Europe’s EV Leasing Prices Double Amid Falling Resale Values

The European electric vehicle (EV) leasing industry is grappling with financial challenges as plummeting resale values have forced companies to double their lease prices over the past three years. These issues are raising concerns among leasing firms about the viability of their business if regulators push for a rapid transition to electric vehicles.

Leasing companies play a crucial role in the European automotive market, with 60% of all new car purchases and approximately 80% of EVs being leased. Corporate fleets and commercial buyers are the primary customers for these leases.

Ayvens, one of Europe’s largest auto leasing companies with a fleet of 3.4 million vehicles—10% of which are EVs—has highlighted the risks associated with a swift transition to electric vehicles.

“If we are pushed too hard to transition everything to electric too soon, my shareholders will say, ‘We do not want to take the risk,’ and we could be out of the market,” says Tim Albertsen, CEO, Ayvens.

The drop in EV resale values has been driven by several factors, including price cuts by Tesla, concerns about charging infrastructure, battery longevity, and the arrival of cheaper Chinese EV models. In early July 2024, resale values for EVs in Germany were 24% below pre-pandemic levels, and in Britain, they were 30% lower, according to Autovista. In contrast, second-hand petrol vehicle values have remained about 15% higher in both markets.

This depreciation of EVs has led to increased leasing costs. For example, in Germany, the monthly lease cost for a EUR 45,000 EV has more than doubled, rising from EUR 284 in August 2021 to EUR 621 in 2024, surpassing the cost of leasing a comparable fossil-fuel vehicle. This trend has been exacerbated by reduced government subsidies for EVs in key markets like Germany, where EV sales fell by 16.4% in the first half of 2024 after subsidies were abruptly cut in December 2023.

In response to these financial pressures, some leasing companies have extended lease periods for EVs to mitigate potential losses. Ayvens has begun leasing EVs for up to eight years and re-leasing them once or twice at reduced rates. Arval, another major leasing firm, has also had to raise lease prices due to the lower residual values of EVs.

Automakers have attempted to offset some of these losses by offering compensation for depreciating EV values, but the financial risk remains primarily with leasing firms. The industry’s concerns are further heightened by potential regulatory measures that could mandate a rapid adoption of EVs by corporate fleets. A recent consultation by the European Commission on accelerating EV adoption has suggested mandatory EV sales targets, which industry leaders warn could worsen financial risks and drive lease prices even higher.