As we cross the start line of the second quarter, it’s that time again to reflect on the forecasts we made at the end of 2024 and whether they’ve begun to materialise so far in 2025. Our Director Spencer Blake gives us his expert opinion as well as his take on the year ahead for the leasing sector…
A buoyant beginning
The first quarter has been pretty buoyant, all things considered. There are good offers in the market and consumer confidence has remained steady. It seems we’ve seen the residual values on EV stabilise, and although discounts are strong, the downward spiral of manufacturers increasing discount and the funders decreasing the RV seems for now to have stopped.
I’m slightly concerned that the current US/China trade war may mean Chinese manufactured cars are pushed to Europe and the UK, possibly bringing disruption to the markets if those cars are priced more competitively.
The affordability crisis
We’ve seen an uptick in finance proposals being declined. This largely seems down to affordability rather than people with poor credit. With home utility bills set to rise in April, it’s a concern that declining affordability may be a trend that’s set to continue.
Car tax hikes
The changes to the Road Fund Licence (RLF) that came into effect at the start of April have been challenging to navigate. There have been significant increases in the first year RFL particularly for the higher CO2 emitting vehicles. It’s clear why, since it aligns to the Government's net zero agenda. But at the same time EVs have now also become subject to an annual £195 RFL in years 2 and 3, (£10 in year 1), and any EV registered after April 5th that’s worth over £40,000 will also incur luxury car tax which is currently £425 a year.
This means an EV on a 3 year lease that’s over £40,000 (a high percentage of all EVs) will now have an additional £1240 cost within the lease. On a typical 3+35 profile contract, this will increase the lease by around £33 a month; a significant rise which may make customers, especially private individuals who don’t get a BIK benefit, question whether electric is right for them. Only time will tell, and I do wonder if the onus will be on the manufacturer once again to support the product with extra discount in-built, to compensate for the RFL impact.
National Insurance impact
In terms of the April employer NI increases, I certainly envisage them having an impact for our business customers. We’re already hearing of recruitment being put on hold whilst businesses look to balance the books - and no new hires will impact new vehicle orders. It’ll take some time for the impact to wash through, and will no doubt hit some sectors of the economy much harder than others.
Spencer's top leasing tips for Q2 2025
In terms of top tips for 2025, I think it’s a case of consumers looking for value when selecting their new vehicles. That doesn’t necessarily mean going for the cheapest monthly payment, but making sure they get the best value for it. Consider fuel type, consider brand and watch the market closely with your broker to take advantage and capitalise on value at the right time.