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The automotive industry has witnessed a significant shift in recent years, with vehicle leasing becoming an increasingly popular choice amongst motorists in the UK. As a convenient alternative to outright car ownership, leasing offers numerous benefits that appeal to a broad range of drivers. This growing trend prompts the question: what percentage of new cars are leased in the UK?
The latest industry statistics reveal that over 1.6 million people now lease a car in the UK. As a rough estimate, it’s believed between 20% to 30% of new cars are leased in the UK, versus being purchased.
This sizable figure suggests a substantial number of British adults are opting for short term car leasing rather than purchasing vehicles, which could mean how many cars are leased in the UK is set to increase. With an assortment of leasing options available in the market, consumers can find flexible deals tailored to their specific requirements, further boosting the appeal of automotive leasing.
New car leasing in the UK
Recent leasing trends
In recent years, car leasing has become increasingly popular in the United Kingdom (view our latest stock). In 2021, it was estimated that over 1.6 million people in the UK were leasing a car, highlighting a significant trend among UK adults to choose car leasing over buying. As a result, the percentage of new cars being leased vs purchased likely went up.
A decrease in consumer car finance new business volumes in March 2023 by 8% compared with 2022, was reported by the Finance & Leasing Association (FLA). Additionally, in Q1 2023, new business fell 6% by value and 5% by volume.
Role of electric vehicles
The UK car leasing market has witnessed a surge in demand for electric vehicles (EVs). In 2021, 327,000 plug-in vehicles (PiVs) were registered for the first time in the UK, representing an increase of 77% on 2020 and 303% on 2019. PiVs accounted for 14.7% of all new vehicle registrations in the UK in 2021. This shift towards electric vehicles could be attributed to a growing awareness of environmental concerns and the UK government's commitment to phasing out petrol and diesel vehicles.
Shift in preferences
Car leasing in the UK has undergone a shift in preferences, with a growing interest in personal contract hire (PCH) becoming apparent around seven years ago. Factors such as affordability, flexibility, and simplicity of PCH have likely contributed to this change in consumer preferences.
Moreover, the percentage change in consumer sales enquiries on Leasing.com for electric, petrol and diesel vehicles between January 2021 and June 2021 indicates a growing demand for electric vehicles within the car leasing market. This shift in preferences for leased vehicles aligns with the broader market trends and the influence of environmental concerns on consumer choices.
Market drivers and influencers
Economic factors and consumer confidence
The UK automotive market is influenced by various economic factors and consumer confidence levels. Consumer confidence plays a significant role in determining the percentage of leased cars in the UK. Economic stability, low-interest rates, and favourable VAT policies can encourage consumers to lease new cars. Additionally, businesses may opt for leasing agreements to save on upfront costs and maintain a flexible fleet.
A strong used car market can also impact the percentage of leased vehicles, as consumers have more options for purchasing affordable cars. Therefore, market demand for new cars and their acquisition cost influence leasing choices.
Technological advancements
Technological advancements in the automotive industry also drive leasing trends. Many consumers are attracted to new vehicle technologies like advanced safety features, connectivity, and infotainment systems. Electric vehicles (EVs) are becoming increasingly popular as they offer an eco-friendly and cost-effective alternative to traditional petrol and diesel cars. These factors contribute to a higher percentage of new cars being leased in the UK, as people prefer to acquire the latest technology without the long-term commitment of ownership.
Environmental and emission regulations
In the fight against climate change, the UK government has introduced stricter emission regulations, including providing incentives for leasing zero-emission vehicles. These policies have led more consumers to choose EVs and hybrids over petrol and diesel cars. Manufacturers are responding to these environmental policies and increasing supply of CO2 emission-compliant vehicles. The evolving emission standards and environmental awareness greatly influence the demand for new cars and, consequently, the leasing market.
COVID-19 pandemic impact
The pandemic has had a significant impact on the automotive industry, especially regarding new car leasing. The COVID-19 crisis caused uncertainty in the market, leading to reduced consumer confidence and impacted supply chain, resulting in decreased production and inventory for various car manufacturers. Businesses have also been affected, as remote work policies and financial restraints have influenced their decisions to lease new vehicles for their fleets.
However, as the market recovers and consumer confidence grows, the percentage of new cars being leased in the UK is expected to rebound accordingly. The long-term implications of the pandemic on the automotive landscape are yet to be fully understood, but it remains a critical factor influencing the leasing market.
Comparing car leasing and purchasing
Financial aspects
When it comes to the financial aspects of leasing and purchasing, there are key differences to consider. For instance, with car leasing, you typically pay a deposit and agree to make monthly repayments in exchange for the use of the vehicle. In comparison, purchasing a new car usually involves obtaining a loan or opting for a Personal Contract Purchase (PCP) allowing for the driver to own the vehicle at the end of the agreement.
Leasing can be particularly beneficial for those looking to drive electric vehicles, as it allows drivers to enjoy the latest technological advancements without the high initial cost that often comes with electric cars. That said, purchasing may still be appealing to those who have a desire for long-term ownership and equity in their motor vehicles.
It's worth noting that, in some cases, the premiums associated with leasing can be lower than the monthly repayments for a purchase. However, this is not always the case and can vary depending on factors such as the vehicle's make and model, as well as the customer's credit history.
This could see a further future increase in the percentage of new cars that are leased versus being purchased / bought on finance.
Car usage and annual mileage allowances
Aside from financial considerations, there are other factors to take into account when deciding whether to lease or purchase. In the UK, the annual mileage allowance plays a significant role in this decision. When leasing, drivers are usually subject to a set mileage limit, which is agreed upon at the beginning of the contract term. If the driver exceeds this limit, they may be charged additional fees.
On the other hand, purchasing a vehicle generally provides the owner with more freedom to use the car without any mileage restrictions. This can be particularly important for UK drivers who require a higher allowance due to the nature of their work or lifestyle.
New car market and trends in finance
Understanding trends within the new car market can also help potential motorists make an informed decision. The motor vehicle landscape is constantly evolving, with an increasing number of new business transactions occurring in the car finance sector. Members of the UK automobile industry have embraced a range of financial products tailored to suit the unique needs and preferences of different drivers.
In conclusion, the choice between leasing and purchasing a new car ultimately depends on individual circumstances and preferences. Financial aspects, car usage, annual mileage allowances, and the new car market should all be considered when making this important decision.
Popular models and trends in UK car leasing
Top leased vehicles
Some of the most sought-after vehicles for leasing in the UK include the Volkswagen Golf and the BMW 3 Series. These popular models continue to attract a significant number of lessees due to their combination of comfort, performance, and efficiency. As more people in the UK choose to lease cars, these models maintain their strong presence in the market.
Shifts in body types and vehicle categories
Over the years, long-term trends in the UK car leasing market have shown shifts in preferences for different body types and vehicle categories. One noticeable trend is the growing preference for light goods vehicles (LGVs) and heavy goods vehicles (HGVs) among commercial lessees. This shift indicates the increasing importance of fleet management and logistics for businesses in the UK, as more companies opt for leasing rather than purchasing such vehicles.
Another area of change is the increasing popularity of motorcycles, buses, and coaches in the leasing market. With urbanisation driving demand for efficient transportation options, these vehicle categories represent a cost-effective solution for both individuals and organisations. Additionally, the rise in electric and hybrid vehicle options is also influencing preferences in the leasing market.
As the UK car leasing market continues to develop, it's crucial for both consumers and industry players to keep abreast of the latest trends and changes to make informed decisions. By staying up-to-date with popular models like the Volkswagen Golf and BMW 3 Series, as well as tracking shifts in body types and vehicle categories, both lessees and providers can better navigate the dynamic lease market.
Challenges and opportunities ahead
Supply chain and manufacturing factors
The car leasing industry in the UK faces challenges due to ongoing supply chain issues, particularly in the manufacturing sector. A significant factor in these supply chain challenges is the global semiconductor shortage, which has had a widespread impact on car manufacturing. As a result, providers are struggling to keep up with demand, leading to longer wait times for customers.
Despite these challenges, there are opportunities for growth in the UK car leasing market. Manufacturers and providers can benefit from improving supply chain resilience and adapting their production strategies. Embracing new manufacturing technologies and innovative solutions could help alleviate some of the pressure caused by shortages in semiconductors and other essential components.
Adapting to market changes
The car leasing market faces further challenges as consumer preferences evolve and new mobility solutions emerge. Providers must remain adaptable and ensure their offerings remain relevant to the changing market landscape. By focusing on customer needs and preferences, they can better anticipate shifts in demand and tailor their services accordingly.
In addition to adapting to changes in consumer preferences, providers must also stay ahead of regulatory changes and media scrutiny as the industry continues to grow. With increasing attention on car leasing and its role in shaping the future of mobility, maintaining a transparent and sustainable business model is of utmost importance.
In conclusion, the UK car leasing industry faces a number of challenges and opportunities in the coming years, driven by supply chain issues, evolving consumer preferences and market trends. By addressing these challenges head-on, providers can position themselves for future success and ensure they remain competitive in an ever-changing industry.
