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EV Leasing

Leasing could become the gateway to increasing EV ownership 

The pandemic has brought profound change to many people’s lives. It has triggered house moves, made home-working an integral part of millions of people’s jobs and prompted many to re-evaluate how they spend their free time. James Fairclough, chief executive of AA Cars, writes

These lifestyle changes have even filtered through to our relationship with cars. As we exited lockdown last year, demand for used cars surged past pre-pandemic levels, and that interest has not tailed off.

But alongside that strong demand, three new trends are emerging – changes in the type of car people are looking to drive, the reasons why they want a new vehicle, and how they want to pay for it.

We’re seeing fewer searches for SUVs on the AA Cars platform, and higher demand for superminis. With the environment becoming an increasing priority for many, switching to a less polluting vehicle has become the number one reason drivers want to purchase a new car this year.

Underlying all these changes, from the types of car people want to drive to the reasons for choosing a new vehicle, is a growing interest in leasing. We’re seeing this first hand at the AA, with rising demand for our new Smart Lease product.

Our lives have probably never been as uncertain as they were during the past year, and this was especially acute in those first few months of lockdown. People worried about their family, their jobs, health, homes and finances, and more widely about the economy and their futures.

Many younger people see renting as practical, giving them greater flexibility and the ability to turn the spending taps on and off again.

James Fairclough, chief executive of AA Cars

Amid this uncertainty, people questioned what flexibility they had with their finances. Foremost in most people’s minds was what would happen if they couldn’t meet regular payments for mortgages and cars?

The widespread availability of payment holidays helped alleviate those worries during the pandemic, but it also prompted people to reflect on the importance of flexibility once the crisis ends and that support is taken away.

This sentiment is translating into increased interest in car leasing. Unexpected life events can put people in a financially precarious situation, but if you have a flexible car lease which allows you to return the vehicle in the event of a sudden change in circumstances, the prospect of paying for that vehicle in uncertain times is suddenly less of a concern.

The perception of leasing something – renting, in other words – is changing and is becoming more ingrained in our everyday lives in a way we don’t always realise. Many of us rent the films we watch, the music we listen to, the homes we live in and now we can even rent furniture and artwork.

Many younger people in particular see renting as practical, giving them greater flexibility over where they live, and how they spend their money, with the ability to turn the spending taps on and off again.

We are seeing especially strong interest in the leasing of electric vehicles (EVs). With new petrol and diesel vehicles being phased out in just nine years’ time, many drivers want to experience an electric car now. However, their lingering concerns about battery lifespan and depreciation mean many are still unsure about buying outright.


Gateway to ownership

Leasing an EV will likely be increasingly seen as the gateway to eventual electric car ownership. Through a lease, drivers will be able to test out an EV over the length of their contract. They may want to even try two or three models over a longer period of time, before settling on one they would like to purchase.

In this way, leasing and car ownership will go hand in hand.

Leasing will never overtake the certainty of ownership. People who can afford to buy a car outright, or choose to do so through car finance, do so because they like the feeling that the car belongs to them, or will do at the end of their finance deal. With outright ownership, drivers know their only costs are taxes, fuel, and maintenance, insurance and repairs — and even repairs can be covered through a warranty, alleviating the concerns of unexpected costs.

Yet for other drivers, particularly younger ones who like to have the latest model in the same way that they want the latest phones, or those who want to try before they buy, leasing will increasingly be the way they initially access a car.

The perception of car ownership is not changing – it is still highly desirable for those who need a car – but leasing will become a new route toward car ownership, particularly as we enter a world where every car will one day be an EV.