AT LARGE
Despite stability returning to the new car market, are recent developments aligning in favour of used vehicle leasing? Alex Grant investigates
Following a period of decline, company cars appear to be coming back into vogue. HMRC data shows the UK’s company car driver population didn’t shrink in 2021/22, and plug-ins offer them such staggering value that I reckon that number will increase next year. Renewed tax incentives, longer ranges and shorter charging times are making electrified motoring very attractive, but I wonder if that shift is a foundation for other mindset changes.
In June, I spent a week driving Hyundai’s striking new Ioniq 6 electric saloon. If you like the divisive styling (and I love it) then it’s a very appealing company car, but it certainly isn’t cheap. It dawned on me after delivery that, alongside the Vauxhall Astra plug-in hybrid it was parked next to, my driveway was temporarily home to two mainstream-brand cars with a combined list price of over £95,000. Almost six figures, for a Hyundai and a Vauxhall. When did that happen?
Of course, company car tax subsidises plug-ins to the point where list prices are irrelevant. As an extreme example, the annual Benefit-in-Kind bill for a £30,000 Ford Focus ST-Line diesel is £1,772 for a basic-rate taxpayer, whereas someone in the 45% income tax band (and with a generous employer) would pay £1,335 for a £148,000 Porsche Taycan Turbo S. It’s hardly surprising that fleets are spearheading the EV transition, but they’re also leasing increasingly pricey assets. BVRLA members have raised concerns about the influx of £45,000-£60,000 cars reaching the used market in a few years.
Changes are bubbling away behind the scenes. Two years of semiconductor chip shortages and the resulting backlog of vehicle supply have nudged fleets to broaden their horizons. It’s a relatively small market, but business contract hire for used vehicles is growing quickly; up 56% between Q3 and Q4 2022 for cars (to 14,261 units) and a whopping 123% for vans (to 16,928 units) where supply issues are more acute.
Leasing companies are aware of the potential. LeasePlan Flexible launched in 2021, enabling businesses to select specific used cars and vans from stock, take delivery within days and use them for anything from a few weeks to two years. The fleet has increased from 2,840 vehicles in 2022 to 6,587 today, and merging with ALD takes it to 8,000. Salary sacrifice schemes from Octopus and Loveelectric have also introduced cheaper second-hand options for drivers.
This feels like a good fit for EVs. Multiple leases could help mitigate the effects of fluctuating used values without the ballooning maintenance costs that are common with ageing ICE vehicles. They could help make fleets’ electrification targets more affordable by offsetting interest rate rises and rising transaction prices, and drivers benefit too. P11d is inflation-proof (it’s fixed for life) and EVs are rated at 0g/km CO₂ so won’t become uncompetitive, tax-wise, compared to newer models.
Time will tell whether the last two years have opened Pandora’s Box – it is a big mindset change, after all. New vehicle supply is beginning to catch up with (waning) demand and increased competition is pushing manufacturers to be more aggressive with EV pricing, but perhaps it’s time to consider the bigger picture.
A used EV will have offset some or all of the extra CO₂ embedded in its manufacturing process and, just like refurbished consumer electronics, it’s a more sustainable choice than buying new. Toyota, for example, is retaining bZ4X electric SUVs on fleet for up to 10 years, refurbishing them and re-leasing them to multiple customers as a step towards climate neutrality.
In these increasingly environmentally conscious times, the most in-vogue company car options might be the ones with a few miles on the clock.
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It’s hardly surprising that fleets are spearheading the EV transition, but they’re also leasing increasingly pricey assets
