Business contract hire (BCH) and salary sacrifice demand is surging among BVRLA members, but private driver uptake is fast becoming a concern.

BCH is up 7.1% year on year, while demand for salary sacrifice cars surged by 47% over the same period

The latest Leasing Outlook report from the BVRLA reveals the BCH fleet is up 7.1% year on year, while demand for salary sacrifice cars surged by 47% over the same period, thanks to a supportive tax regime and corporate ESG strategies. Meanwhile, personal contract hire (PCH) has fallen by 7.1% on the back of increasing costs and fewer incentives.

The report also reveals the BVRLA leasing fleet is up 2.4% to 1.9 million vehicles as lead times return to pre-pandemic levels. Both cars (+1.9%) and vans (+3.9%) have recorded year-on-year growth.

The rental and leasing industry body said the figures give leasing companies reasons to be optimistic through 2024 but also warned the split between business and retail demand is “becoming a gulf” – with a knock-on effect for electric vehicle deployment and decarbonisation.

Toby Poston, BVRLA director of corporate affairs, said: “It is great to see the BVRLA member lease fleet growing, but this growing imbalance between the business and retail segments – particularly for EVs – is a real concern.

“Benefit-in-Kind and salary sacrifice incentives have fast-tracked corporate uptake of electric vehicles and are underpinning our progress towards the ZEV mandate targets. Fleet operators and business drivers cannot bear the weight of the EV transition alone, especially as the mandate targets ratchet up in future years. The spotlight must turn to the retail sector. It needs igniting.”

BVRLA figures for uptake of the different powertrains underscore the polarised approach to EV adoption.

In Q4 2023, 75% of new additions to the BCH fleet were battery-powered (BEV) or plug-in hybrids. For PCH, the situation is flipped with petrol accounting for two-thirds of new registrations.

While the surging BCH market is accelerating the adoption of cleaner, greener vehicles onto UK road, there are red flags for BEV demand on PCH.

Cap HPI’s Dylan Setterfield, head of forecast strategy, said the Government has many tools at its disposal to address the imbalance between business and retail demand for BEVs and ensure the terms of the ZEV mandate can be met.

“An obvious change would be harmonisation of VAT, where public charging costs can be reduced to make EV running costs cheaper for those without off-street parking.

“Other measures must be on the table too and include exemptions from tolls or discounted parking charges. In short, incentives are required. The annual increases set by the mandate only get steeper between now and 2030.”

However, while many had called for such measures to be introduced in the recent Spring Budget, there was a distinct lack of BEV action.

Other trends highlighted in the BVRLA Leasing Outlook include robust consumer demand for used cars, which has seen some leasing companies explore second-life leasing or extended contracts to navigate volatile used values.

The full BVRLA Leasing Outlook report, which includes analysis from Auto Trader, Cap HPI and Fleet Assist, is available here.