Leasing companies expect rising National Insurance Contributions (NICs) and the general sentiment of rising taxes to have a negative impact on vehicle orders next year.

The results, from the last British Vehicle Rental Leasing Association (BVRLA) Industry Outlook Reportshow that less than half (48%) of respondents expect new vehicle sales to increase next year,

Professional contract leasing will once again lead the way, although there is some optimism about demand for personal leasing.

The managing director of a leasing company said: “Customers who have extended their existing lease or held on to their vehicle for longer will eventually need to switch. So we think there is an element of pent-up demand that could drive growth. »

However, the BVRLA report suggests that businesses and private households will re-examine all areas of spending following the Budgetbefore committing to assets as expensive as new vehicles.

Delivery times have returned to normal after the pandemic and the semiconductor crisis, but the impact of inflation is impossible to ignore, says BVRLA.

Compared to 2019, rising new vehicle prices, rising interest rates and falling residual values ​​(RVs) have significantly increased the cost of new lease rates compared to expiring contracts.

As a result, BVRLA says fleets and private drivers have a significant volume of aging vehicles that need to be replaced.

Gerry Keaney, chief executive of BVRLA, warned: “Our energetic, innovative and resilient sector faces challenging times.

“Expectations that consumer and business demand would increase across the board in 2025 are being offset by turbulent business conditions and regulatory hurdles.

“Dizzying increases in employer national insurance contributions. The upheaval caused by Judgment of the Court of Appeal on automobile financing commissions. Constant confusion over decarbonization targets. There is no respite.

He added: “Faced with an evolving operating landscape, BVRLA members and their customers are required to maintain their leadership role in achieving ambitious road transport decarbonization targets.

“These targets are only increasing and the report reiterates the need for the sector to be supported to match its ambitions.”

At first glance, the information behind the latest report shows that the situation will improve next year compared to the last 12 months.

The vehicle leasing and rental industry expects market conditions to improve, driven by fleet demand and falling interest rates (see below).

However, the extent of these improvements depends on the magnitude of the impacts of the corresponding causes of concern.

The report shows that internal combustion engine (ICE) car supply, cash flow and regulatory burden are all expected to worsen in 2025.

Each can be directly linked to the three macroeconomic factors that came to a head in the fourth quarter: increase in NIC, zero-emission vehicle (ZEV) mandate uncertainty, decision of the automobile financing commission.

The uncertainty facing businesses is also reflected in the fact that none of the top three challenges predicted for 2024 are at the top of the list for 2025, says the BVRLA.

Motorhome risk, supply constraints due to the ZEV mandate and rising energy costs and prices are the biggest causes for concern in 2025, after appearing in the report’s ranking last year.

Separate analysis from ADS data experts suggests that the RV situation for used EVs is also likely to deteriorate before used values ​​improve.

Borrowing costs fall

However, according to the BVRLA report, better news is on the horizon: the majority of leasing and rental companies believe that interest rates have peaked and that the cost of borrowing will continue to fall in 2025 .

Few – just 3% – expect significant cuts from the Bank of England, but only 15% expect the cost of funding to rise, although the bank suggests the recent Budget is likely to lead to a half-percentage-point rise in CPI inflation.

Lower rates should help businesses meet their own borrowing costs and support lower monthly rents, BVRLA suggests.

Some executives also predict that lower interest rates will improve confidence in the broader economy, boosting demand for expensive products such as cars, with the potential to boost both the new car and car markets. ‘occasion.

THE BVRLA Industry Outlook Report 2025 was launched as part of the Industry Outlook Conference earlier today (Thursday December).