Used car values could fall by 10% in the UK next year, according to the BVRLA’s new report outlining the many challenges the leasing sector is facing

The report sets out an expected “rebalancing” of RVs next year

Although the latest Leasing Outlook report highlights a sector that remains agile, it points out that the industry is braced for yet more challenges, including ongoing uncertainty from the impact of the EU exit, the coronavirus pandemic and the transition to zero-emission motoring, “as the most turbulent year imaginable comes to an end”.

Key issues on the horizon include an expected rebalancing of residual values; the result of both the long-term economic impact of the pandemic and the used market’s capacity to absorb a large influx of electric vehicles. Strong RVs have been one of the few positives in 2020 – used car values are around 7% higher than they were a year ago – but this is unsustainable and a fall of 10% is expected next year; broadly similar to 2019 and not as dramatic as that seen in 2008 following the recession.

The report, which makes for interesting reading across the industry, also sets out that the 2030 phase-out confirmation is a further event in a “transformative” year.

It reveals a growing appetite already among fleets for battery electric vehicles (BEVs), hampered by limitations in supply and the current range of products. This is, however, pushing demand towards plug-in hybrids (PHEVs) and, to a lesser degree, hybrids. As availability of both BEVs and PHEVs increases – which a successful EU trade deal will play a key role in – these are expected to take market share from diesel, while petrol is expected to remain static.

Members expect BEVs to hit 6% of the total lease car fleet by the middle of next year, with PHEVs hitting 9%. Petrol’s market share will begin to plateau at around 38%, with diesel’s market share slipping under 50% for the first time at 46%.

The report also identifies that the reduction in cars on business leasing continues but at a slightly higher percentage due to the impact of Covid-19.

The consensus is that the economic fall-out from the pandemic will create challenges for the industry at the end of 2020 through to the start of 2021 and any subsequent recovery will be largely dependent on the conclusion of a successful UK–EU trade deal before the end of this year.

A senior leasing industry figure said: “We have experienced 20 years of change in six months… customers still have high expectations, but the challenges keep coming.”

BVRLA members will get a chance to discuss the challenges facing the leasing sector at the association’s final Industry Outlook webinar of 2020. Taking place on Thursday 10 December at 11am, the event will begin with an EU Exit impact assessment from BVRLA Senior Policy Advisor Thomas McLennan. Delegates will then get the latest market insights from Cazana, Enterprise Rent-A-Car, LeasePlan, Select Car Leasing and Trakm8.

To access the BVRLA’s Leasing Outlook 2020 report, click here.