Leasing industry hits back at EV overcharging claims
Industry rejects claims that EV leases are too expensive because of pessimistic RV forecasts.
Europe’s vehicle leasing industry has rejected the claims of a new report that accuses them of slowing down the transition to electric vehicles by setting lease rentals too high. The report says that the industry’s overly cautious residual value forecasts for electric cars mean the depreciation cost within a lease is unduly high, pushing up the price of contracts and deterring potential customers.
Transport & Environment said its analysis had found that the percentage difference between leases for battery electric vehicles (BEV) and internal combustion engine (ICE) vehicles were substantially greater than the difference in new vehicle prices. So, while new BEV prices are typically about 30% more expensive than their ICE equivalents: “Across major European markets, leasing companies charge consumers 57% more to lease a BEV compared to an equivalent petrol model,” said the report. “This premium is even higher in Germany (69%) and Spain (61%).”
In real terms, this means BEVs cost an average of €233 per month more to lease than their ICE equivalents over a three-year contract, equating to an additional €8,370.
Leasing companies drive electrification
With leasing companies responsible for funding 22% of new cars in Europe, and the top 10 companies operating a fleet of 11.5 million cars, they have an important role to play in electrification and the generation of used electric vehicles for the wider market.
T&E accepts that the higher prices, higher interest payments and higher insurance premiums mean BEV leases will be more expensive, even if some of these additional costs are offset by low or zero road taxes and cheaper service and maintenance bills.
The principal difference in the lease rates of BEV and ICE vehicles, however, is down to the depreciation forecasts made by leasing companies.
“The higher leasing deals for BEVs therefore suggest that leasing companies are quite pessimistic about BEV resale values and are thus applying low residual values in their leasing deals,” said the report, citing analysis that shows BEV resale values for 36-month old cars are currently the same as petrol and diesel in Germany and the UK, and only slightly lower in France or Spain.
Stef Cornelis, director of electric fleets at T&E, said: “Customers are being overcharged by leasing companies if they want to switch to a battery electric car. Leasing firms are too conservative when setting their monthly prices. Their rates reflect the state of play from five years ago… and consumers are overpaying to go electric.”
This conservatism, he added, is harming the BEV transition.
His claim was rejected by Richard Knubben, Director General of Leaseurope, who said it was important to see the T&E report in the context of a wider campaign to persuade the European Commission to set an EV mandate that would force any fleet of 25 vehicles or more to acquire half of its cars and vans as zero emission vehicles from 2025, and 100% by 2030.
“Leasing companies are already the largest acquirers of EVs in Europe,” said Knubben. “We buy about half of all new vehicles and a significantly higher percentage of EVs, so any claim that the sector is anti-EV is complete nonsense.”
But the market cannot proceed faster either than the available supply of new vehicles or the public charging infrastructure, which is progressing at very different speeds across Europe, he added.
"T&E want us to go faster than reality allows,” said Knubben.
He also challenged the notion that today’s used car market, with its shortage of stock creating record resale values, provides any sort of guide to the used EV prices that leasing companies will achieve in three or four years’ time.
Residual value forecasters are having to assess the impact on EV residual values of substantial increases in supply; sharp fluctuations in the price of new EVs (such as Tesla’s major price cuts last month); and huge variations in national recharging infrastructure; with no significan historic data on which to base their decisions.
Toby Poston, Director of Corporate Affairs at the BVRLA, which represents the UK vehicle leasing industry, said: “The accusations levelled by T&E show little understanding of how this market operates. Vehicle leasing companies have led the charge in bringing battery electric vehicles (BEVs) to market.
“Like a toddler taking its first steps, the BEV market still needs support in the form of tax incentives, grants and marketing campaigns that give fleets and drivers the encouragement they need to make the leap.
“This support disappears when it comes to selling the same vehicle on the second-hand market. The lease companies that have invested billions in untried, untested BEV technology are navigating this ocean without a map, compass or weather gauge.”
He highlighted the stark difference in the residual values of EVs between last summer, when limited supply ensured buoyant used prices, and today, after five consecutive months of falling prices.
“Despite these market conditions, BVRLA members continue to buy new electric vehicles in record volumes. They are absorbing the financial risks of a turbulent used market on behalf of their customers… and cannot be expected to take unsustainable risks in a bid to underwrite cheaper electric cars,” said Poston.
Sesamlld, which represents car leasing companies in France, said the higher monthly rentals of EVs mainly reflect the cars' higher list prices and lower manufacturer discounts.
"As the list price of an EV is 50% higher than that of an equivalent petrol model, this extra cost is automatically reflected in its monthly rental costs. Under current market conditions, EV lease payments are therefore higher than for combustion vehicles, even with a similar level of residual values as a percentage of the original price. Achieving monthly rental parity would require totally unrealistic and unfounded levels of RVs, both in percentage and absolute values," said a spokesperson.
They added that rather than focus on rentals, customers should priortise total cost of ownership (TCO), which includes all the benefits of BEVs in terms of taxation and energy costs. These strongly mitigate the impact of a higher lease rental when considered over the whole life cycle, added the Sesamlld spokesperson.
Arval pushing electrification
By the end of 2022 Arval already leased 300,000 electrified vehicles (EVs and plug-in hybrids) around the world, out of its fleet of 1.6 million vehicles, and one in three of its new orders is electrified, said Bart Beckers, Arval Chief Commercial Officer and Deputy CEO.
“In terms of EV uptake, we are significantly ahead of the market in every country apart from Norway,” he said. “At Arval, we are pushing our clients to electrify and pushing our pricing experts to take risks on residual values and service and maintenance costs, even at a time when the statistics to underpin all of these are still building up.”
Nonetheless, Arval has increased its EV ambitions, setting a target of having 700,000 electrified vehicles by the end of 2025.
“This shows the growing demand of our clients as well as our willingness to reinforce our action towards energy transition,” said Beckers. “We are convinced that electrification is key and Arval facilitates EV adoption by offering a complete package (advice, charging point, partnerships with energy providers, car) in order to remove potential barriers.”