UK fleets and drivers are being overcharged on leasing deals for battery electric vehicles (BEVs), according to a new study that says such overpricing is impacting electrification plans.

T&E says EV leasing offers are too expensive but the BVRLA says the sector is leading the charge on EVs

Campaign group T&E conducted analysis of the leasing sector and found that leasing deals for BEVs are on average 51% more expensive than their equivalent petrol models. It uses the example of a lease for an electric VW ID.3, which costs approximately £605 a month, whilst the petrol Golf is offered at £376.

Leasing companies typically charge customers for the expected loss in value of a vehicle over the three- to four-year lease, so higher lease prices mean they expect BEVs to lose more of their value.

But T&E says this is no longer the case in the UK. It’s arguing that resale values for both older and newer electric models are high, but leasing offers for clean cars don’t reflect these trends and are too expensive.

And the eco group says leasing companies are harming the transition to electric cars through such high pricing and weak zero-emission targets.

Ralph Palmer, electric fleets lead at T&E UK, said: “Today customers are being overcharged by leasing companies if they want to switch to a battery electric car. Leasing firms are too conservative when setting their monthly prices. Their rates reflect the state of play from five years ago. With this pricing strategy, their profits are obviously high and consumers are overpaying to go electric.”

The accusations have been swiftly rebutted by the BVRLA, which says leasing companies are actually leading the charge on EVs.

Toby Poston, director of corporate affairs at the association, said: “Vehicle leasing companies have led the charge in bringing battery electric vehicles to market. The accusations levelled by T&E show little understanding of how this market operates.

“Like a toddler taking its first steps, the BEV market still needs support in the form of tax incentives, grants and marketing campaigns that give fleets and drivers the encouragement they need to make the leap.

“This support disappears when it comes to selling the same vehicle on the second-hand market. The lease companies that have invested billions in untried, untested BEV technology are navigating this ocean without a map, compass or weather gauge.”

An outdated approach to BEVs, claims T&E

T&E says leasing companies are not offering the right prices to consumers for battery electric vehicles due to an “outdated” approach whereby they “penalise consumers with high monthly deals because they still consider BEVs as new and uncertain products”.

Its argument is that the BEV market is now established in the UK, and entails much fewer investment risks.

And it says cheaper leasing deals will help consumers access affordable new BEVs, whilst also supplying more battery electric vehicles on the second-hand market after three to five years of being leased.

The T&E argument centres around claimed strong second-hand prices for BEVs, supported by supply constraints, as used BEVs are hard to come by.

However, according to Cap HPI, electric cars have been hard hit in the used market in recent months, dropping significantly more than petrol and diesel vehicles, not helped by rising energy prices and large numbers of models arriving in the second-hand sector. The market was further hard hit by Tesla’s shock announcement mid-January of price cuts of to £8,000 for the Model 3 and Model Y, leading to concerns for RVs.

Cap data shows that Tesla models have already been hard hit by the move; it cites the example of for a one-year-old Tesla Model 3 Long Range with 20,000 miles on the clock, which in mid-January had seen its used value fall by £11,600, or more than 25%, since the middle of September.

Data from Indicata also shows a “massive price fall” for EVs across the board. The auction firm says used EV prices fell by 15.3 percentage points between 1 October 2022 and 31 January 2023. While this helped to reignite interest from wholesale buyers, used EVs still took twice as long to sell as used hybrids and even longer than used ICE cars.

The BVRLA has responded to the T&E report, saying that leasing companies are exposed to such market drops and are absorbing the risks from a volatile market.

Toby Poston added: “Last summer, leasing companies were able to sell a limited number of battery electric vehicles into a buoyant market. Fast forward six months and they are presenting a surging inventory of electric cars in very different conditions. The current market has seen five consecutive months of falling prices and a growing imbalance between vehicle stock and prospective buyers.

“Despite these market conditions, BVRLA members continue to buy new electric vehicles in record volumes. They are absorbing the financial risks of a turbulent used market on behalf of their customers.

“The leasing sector is already doing its bit and cannot be expected to take unsustainable risks in a bid to underwrite cheaper electric cars.”

Combined call for more support

One area where both organisations are united is on the need for more external support to drive EV take-up.

The BVRLA has called for T&E to focus its research on “making the case for more government support on public charging infrastructure and other measures that will benefit the used BEV market”.

T&E itself has said that carmakers must play their part to help drive take-up of new BEVs by increasing supply – and it’s called for a robust ZEV mandate to enforce this.

While the Department for Transport made a commitment in last year’s Net Zero Strategy that it would introduce such a mandate from 2024, and opened a consultation last year, details haven’t been announced. According to reports, the final consultations for the mandate are due to take place imminently.

T&E has said the ZEV mandate will help drive more BEVs in the second-hand market.

Ralph Palmer commented: “The zero-emission vehicle mandate – which sets targets for BEV sales for manufacturers and helps provide certainty for manufacturers to make the switch quickly to all electric production – will be key for that, but ministers keep failing to sign off on the final regulations for consultation.”

To access the T&E study, click here.