Drivers shift towards short-term leases as economic uncertainty continues
New research suggests that a sizeable proportion of drivers prefer short-term vehicle leases to longer contracts, due to the greater financial flexibility they provide.
A surprising 37% of respondents to a recent survey on personal financial commitments and car ownership said they preferred a short-term lease.
Drivers less likely to sign three-year term leases
What’s more, according to the survey, 32% of drivers said they are now less likely to sign a longer three-year term lease for a new vehicle than they were a year ago.
"As the economy faces significant challenges, flexible leasing enables short-term demand to be met without the problems of a long-term commitment in an uncertain market," said Karl Howkins, Managing Director of leasing company Sogo, which carried out the research.
“Monthly leasing frees capital from the balance sheet that can be deployed elsewhere in the company to fund growth. While many managers may not yet be able to transition out of traditional lease models immediately, it’s useful to start thinking about the mix across fleets.”
Are EVs to blame?
The increasing uptake of electric vehicles could help explain why more fleet managers are opting for shorter leases.
The most recent government statistics show that in 2020, transport accounted for 24% of the United Kingdom's total greenhouse gas (GHG) emissions. It was also the cause of 33% of NOX emissions and 14% of particulate matter emissions (PM2.5).
Clearly, electrification is top of mind for many businesses since fleets have been setting the pace at the forefront of the shift to electric vehicles.
Recent research shows fleets running EVs have reduced their carbon emissions by over 15 tonnes per car per annum; a saving of around 5,665l of fuel.
EVs delivered another stellar performance in terms of new vehicle registrations in January. The number of battery electric vehicles (BEVs) increased by 19.8% year on year, while hybrid electric vehicles (HEVs) registrations increased by some 40.6% in the same period.
The Society for Motor Manufacturers and Traders now estimates that plug-in electric vehicles (PHEVs) will make up over a quarter of all new registrations this year, and nearly a third of the market in 2024.
Can charging infrastructure keep up with demand?
It remains to be seen whether charging infrastructure will keep up with increasing demand, though the latest data from ZapMap looks promising. January saw a 31% increase in the total number of charging points in comparison with January 2022. At the end of the month, there were 37,851 charging points in the UK across 22,355 different locations.
As the range of available electric vehicles increases and the 2030 ban on sales of new combustion engine cars draws ever closer, it’s possible that more drivers will be looking for shorter leases that allow them to keep their options open. And in the middle of the cost-of-living crisis, surely anything which cost less to run is going to be an inviting prospect.
But where’s your fleet at? What’s the average length of your company’s leasing contracts? Are the increasing electric options affecting the duration of your contracts?
