Pressure builds for UK leasing sector

The UK's vehicle leasing fleet has continued its steady expansion, growing by 7.2pct year-on-year to more than 2.05 million vehicles. Yet while fleet numbers continue to rise, profitability remains under sustained pressure, according to the latest Leasing Outlook from the British Vehicle Rental & Leasing Association (“BVRLA”). EV depreciation, aggressive manufacturer discounting and government policy uncertainty continue to reshape the market. 

The report shows the lease fleet reached 2,052,673 vehicles in Q1 2026, driven primarily by an 8.4pct increase in leased cars, while the van fleet grew by 3.4pct. A factor behind this growth is a shortening of average contract lengths (40 months down to 37 for BCH), as fewer customers lean on extensions to manage costs. 

Business Contract Hire (BCH) continued its prolonged upward trajectory, up 6.1pct year-on-year, while Salary Sacrifice remained the market's fastest-growing funding model, rising by almost 165pct as more affordable electric vehicles broadened its appeal. Personal Contract Hire (“PCH”), however, remained broadly flat, reflecting continued pressure on household finances and strong competition from manufacturer-backed retail finance offers.  

The report also highlights the central role leasing companies continue to play in the UK's transition to zero-emission transport. Battery electric vehicles now account for 48pct of the BVRLA car lease fleet, with members funding more than one-third of all EVs on UK roads. 

Alongside fleet growth, the Leasing Outlook report emphasises the developing opportunity in the used EV market. Used vehicle leasing is expanding rapidly, particularly through salary sacrifice and personal leasing, providing a valuable outlet for two- and three-year-old electric vehicles while giving more motorists access to lower-cost EVs. 

Looking ahead, the industry leaders warn that policy uncertainty remains one of the biggest threats to market stability. The Government's review of the Zero Emission Vehicle Mandate, combined with proposals for a mileage-based electric Vehicle Excise Duty (“eVED”), risk undermining confidence on both the supply and demand sides of the market at a time when consistent policy is needed most.  

BVRLA Chief Executive Toby Poston said, "Our members continue to invest through difficult market conditions, but long-term success depends on policy that is stable, predictable and supports confidence across both the new and used EV markets." 

Despite ongoing challenges, the report forecasts continued fleet growth over the next twelve months, with the total BVRLA lease fleet expected to exceed 2.13 million vehicles by Q1 2027. Growth is expected to remain strongest in business contract hire, salary sacrifice and battery electric vehicles, although leasing companies anticipate continued pressure on profitability as they adapt to a rapidly evolving market. 

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