As Q4 gets underway, one of our Directors, Spencer Blake, discusses how the vehicle leasing sector's looking as it gears up for the final leg towards 2026.
Electric Car Grant programme impact
The grant has had a positive short-term impact on the uptake of EVs on lease but the downside has been the negative impact on residual values (RVs). In essence, if a car is cheaper to purchase it will generally have a lower worth at the end of the lease. The negative impact on RVs for cars that qualify for the grant has, in nearly all cases, outweighed the value of the grant and we are now seeing the cars become more expensive to lease than before the grant. I’m hopeful though that in time, with a reduction in the RV of an EV, the EV will become a cheaper option as a used car. This may, in turn, help by supporting the RV and the market, and the price point on leases for new EVs will stabilise.
Chinese entrants gaining pace
Brands like BYD, Omoda, and Jaecoo have established themselves very quickly in the UK market, and are being followed by a number of brands including Chery and Changan. We're seeing more enquiries and orders for them as they offer incredible value for money on lease, in terms of the monthly rental relative to the specification and technology included as standard. Customers are becoming increasingly brand agnostic; instead it’s more about perceived value. There do remain some question marks over the retailer/support network and its ability to service customers nationwide. The new entrants must work hard to ensure they can support the customers who purchase the product otherwise this risks becoming a barrier to purchase.
Some realignment for the German premium brands
The German premium brands have been taking different tacks, with Mercedes scaling back on volume and aiming to position itself as the premium brand of choice. BMW continues to sell in volume based on its premium status; it has used its own finance arm to support the sale of EV into the corporate and business channel. Audi has been in a state of transition in 2025 and slower to bring to market its EV range, which is now gathering pace and after early product was criticised for lack of range, this has improved significantly.
There are still customers who want to drive one of these 3 brands and will pay extra to do so. The volume of Audi and BMW we see through our doors continues to improve since the supply restriction caused by the Ukraine crisis. Mercedes however, have changed how they go to market and we've seen our order take drop to a handful each month.
Intense competition benefits consumers
I think the sector is in a very positive position currently. As a broker we're able to search the market and find our customers a great deal on a vehicle that meets their needs. There are multiple funders including captives that are vying for business. This, combined with multiple manufacturers and new entrants, has created a very competitive market. It means consumers are getting presented with more choices and better offers than they've seen for years.
Spencer's top leasing tips for Q4 2025
I don’t see many changes on the horizon for us or our sector in Q4. I do, however, feel 2026 will bring some challenges as the drive to electrification ramps up. Manufacturers are being pushed by the ZEV mandate for ever increasing sales of EV; the leasing companies are shouldering much of this risk. In 2026, we'll likely see some manufacturers reducing the level of petrol and diesel cars they produce and send to the UK in order to ensure they can hit the percentage mix required to prevent them paying millions in fines.