary sacrifice market and accelerating our plans to continue scaling. Our pipeline, in terms of the number of new companies we are consulting with and the number of employees we’re able to engage with, gives us real confidence in our capability to deliver sustained growth.”
However, brokers are conscious that they are dependent on manufacturer pricing strategies for the year.
“OEM is still a massive requirement for 2024. Without the discount support, it will be difficult for businesses to afford good lease prices.”
Van market starting to return to ‘pre-Covid’ conditions
Despite a 6% drop YoY in the BCH van fleet and a 7% decline in the number of BCH additions, brokers report improvements in Q4 2023 and Q1 2024.
“Q4 definitely felt like it was the start of a shift back to pre-Covid market conditions, supply was certainly up and prices were dropping. We also started to see the beginning of manufacturers and dealers starting to pre-reg vehicles so there was certainly a lot going on in the market.”
Liam went on to explain the factors behind the Q4 surge at Vanaways:
“The end of a year is always a buoyant time in the LCV market, as it was for Vanaways. Dealerships are trying to hit a target hence some pre-reg deals appearing. From a customer perspective, many businesses may have a budget to spend before the end of the year so invest in LCV to use up their Annual Investment Allowance.
“For certain sectors, Q4 is the busiest time of the year, where they need to scale up their fleets, such as the busy courier van market in the lead up to Christmas which kept us busy.”
This positive activity has continued in 2024, with “much more available stock in the market and pricing coming down”, according to Liam, which has created “lots of opportunities”.
“Businesses are no longer holding off replacing vehicles and with the worst of inflation and interest rates seeming to be behind us now there is “a bit more confidence in the market”, he says.
Lots of businesses need to electrify their van fleets and manufacturers will be looking to hit the 10% LCV ZEV mandate this year but, says Liam, “there is still a lot to be done around educating an electric van driver, and how it can work, or not work, for their business”.
Read the Bi-Annual Leasing Broker Survey H2 December 2023
Download from the BVRLA’s website 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.
