Used car leasing boom: drivers can cash-in as firms scramble for EV depreciation life raft

The number of people signing up for lease deals on used cars in the UK has exploded in the last 12 months. The trend is being driven by leasing firms offering tantalising deals to consumers as they try to recoup their losses from steep depreciation on older electric cars.

New figures from the British Vehicle Rental and Leasing Association’s (BVRLA) October report show that the number of used car leases rose by a significant 166 per cent year-on-year to 40,600 in the second quarter of 2025.

Similar increases can be seen in the used salary sacrifice and business contract hire sectors, with these areas of the market having seen annual rises of 7,000 per cent and 174 per cent respectively to 3,990 and 33,131 vehicles.  

What’s going on in the leasing market? 

Why are we seeing such a huge growth in the used car market when it comes to finance and leasing? Well, the BVRLA’s Chief Executive, Tony Poston, was quick to point out that “the used vehicle market is four times the size of new”, meaning there is ultimately greater demand in that sector.

Much of the industry’s focus appears to be on electric vehicles, with Poston explaining that: “By supporting second and third owners, we also support the first. In doing so we can protect value throughout the vehicle’s life, making EVs affordable to more households”.

It’s this ‘protection of a vehicle’s value’ that appears to be the main driving factor behind the growth in leasing and financing of used cars – particularly electric ones. The BVRLA has previously admitted that the poor residual values suffered by many EVs has been costing fleets hundreds of millions of pounds, both in the finance and leasing sectors. While selling a car that has depreciated more heavily than expected is effectively crystallising losses for the owner, leasing it out again as a used car helps offset the financial pain. 

Speaking exclusively with Auto Express, Philip Nothard, director of analytics at Cox Automotive, said: “For EVs in the leasing sector, providers are absolutely looking to mitigate future depreciation risks after recent challenges in the market. 

“Although reports indicate improvements in depreciation protection, secondary leasing needs significantly more adopters. Providers are therefore tasked with striking a delicate balance between risk mitigation and future proofing, with consumer demands, as reasonable monthly payments remain a priority.”

It’s reasonable monthly payments that’s ultimately the biggest draw for consumers when it comes to used car leasing. Older cars typically benefit from a shallower depreciation curve, so this in conjunction with the lower purchasing cost of a used vehicle in the first place means leasing firms can charge less as the expenditure on their size is, in theory, much less than for renting out a new car. It should mean there are some great deals out there for consumers. 

Trouble ahead with Employee Car Ownership Schemes

While the rise in used car leasing agreements should be seen as good news for the industry, not everything is looking up. Nothard explained that although “it is encouraging to see this positive performance in the market… we must consider the potential impact that the changes to the Employee Car Ownership Scheme may have on the electric vehicle leasing market. A change which is already prompting many companies to review and reassess their future vehicle ownership and usage models."

In case you were wondering, the changes to the ECOS involve making cars subject to normal company car rules and Benefit-in-Kind taxation in certain circumstances. If the employee receiving the car isn’t allowed to use it privately or isn’t the registered keeper they would become liable for BiK tax and the same would apply if the car arrangement includes a set buyback agreement. Schemes of this type are an important source of used cars arriving on the market that could be cut off. 

It’s also worth considering the effects of the government’s Electric Car Grant on the car market and car prices. While the discounting certainly helps new buyers in the short-term, the BVRLA says it “add[s] to the volatility of used car prices” and makes life more difficult for retailers.

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