As we make headway into the third quarter, our Director Spencer Blake gives us his expert opinion on how our vehicle leasing business has fared in Q2 of 2025, as well as his take on the rest of the year ahead…
The show must go on
Many of the things I thought would happen in Q2 haven’t come to fruition. I thought we’d see a downturn in orders due to faltering consumer and business confidence due to increased costs. That doesn’t seem to have been the case. I don’t know whether because of Covid and the Ukraine war there is now more of a steeliness in the people and businesses’ views. Market disruption due to the US tariffs, or the Isreal conflict, seems to have been accompanied by more of a ‘show must go on’, attitude.
Focusing on the best leasing deals
We’ve seen a slight shift in funding solutions in favour of captive finance over the course of Q2, as we continue to see some manufacturers looking to drive sales through their own finance arms or through white label partnerships.
This has been particularly noticeable with Omodo, BYD, BMW, Renault, and Audi. It makes sense as it allows the manufacturer the ability to control the price in the market and have access to the used stock as it comes off lease.
I do see this trend accelerating throughout the remainder of 2025. It’s not ideal for a broker such as us but the rates and offers are hard to ignore and if we don’t market some of the best deals we’ll lose the customers anyway, so in some ways it’s keeping us focused on how high the bar is.
Disruption from Chinese entrants
We’re still seeing disruption from the new Chinese entrants and that’s causing established manufacturers to consider their pricing position to retain market share. The likes of BYD and Omodo have reported strong Q1 sales and I anticipate they’ll have backed that up in Q2 when the sales results are released. There are still more new entrants due to arrive in Q3 and I anticipate the disruption in the market will continue. I'm pretty certain 1 or 2 established brands won’t be here this time next year.
The affordability crisis continues
We’ve seen an uptick in challenges faced securing credit approval for customers, in particular within the PCH channel. The vast majority aren't due to customers having poor credit, they're due to affordability. I think this is a result of consumers still feeling their pockets are squeezed and lenders therefore not assessing there's much capacity within an individual’s financial circumstance if something were to change.
Prices realigned due to RFL
The increases in the Road Fund Licence have hit EVs, now also subject to an annual £195 RFL in years 2 and 3, with all cars worth over £40,000 now incurring luxury car tax too. Drivers of new electric cars with list prices exceeding £40,000 could pay as much as £620 a year.
It’s certainly caused confusion in the market and meant a lot of cars were registered in March to beat the change. It does feel that it’s fallen on the manufacturer to cover the cost with increased discounts. Some manufacturers realigned the specification on their models, removing items to reprice the vehicles under the £40k threshold. There seem to be ceilings for where a ‘type’ of car needs to be positioned on a monthly rental in order to sell; a maximum amount you can charge for a non-premium mid-sized SUV. If a car exceeds it, there’s a decreasing demand curve. To keep the car in the right space it's been the manufacturer that's needed to support it, sometimes alongside the funders.
Commissions disclosure ruling imminent
We're also expecting a decision in the Supreme Court regarding motor finance commissions. Although this ruling's currently concerning credit products such as Personal Contract Purchase it may potentially have outcomes that affect the Personal Contract Hire market. We're watching with interest.
Spencer's top leasing tips for Q3 2025
I think there are going to be some very well priced leasing deals on the market for consumers as the pressure is put on leasing companies such as ourselves to structure deals in order to give customers unbeatable value for money in a very competitive landscape. It’s certainly interesting times at the moment and customers should keep an eye out for pockets of surprisingly good lease deals that fall into their price bracket.