Salary sacrifice up an amazing 63% year-on-year

THE BVRLA’s leasing fleet has grown for five consecutive quarters, driven by the successes of salary sacrifice and business contract hire (BCH).

BCH was up 7.5% year-on-year (YOY), while salary sacrifice was up a staggering 63% YOY.

The fleet now stands at more than 52,000 vehicles, up 2.8% in quarter one 2024 versus the same period in 2023, according to the latest BVRLA Leasing Outlook report.

In contrast, personal contract hire (PCH) was down 11.3% YOY due to the cost-of-living crisis allied to the ‘sticker shock’ of new lease rentals being much more expensive than for the cars they replace.

A fifth of businesses plan to implement salary sacrifice

Salary sacrifice numbers were boosted by the inclusion of new fleet data from a funder specialising in electric vehicles (EVs). Nonetheless, some executives think salary sacrifice numbers might be even higher, with vehicles provided by brokers or via public sector framework agreements recorded as BCH.

Salary sacrifice specialist Gofor has seen consistent quarter-on-quarter growth across the last year, including 66% growth at the start of 2024 versus the beginning of 2023.

Managing Director Iain Bennett is confident about the market outlook as Gofor’s recent research via YouGov found that a fifth of businesses are using salary sacrifice, with a further fifth planning to implement it.

“To achieve this growth, we need to keep our focus in some key areas; our proposition, listening to our customers and making sure our salary sacrifice offering keeps pace with their demand, and how we’re engaging with both companies in-market and with those employees who are beginning to realise the opportunities of an EV through salary sacrifice.”

Iain Bennett, Managing Director, Gofor Tweet

While the BVRLA notes that some leasing companies have experienced an increase in early terminations from private and salary sacrifice EV drivers who find the technology doesn’t work for them, Gofor isn’t seeing this trend.

It recommends employees take test drives before committing to their first EV and also offers EV demo days at company headquarters to help people get comfortable with electric vehicles.

BEVs account for 41% of all new BCH cars

The BVRLA says the “insatiable appetite” of company car drivers for vehicles with a low benefit-in-kind (BIK) tax bill has seen battery electric cars account for 37% of new deliveries in Q1 2024, and 33% of the entire BVRLA car fleet.

Looking specifically at BCH, battery electric vehicles (BEVs) now make up 41% of all new cars and average new BCH car CO2 emissions were just 56.3g/km in Q1.

However, for PCH, average CO2 emissions remained above 100g/km in Q1, with consumers slow to adopt EVs.

“The current trajectory of the transition to EVs is increasingly one of the haves and the have-nots. Phase-out targets and sales mandates are beginning to force the industry’s hand but will not succeed in isolation. Where incentives have been present, registrations have followed. The sectors currently benefiting from such support cannot bear the weight of the full transition alone. As the divergence between corporate and new and used private demand grows, the financial risk associated with bearing that risk becomes unsustainable.”

Toby Poston, Director of Corporate Affairs, BVRLA Tweet

One way in which the leasing sector is adapting to a volatile market for second-hand electric vehicles is through used car leasing. Demand there was up 7.7% in the last quarter of 2024 alone as more drivers were drawn to accessing a used EV via lease, where they are not personally taking the risk on the residual value.

The BVRLA also notes that lease contracts on new cars are shortening to allow for electric replacements before the end of the decade. The ready availability of new car supply in the PCH market has also seen contract terms shorten, with new additions to BVRLA members’ fleets averaging 34 months and 25,646 miles, compared to 40 months and 30,689 miles for the entire PCH fleet.

Electric van strategies

Van manufacturers are taking different approaches to electric vans. Some brands are heavily discounting, which risks undermining future residual values, the BVRLA says, while others are restricting their sales of diesel vans so that their ratio of electric vans to diesel sales matches the ZEV mandate.

Some are continuing as they are in the hope or expectation that their sales of zero emission vehicles in 2025 and 2026 will exceed the mandate by such an extent that it will give them credits to offset against this year’s missed targets.

Vanaways is taking advantage of reduced prices on electric vans and passing the savings on to the customer, according to Liam Nicholas, Director of Business Development.

Getting SMEs to switch to electric is a challenge but Liam believes education and giving businesses visibility of the journeys their vehicles are doing through telematics can make a difference.

Vanaways is also arranging demonstrators so businesses have real world experience of an electric van.

Despite the BVRLA van fleet only growing by 0.7% YOY, Vanaways has had a “very strong start to the year” and has won major fleet contracts, according to Liam.

It was recently ranked number three in sales in The Sunday Times Hundred 2024: Britain’s Fastest Growing Private Companies.

Liam believes that having four people working specifically on fleet, with a dedicated administration team which processes everything, makes Vanaways “easy to deal with” and helps attract and retain customers.

“We proactively go out and find customers rather than waiting to receive enquiries. We’re an online business but we’ll have face-to-face meetings with a fleet department and we can provide them with a suite of options - outright purchase, hire purchase, contract hire, finance lease - as well as saving them the time of having multiple meetings and negotiations with different manufacturers.”

Liam Nicholas, Director of Business Development, Vanaways Tweet