The EV value squeeze
Industry leaders brace for a turbulent 2026. By Toby Poston, chief executive, BVRLA
Toby Poston
Chief executive, BVRLA
As we look ahead to 2026, the UK’s rental and leasing sectors are preparing for another year marked by contradiction: optimism in innovation and electrification on one hand, with mounting economic pressures on the other. Our newly published 2026 Industry Outlook Report captures this duality in stark terms. It shows a sector that is resilient, adaptive and determined to lead the transition to cleaner mobility. Cause for concern is that the same sector is increasingly mindful that the broader economic climate, volatile EV values – and inconsistent policy signals are creating unnecessary headwinds.
The macroeconomic picture looms large in this year’s analysis. Nearly two-thirds of rental and leasing companies (63%) expect economic conditions to deteriorate in 2026, a sobering statistic that tempers otherwise strong indications of growth. Businesses across our sector have become adept at operating through uncertainty, but the combination of stubborn inflation, weakened consumer confidence and financial caution across corporate fleets will shape the coming year.
Yet it is in the electric vehicle market – now central to every fleet strategy – that the most profound industry shifts are playing out. Here, the story is again both positive and problematic.
One of the most significant developments highlighted in the report is the arrival of lower-cost EVs, priced below £37,000, entering the market at scale. Some 70% of respondents expect availability to grow next year, signalling a rapid diversification in the EV supply chain. This is a welcome trend. More affordable models broaden accessibility, accelerate fleet electrification, and stimulate competition across brands and drivetrains.
This influx of supply is also feeding into the most acute financial challenge facing fleets today: plummeting EV residual values. Nearly two-thirds (64%) of rental and leasing companies believe EV depreciation will worsen in 2026. This decline is already undermining whole-life cost models and forcing providers to raise rates on new EVs to compensate. For operators with thousands of vehicles cycling through the used market, the impact is dramatic.
The situation is further complicated by the rise of Chinese manufacturers, who are playing a key role in that increase in affordable EVs. Some 43% of leasing companies expect Chinese brands to significantly expand their presence next year. Their competitive pricing and growing product sophistication will undoubtedly strengthen the case for electrification for some – but new OEMs with nascent operations in the UK also bring fresh uncertainty into future valuations and remarketing performance.
“For many employers, salary sacrifice is now the most cost-effective and proven method of accelerating fleet electrification while enhancing employee benefits”
Against this backdrop, the clearest success story remains salary sacrifice. Nine in 10 leasing companies forecast growth in 2026, cementing the product as one of the most important tools in the UK’s transition to zero-emission motoring. For many employers, salary sacrifice is now the most cost-effective and proven method of accelerating fleet electrification while enhancing employee benefits.
The scheme works because policy stability has been maintained. It is a clear demonstration of how government incentives, when applied consistently and intelligently, can unlock private sector investment and accelerate decarbonisation at pace. We need more policy thinking that looks like this – not less.
What our industry needs most in 2026 is stability. Unfortunately, recent policy decisions have delivered the opposite. The ZEV mandate, while essential for long-term decarbonisation, is currently out of sync with market conditions. Softening retail demand, unbalanced incentives between EVs and ICE, infrastructure gaps – and the ongoing collapse in used EV values combine to create a rocky reality.
Layered on top of this is the proposal for a new pay-per-mile tax, which risks penalising EV drivers at the very moment we need to be encouraging them. It introduces a new layer of complexity, cost and behavioural uncertainty just as electric motoring should be becoming simpler and more attractive. It is the wrong policy at the wrong time.
Our sector has shown repeatedly that it can rise to challenges, be them economic, technological, or regulatory. We will continue to innovate, invest and champion the UK’s transition to zero-emission mobility, but the findings of the 2026 Industry Outlook Report make one thing clear: we need a policy environment that supports momentum, not one that undermines it.
If the past few years have taught us anything, it is that this sector thrives in adversity. We will do so again in 2026. But with the right strategic decisions from government, we could do far more.
