Strong growth has been seen in demand for business contract hire (BCH) and salary sacrifice cars, according to the BVRLA.

Data from the rental and leasing industry body’s latest Leasing Outlook report, taken from members’ fleets, shows a 7.1% year-on-year increase in BCH, and a 47% increase in salary sacrifice over the same period.

The BVRLA said the strong interest in business vehicles had been motivated by a ‘fair’ tax regime, and corporate ESG strategies.

It comes in contrast to demand for private vehicles, with personal contract hire down by 7.1% year-on-year.

The corporate market is also driving take-up of electrified vehicles, with 44% of new BCH cars in the final quarter of 2023 being pure EVs, and 31% plug-in hybrids. This helped the average CO2 emissions of new BCH vehicles to an all-time low of 55.3g/km – the overall BVRLA car fleet figure is now 81.1g/km.

Salary sacrifice demand for electrification was even greater, with 84% of new cars in this sector during the quarter being pure EVs.

Overall, BVRLA members’ leasing fleet grew by 2.4%, to 1.9 million vehicles, including a 1.9% increase in cars, and a 3.9% increase in vans.

BVRLA director of corporate affairs Toby Poston said: “It is great to see the BVRLA member lease fleet growing, but this growing imbalance between the business and retail segments – particularly for EVs – is a real concern.

“BIK and salary sacrifice incentives have fast-tracked corporate uptake of electric vehicles and are underpinning our progress towards the ZEV mandate targets. 

“Fleet operators and business drivers cannot bear the weight of the EV transition alone, especially as the mandate targets ratchet up in future years. The spotlight must turn to the retail sector. It needs igniting.”

Discussing ways of addressing the imbalance between business and retail demand, Cap HPI head of forecast strategy Dylan Setterfield said: “The government has many tools at its disposal to support BEV uptake and ensure the terms of the ZEV mandate can be met. 

“An obvious change would be harmonisation of VAT, where public charging costs can be reduced to make EV running costs cheaper for those without off-street parking.

“Other measures must be on the table too and include exemptions from tolls or discounted parking charges. 

“In short, incentives are required. The annual increases set by the mandate only get steeper between now and 2030.”