Low EV Resale Values Problematic For Shoppers And Lenders

The increasing cost of leasing electric vehicles (EVs) is becoming a significant issue in Europe, with some leasing firms having to double their prices over the last three years due to low resale values of EVs.

This trend has prompted concerns among industry executives that if the transition to electric vehicles is pushed too rapidly by regulators, many leasing companies might exit the market altogether.

According to Reuters, one of the largest auto leasing firms in Europe, Ayvens, which manages a fleet of 3.4 million vehicles, including about 10% EVs, has expressed concerns about the financial risks associated with the depreciating value of used EVs. The leasing sector plays a crucial role in Europe, where 60% of new car purchases, including an estimated 80% of EVs, are leased. However, the decline in second-hand EV prices, driven by factors like Tesla's price cuts, concerns about charging infrastructure, and the influx of cheaper Chinese EVs, has led to significant financial losses for leasing firms.

In Germany, for example, EV resale values in early July were reported to be 24% below pre-pandemic levels, while petrol vehicle values remained higher. As a result, the cost of leasing an EV in Germany has more than doubled in the past three years, making it more expensive than leasing a traditional fuel vehicle. This increase in leasing costs, combined with the reduction in government subsidies for EVs in key markets like Germany, has already slowed the growth of EV sales in Europe.

Some leasing companies have started leasing EVs for longer periods to mitigate resale risks, extending the duration to up to eight years. Others, like Arval, another large leasing firm, have had to increase lease prices due to lower residual values for EVs. Automakers have attempted to offset some of these losses by providing compensation to leasing companies, but the financial risk largely remains with the leasing firms.

There is also growing concern about potential regulatory measures that could mandate the rapid adoption of EVs by corporate fleets, further exacerbating the financial risks faced by leasing companies. The European Commission recently conducted a consultation on how to accelerate EV adoption by corporate fleets, raising the possibility of mandatory EV sales targets. However, leasing firms warn that such mandates would likely lead to even higher lease prices, discouraging companies from leasing EVs and potentially slowing the overall transition to electric vehicles.

The outcome of these developments will significantly impact the future of EV adoption in Europe, as the leasing industry plays a critical role in driving new car sales, particularly for electric vehicles.

This article was co-written using AI and was then heavily edited and optimized by our editorial team.

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