The latest update from the British Vehicle Rental and Leasing Association (BVRLA) indicates the number of vehicles on leasing company fleets grew during 2022.

Although hampered by the lack of new vehicle availability and some severe economic headwinds that hit the U.K. economy following the brief but fateful Liz Truss premiership, there was growth of 0.3% year-on-year.

The stimulus for the growth came from business contract hire (long-term operational leasing) of electric vehicles (EVs), energized by the tax regime for battery electric vehicles. EVs accounted for 53% of all new cars on business contract hire.

Meanwhile, salary sacrifice, which makes use of the low taxation on EV drivers, showed growth of 34% year on year. The report — Leasing Outlook, April 2023 — suggested this growth will continue during 2023 since leasing companies, having established salary sacrifice schemes with their clients, will start to see orders coming through at a significant level.

Demand for diesel, on the other hand, accounted for just 7% of new car orders in Q4 2022. Before 2014’s diesel-gate scandal, diesel’s share stood at 83%, the report added, demonstrating how swiftly the switch to decarbonized fleets is moving.

Commercial vehicles, however, are slower to move away from diesel powertrains, with CO2 emissions actually increasing, although the BVRLA said this may be the result of companies leasing heavier vans.

And while the total fleet of light commercial vehicles (LCV) was maintained, new van sales declined by 20.6% year-on-year, once more a victim of supply chain issues.

Business contract hire accounted for 69% of LCV agreements, followed by finance lease (balloon leasing) with an 18% share. The report said leasing companies expected both forms of leasing to rise as fleets seek ways to afford new vans, given the steep rise in acquisition costs.

However, the lack of availability has stimulated growth in used-vehicle leasing, especially in vans. The BVRLA reported the number of secondhand LCV leases increased by almost 10,000 to 17,061 between Q3 and Q4 2022, reflecting the acute scarcity of new LCVs.

Also on the rise — by 56% — were the number of used cars supplied to businesses, largely on contract hire, as companies sought solutions to bridge the gap until new deliveries arrive.

Several leasing companies — such as ALD and Lex Autolease — now report they are exploring the possibilities of second-life leasing, confident that older EVs will not suffer a steep rise in maintenance bills and keen to tap into a new market of SMEs and private drivers who cannot afford new EV leases.

The BVRLA says the success of used leasing will depend on the accurate communication of a vehicle’s condition as well as suitable pricing to make the package attractive to potential customers.