Will car lease prices go down in the UK?

Are car lease prices going down? It's the question on every car buyer's lips

TL;DR – Will car lease prices get any lower?

Car lease prices are heading in the right direction — Bank of England base rate cuts are feeding through to more competitive pricing, and manufacturers under pressure to hit EV sales targets are discounting hard to shift electric cars.

That said, it's not all good news: VED exemptions for EVs are gone, the expensive car supplement threshold has shifted, and eVED is on the horizon from 2028. For ICE and hybrid, the market is broadly stable — no dramatic drops expected.

Will car lease prices go down? Is now the right time to place my order?

These questions may be racing around your head as you debate whether to wait or make the leap and go for your dream car lease.

No one wants to commit, only for prices to drop significantly straight after. It feels like a kick in the teeth.

Unfortunately, our wonderful pricing analysts will be the first to tell you that car lease pricing isn't simple or predictable.

We know. We heard your gasp of surprise from here.

There are so many parts that can impact car lease prices and as a leasing broker, we're smack bang in the centre of that wild hurricane.

Thankfully, we have some hugely skilled experts in our ranks whose day job is to predict pricing trends and secure our customers the best lease deals. They're our not-so-secret weapon, and we're delighted to share their insights with you.

Read on to unpick what affects the cost of your lease, whether prices are heading down, and when the right time to make your move could be.

Don’t feel like reading right now? Luckily we have a video just for you.

What impacts car lease prices?

Before we dive into whether car lease prices will go down, we need to understand what contributes to the cost of a car lease in the first place.

Five main things impact car lease costs, and we'll tackle each of these in turn.

• On the road price (OTR)
• Depreciation curve
• Interest rates
• Vehicle taxation (VED, or road tax)
• Broker discounts

How does OTR affect lease prices?

Your lease cost starts with the car's list price. This is what the manufacturer wants to charge for the vehicle before it reaches your driveway.

Add delivery charges, registration fees, number plates, half a tank of fuel and the first year's road tax, and you've got the On The Road Price (OTR). That's your starting point for everything.

Manufacturers don't change their prices often, but when they do (or when they offer discounts) it has a direct knock-on effect on what you'll pay each month.

What drives OTR up or down?

A few things affect OTR, including:

• Production costs
• Market competition
• Supply and demand
• Global events

After the disruption of the pandemic years, supply has largely stabilised — but manufacturers are now navigating a new challenge: hitting government EV sales targets under the Zero Emission Vehicle (ZEV) mandate.

That pressure is actively driving discounts and pre-registration deals, particularly on electric cars (more on that shortly).

One thing worth knowing though, OTR differs from P11D value.

P11D only includes list price and delivery charges — no road tax, no registration fee.

It's the figure used to calculate company car tax (BiK), and it can actually be higher than the OTR even though it covers less. Something to bear in mind if you're leasing for business.

How does depreciation affect lease prices?

Here's one of leasing's biggest advantages: you're only ever paying for the depreciation of the car, not its full value.

Depreciation is simply the difference between what the car is worth when you take delivery and what it's worth when you hand it back.

That end figure is called the residual value. Industry data provider CAP sets a benchmark depreciation value for every vehicle, and funders use this as their starting point; choosing to set their threshold at 100%, or apply a more cautious discount of 90% or 85% depending on what's happening in the market and wider economy.

Either way, it's ultimately the funder’s call to make.

But the better the residual value, the lower your monthly payments. And crucially, whatever is predicted, your payments stay fixed for the duration of your lease. So if the car depreciates faster than expected, that's their problem, not yours.

What affects depreciation though?

Age, mileage and condition are the obvious ones.

But brand perception, safety ratings, the state of the market, new model releases and manufacturer scandals all factor in too.

Anything that makes the car harder to sell on will drag that residual value down.

What about electric cars?

EV depreciation is still one of the more unpredictable elements of the market. New models are arriving at pace, technology is improving rapidly, and that means older EVs can date quickly; particularly in the premium segment.

For leasing customers, this is actually less of a concern than it sounds.

The depreciation risk sits with the funder, not you. But it does mean funders tend to be more cautious with EV residual values, which can keep monthly payments slightly higher.

The good news is as the EV market matures, residual values begin to stabilise on more established models.

How do interest rates affect lease prices?

If you have a mortgage or a loan, you'll know the feeling. Interest rates have been a hot topic for the last few years — and for good reason.

Car leasing involves borrowing, meaning interest rates directly affect what you pay. When rates go up, funders pay more to borrow money and pass that cost on to you. When they fall, the reverse applies.

The Bank of England base rate peaked at over 5% in late 2023 — the highest it had been since 2008. Since then, the Monetary Policy Committee (MPC) has cut rates six times, bringing the base rate down to 3.75% as of February 2026.

Inflation has fallen sharply from its peak of over 10% and is expected to return to the 2% target this spring. The Bank of England has signalled that further cuts are likely through 2026 if the economy continues to perform as expected.

What does that mean for your lease?

Falling rates feed through to more competitive lease pricing over time — and the direction of travel is now firmly downward.

It won't happen overnight, but the worst of the interest rate pressure is seemingly behind us.

How does road tax affect lease prices?

Vehicle Excise Duty (VED), or road tax, is included in your lease price, so any changes to the rates will affect what you pay.

For most cars registered on or after April 2017, first-year VED is based on CO2 emissions. From the second year onwards, a standard rate of £195/year applies across petrol, diesel, hybrid and electric vehicles.

That last point is a significant change. The longstanding VED exemption for electric vehicles ended in April 2025. EVs are now subject to the same standard rate as every other car. Here's how it breaks down:

• New EVs registered on or after 1 April 2025: £10 first year, then £195 standard rate
• EVs registered 1 April 2017–31 March 2025: £195 standard rate
• EVs registered 1 March 2001–31 March 2017: £20

The hybrid and AFV £10 annual discount has also been removed.

The expensive car supplement

If your car has a list price over £50,000, an additional £425/year applies for five years from the second tax payment — bringing the total to £620/year. This threshold increased from £40,000 to £50,000 in April 2026, which is good news for EV drivers — many popular models that were previously caught by the supplement will no longer be subject to it.

Note: EVs registered before 1 April 2025 remain exempt from the supplement. Those registered on or after that date and with a list price exceeding £50,000 will be liable.

What about company car tax (BiK)?

BiK isn't included in your monthly lease payment, but it's still a real cost for business drivers. Calculated using your car's P11D value and CO2 emissions banding, it's charged on any vehicle used for personal journeys as well as work.

The current BiK rate for pure electric vehicles is 3% for 2025/26 — rising by 1% per year and confirmed through to 2029/30, when it will reach 9%. That's still significantly lower than the equivalent rate for higher-emission vehicles, which cap out at 37%.

For business drivers, an EV lease remains one of the most tax-efficient ways into a new car

What's coming next: eVED

Looking further ahead, the government has launched a consultation on electric Vehicle Excise Duty (eVED) — a mileage-based tax for electric and plug-in hybrid cars, due to come into force in April 2028.

Rather than a flat annual rate, eVED charges based on how far you actually drive:

• Pure electric vehicles: 3p per mile
• Plug-in hybrids: 1.5p per mile

For context, the average EV driver covering around 8,500 miles a year would pay roughly £255 annually — approximately half what a petrol driver pays in fuel duty for equivalent mileage.

How eVED will be handled within a lease contract is still to be confirmed.

As the registered keeper, your leasing company is responsible for VED — and eVED is likely to follow the same principle. Whether that means it's estimated and built into your monthly payment, or reconciled against your actual mileage at the end of your term, is still being worked out.

What we do know is that it adds a layer of variability that flat-rate road tax never did.

If you're ordering a lease now, eVED won't affect you during your current contract term. But it's worth factoring into your thinking when the time comes to renew.

How do broker discounts affect lease prices?

Here's where we get to the good bit.

Most of the factors above are outside anyone's control. But this one? This is where a good broker earns its keep.

Brokers with access to a wide panel of funders can compare millions of rates to find you the best deal — and at Carparison, that's exactly what we do. But we go further than a straight comparison.

Because we operate at volume, we're in a position to negotiate directly with manufacturers and funders, securing exclusive OTR discounts and stock allocations that simply aren't available elsewhere. Our buying power becomes your saving.

This is particularly relevant right now.

The ZEV mandate requires manufacturers to ensure a set proportion of their sales are fully electric. EV market share currently sits at 22% year-to-date — well behind the government's target of 33%.

Every car sold under that threshold carries a potential fine of £12,000.

That pressure creates opportunity.

Manufacturers are actively incentivising EV sales through pre-registration deals and aggressive discounting to hit their targets — and as a high-volume broker, we're well placed to access those deals and pass the savings on to you.

The end of each quarter is traditionally when the best deals emerge, as manufacturers and funders push to hit their sales targets. It's one of the best times to start your search.

Want to see what our buying power can get you? Head over to our best lease deals — cherry-picked by our team every month.

So, will car lease prices go down?

You've made it. The big question. And the honest answer? It depends on which part of the cost you're looking at.

The good news

Interest rates have fallen significantly from their 2023 peak — the base rate now sits at 3.75% and further cuts are expected through 2026. That feeds through to lease pricing over time.

Manufacturer pressure to hit ZEV mandate targets is also working in your favour. With EV market share at 22% against a government target of 33%, manufacturers are under real pressure to shift electric cars.

This means pre-registration deals, aggressive discounting, and brokers like us securing rates you won't find elsewhere.

If you're considering an electric lease, now is a good time to be looking.

The less good news

Vehicle taxation has increased and isn't going back down.

EV road tax exemptions are gone, the expensive car supplement now applies to new EVs over £50,000, and eVED is on the horizon from 2028. These are real costs to factor in.

EV residual values also remain harder to predict than combustion engines, which keeps some monthly payments higher than you might expect. But as time goes on, this is stabilising and getting easier.

The bottom line

For electric cars, there's genuine downward pressure on pricing right now.

For ICE and hybrid, the market is broadly stable.

Either way, the best deal isn't always about timing it perfectly — it's about having the right broker in your corner.

And that's exactly what we're here for.