ELECTRIC vehicle leasing looks set to remain a preeminent, rapidly growing theme over the next few years, offering up some interesting opportunities for brokers.Â
Major car manufacturers are increasingly rolling out electric and hybrid vehicles, while certain countries, including the UK, have announced ambitious targets to force through a fundamental switch away from fossil-powered engines over the next couple of decades.Â
While the UK and many other European governments are focused on meeting targets to reduce global warming as set out in the Paris climate accord, there is also growing appetite from both consumers and investors for electric vehicles as part of a general move in favour of clean energy.
Last year, around 100 new EV models were launched around the world, with two million of the vehicles sold.
Given the tail winds for electric vehicles, it makes sense for brokers to position themselves to benefit from this fast-evolving theme. Brokers should be able to tap substantial sources of new revenue from additional services, such as those linked to batteries for instance.
While strong growth is expected in the EV leasing market over the coming years, brokers must not become complacent as experts also predict that OEMs themselves will focus aggressively on EV leasing, competing with established leasing businesses.
Many OEMs are still struggling to turn a profit from EVs despite surging sales, with the still relatively high price of car batteries eating into their margins.Â
Electric vehicle battery leasing
One key opportunity for brokers is to provide battery leases, enabling EVs to be acquired without the inbuilt cost of expensive battery packs.
This can be an especially attractive option for consumers as it can greatly reduce the near-term cost of EVs, making them more favourable as compared to buying traditional vehicles.
From the consumers point of view, EVs still equate to higher acquisition costs as compared to fossil-fuel powered vehicles but lower operating costs, as running cars on electric is much cheaper versus filling up at the pump.
To make EVs attractive to consumers, in what is going to be an increasingly competitive market, it’s vital that brokers come up with solutions that offer an early payback on EVs, as well as enabling them to receive the longer-term operational savings.
There are also some technical, financial considerations for brokers to take on board, which contrast with those of traditional vehicles.
Electric vehicle depreciation
As EVs are still much more expensive to buy as compared with fossil-fuel powered vehicles once the battery cost is included, EVs have a markedly higher depreciation cost to factor in over the first 3-5 years.
Meanwhile, maintenance costs for EVs are significantly lower further out, especially beyond the 5-10 year time frame.
As EVs are more expensive to purchase than conventional vehicles when the battery cost is included, they incur a comparatively higher depreciation cost over the initial 3-5 years of ownership.
Versus conventional cars, operation and maintenance costs also much lower for EVs, especially between the 5-10 year mark. Taking all this together, it follows that shorter leases do not work for EV vehicles.Â
EVs and EV leasing will also naturally become more attractive to consumers as the price of batteries falls, with improving technology and increasing mass production.
At the same time, the rapid growth going on in this segment, means brokers need to ensure they are firmly up to speed and able to offer competitive deals.
For the time being, especially as the EV industry continues to evolve and remains in its relatively early stages, brokers must also consider the unique traits of EVs versus traditional vehicles.Â
