The BVRLA’s car lease fleet rose 3.3% in Q3 2024 on the back of booming salary sacrifice demand and rising business contract hire (BCH) uptake.

The stellar performer in the car sector continues to be salary sacrifice, up 51% year-on-year

The association’s latest Leasing Outlook report shows that salary sacrifice soared 51% year-on-year, while BCH was up 6.3%, helping to offset a 51% decline in personal contract hire (PCH).

Sal-sac continued as the car sector’s “stellar” performer, propelling the UK’s transition to cleaner, greener models thanks to a new wave of smaller, cheaper electric vehicles and fledgling developments in second-hand EV sal-sac schemes.

Toby Poston, BVRLA chief executive said: “Salary sacrifice is the zero-emission transition’s driving force. Its popularity continues to grow, bolstered by a wave of smaller, cheaper electric vehicles and innovative new leasing products providing second hand EVs. More employers are seeing the appeal and more employees – at all income levels – can make the switch.”

BCH also showed healthy demand, with the 6.3% year-on-year increase giving a 60% share of the lease fleet; levels not seen since the first half of 2019 before coronavirus struck.

PCH however continued its ongoing decline seen almost consistently since the first three months of 2021, with vehicle price rises, higher interest rates and the cost-of-living crisis dampening demand. The 15.1% YoY fall in PCH numbers reflects the decline seen in the private new car market, where SMMT data tracked a 9.4% fall between January and September.

The new Leasing Outlook report also reveals that the combined BVRLA car and van fleet grew 1.4% to 1,938,585 in Q3 2024; up by 26,295 vehicles but down on the previous quarter.

A dip in van numbers restricted growth in the overall BVRLA lease fleet during the third quarter of 2024. The van sector fell 3.6% YoY, down for the third consecutive quarter and falling below 500,000 vehicles for the first time since 2022.

The decline to 497,634 vehicles is set against the wider market backdrop of new LCV sales rising by 3.6% in the first nine months of the year, suggesting that leasing is losing share in the funding market.

Electric van uptake remains extremely limited

Electric van uptake remains extremely limited, and even leasing companies with eLCV penetrations above the ZEV mandate attribute demand to a handful of major fleets trying to make the technology work.

Closer analysis suggests demand is limited to the smaller van sector, with regulations and capabilities making larger 4.25-tonne eLCVs operationally unsuitable for the majority of applications. The Government is now consulting on fully aligning 3.5-tonne diesel and 4.25-tonne eLCV regulations, which could shift demand.

In contrast, on the car side, EVs dominated business take-up in Q3, accounting for 53% of new BCH orders and 87% of new salary sacrifice orders. Plug-in hybrids represented 19% of the total fleet, and 17% of new orders, while hybrids had a 9% share of the total car fleet and accounted for 7% of new orders.

Among the BCH fleet, average CO2 emissions now stand at 61.8g/km – and 61.3g/km looking solely at new additions.

But across the car fleet, average emissions are at 83.2g/km due to the personal contract hire market, where the emissions of new cars are actually rising due to continued SUV demand and the switch from diesel to petrol.

Other areas explored in the BVRLA report include a ‘storm warning’ for the impact of falling EV residual values, which is forcing leasing firms to keep hold of vehicles, mitigating depreciation over a longer period in the hope that the used EV market picks up. The overriding concern is that uptake of new and used BEVs will fall if the matter is not addressed.

Poston continued: “The fleets that have championed the switch to zero-emission vehicles are now being hit with eyewatering costs in vehicle depreciation. Our Happy EV After campaign highlights how support is required to help bring confidence and stability back to this vital part of the automotive ecosystem. Supply of used BEVs will continue to surge and we must work with Government and wider industry to create and sustain demand for these vehicles.”

The report also looks at the changing face of leasing – including shortening lease terms and changes for maintenance contracts – and includes commentary from Fleet Assist on SMR trends, insights from Cap HPI on the impact of ZEV mandate and an Auto Trader look at expectations for 2025.

The full report can be read on the BVRLA website.