Our Managing Director at DAVIS, Keith Allen, warns that a glaring imbalance between the new and used electric car markets is leading to higher lease rentals as residual values remain volatile, challenging the ESG ambitions of businesses.
It’s a situation which will only get worse in 2026 because of a lack of demand in the used EV market due to lingering doubts amongst second-hand buyers and which requires a reset from government on over-ambitious ZEV targets, says Allen.
Under the ZEV mandate, vehicle manufacturers must reach 28% of total sales for electric cars and 16% for vans in 2025, rising to 33% and 24% respectively for 2026 – figures which are putting undue pressure on the used vehicle market, says Allen.
Everyone talks about the new car market at around 2m transactions per annum but overlook the fact that there are over 7.6m used car transactions. And there is still this continuing uncertainty over exactly what it means to own a used electric car, about battery life, availability of charging networks and, from 2028, pay-by-mile road tax.
As well as ESG ambitions, duty of care will remain high on the corporate agenda for 2026, predicts Allen.
“As a consequence, there is an imbalance between electric supply and demand which is impacting heavily on the leasing industry. It’s driving down RVs and pushing up lease rentals to higher levels.
“However, at the same time, going electric is in line with most corporate ESG targets. But it is becoming increasingly unaffordable to get there for many companies because, at the same time as increasing rentals, they are being hit with rising labour costs due to the hike in National Insurance and the Minimum Living Wage.
“It is proving increasingly difficult to square this circle of oversupply, constrained demand and rising costs. We need a reset from government, an acknowledgement that 2030 is too ambitious for the banning of new petrol and diesel sales and that ZEV targets are unrealistic.
