Demand for flexible motoring will see car leasing double in popularity

Consumers preparing to embrace car leasing for more flexibility

Findings from a new report predict a rise in the demand for car leasing as consumers seek greater financial flexibility in their car-buying habits.

According to the McKinsey Center for Future Mobility (MCFM), drivers are poised to make leasing their preferred financing method due to the flexibility and convenience that it offers.

Over 4,000 drivers from across the United Kingdom, France and Germany answered the McKinsey Mobility Consumer Pulse survey, giving invaluable insight into their future plans.

When analysing the circumstances of the respondents, 61% of those quizzed confirmed they currently owned a car, while as little as 8% leased their vehicle.

With consumers demanding more financial freedom, the report confirms many consumers are leaning towards leasing.

When asked about their future plans, 14% of respondents admitted they would consider leasing their next vehicle. There was also a 3% drop in the number of consumers planning to buy their next car outright.

What flexibility does leasing offer?

Leasing is emerging as the most flexible choice for consumers wanting to avoid long-term contracts or large upfront payments, particularly in the expanding electric car market.

Personal contract hire terms can be as short as 12 months, giving consumers the option to swap and change their vehicles in line with a change in personal circumstances, industry trends, or new model releases.

With cars and technology hitting our roads all the time, the EV market is developing at a frantic rate and particular models can be at risk of becoming outdated in a matter of years.

The sudden rate of change in this space can naturally cause some degree of uncertainty, as we prepare for perhaps the biggest shift in our driving habits since the early days of the combustion engine.

According to the report, vehicle leasing becomes an increasingly attractive prospect for consumers shifting into the electric market.

So much so, the figures suggest that leasing is two times more likely to be the ownership preference for consumers, be that for those dipping their toes into the water for the first time wanting to avoid any long-term commitments, or for those searching for more convenience month on month.

Leasing creates an affordable and attainable entry point into the world of sustainable motoring, while the short-term nature offers an element of protection for customers who might yet be unsure.

Why is it beneficial to lease an electric car?

Electric cars are more expensive to build when compared to their combustion engine rivals. Once you add in the costs of battery production, you’re left with On the Road (OTR) prices that are substantially higher than their combustion engine competitor.

When comparing a combustion engine car against a close electric relative, the difference can be stark. For example, prices for a brand new Vauxhall Corsa GC start from £21,655. However, if you want the Vauxhall Corsa Electric in the same specification, prices start from £35,125.

Leasing an electric car allows you to spread that cost into affordable, fixed monthly payments over a set duration.

Previously unattainable cars become affordable and allow consumers to make the switch towards sustainable driving.

The benefits stretch beyond personal customers, with companies also able to take advantage of numerous tax incentives that make leasing a hugely cost-effective business decision.

Making electric cars accessible for the masses will increase the widespread adoption of EVs ahead of the 2030 ban on the sale of new petrol and diesel cars.

Leasing an electric car vs buying

For many, leasing will be the more convenient and flexible option compared to buying outright.

By removing the option of ownership at the end of your term, you don’t have to deal with the hassle that comes with advertising and selling the vehicle.

You simply hand the car back and move onto pastures new. No haggling, no time wasters.

For business lease customers, there are many tax benefits of car leasing. All the associated VAT is written off and 100% of the lease payments can be classed as an expense against your company’s annual tax bill. 

Like combustion engine cars, EVs are at risk of depreciation, with studies suggesting they lose close to 50% of their value after three years. When buying outright, this puts you, the consumer, at risk of a depreciating asset when it comes to selling.

Simple car leasing the key to unlocking a flexible future

The findings uncovered a lack of in-depth knowledge of leasing and its inner workings as one of the biggest stumbling blocks among UK-based respondents.

Among those quizzed that don’t currently lease their current vehicle, 61% admitted they aren't familiar with car leasing or couldn’t explain how it works as a financing method to their friends.

More than 70% cited a fear of hidden or unknown costs among their reasons for not trusting a leasing quote. Meanwhile, a quarter of those who already lease falsely believe they own the vehicle.

Hidden costs have become an unfortunate stereotype of the car leasing world, but like so many automotive myths, it isn’t strictly true. 

At Carparison Leasing, we pride ourselves on transparency, openly disclosing all commission and fees included in any one lease deal. Our helpful leasing guides can also explain any questions you might have.

Our website will clearly show the processing fee and commission fee we make on every vehicle, ensuring, you, the customer is left with no hidden surprises.

In 2021, Carparison Leasing became the first leasing broker in the UK to openly disclose their commission on each vehicle as we strive for a more transparent automotive industry.

In an ever-changing market, the report has confirmed that consumers value financial flexibility.

There has never been a more pressing time for greater transparency in the industry and we’re proud to be striving towards that.