Europe's EV leasing boom faces risk amid falling resale values

The development of electric vehicles (EVs) within the European market is at risk if rising lease prices and diminishing trade-in values continue. Analysis of European leasing firms reveals that in the past three years, they have almost doubled the rental price of EVs due to the declining resale value of the cars. Prominent stakeholders have warned that if financiers are pressured to transition to clean mobility fast, many leasing firms risk exiting the market.

These rising rents are emerging at a time when some of the most important markets in Europe like Germany are cutting back on the subsidies for the new EVs. This is affecting sales and threatening to slow the electrification of Europe’s automobile industry even though Brussels is trying to fast-track electric mobility.

He said, “If the push for electrification is too aggressive, then I would see my shareholders not investing in cars anymore,” said Tim Albertsen, the CEO of Ayvens, Europe’s largest auto leasing company. ‘Who will recall the risk if we are not there?’ Ghana-based Ayvens is 60 percent owned by French bank Société Générale and operates a fleet of 3. 4000 thousand cars out of which 1000 thousand cars are electric cars.

New car registrations in Europe show that at least 60% of the new cars, regardless of their fuel type of the engine are leased and not purchased, this is as has been revealed by the Transport & Environment. As for electric vehicles, leasing is also rather popular, with data indicating that leasing rates stand at approximately 80%. About 60% of newly sold EVs in Germany, Great Britain, France, and Spain are registered by corporate fleets and other business consumers that are likely to use leasing.

However, leasing companies’ profitability is declining because EVs’ resale values are dropping owing to technological advancement. Range and charging an electric car, affordable offers from Tesla, the bombardment of cheap Chinese clones, and more resulted in the shrinking of second-hand EV prices since October 2022. Data from Autovista reveals that in early July, resale values for EVs in Germany were 24% below pre-pandemic levels, while in Britain, they were 30% lower. In contrast, second-hand petrol cars remain about 15% more expensive.

Gary Cambridge, a partner at Cambridge Motors in London, noted, "People have become more open to used EVs, but they need to be affordable. If they are pricey, demand wanes." The challenges facing the EV leasing market underscore the broader difficulties in achieving a swift transition to electric vehicles in Europe.