The rush for electric company cars is out of step with natural demand for EVs, causing an oversupplied used market and heavy losses when cars are de-fleeted.

That’s according to a new report from the British Vehicle Rental and Leasing Association (BVRLA), whose members run a combined fleet of 1.6 million cars and account for a large share of new EV registrations each year. 

Data from the fourth quarter of 2025 shows that demand for electric company cars continued to surge, supported by cheaper newcomers reaching showrooms and aggressive discounting from manufacturers trying to meet the government’s ZEV mandate targets.

Both of those factors are important for salary-sacrifice schemes, whereby drivers lease a car through their employer using their pre-tax wages. The main restriction is the monthly rentals can’t nudge their remaining income under the national minimum wage threshold. 

With an influx of cheaper plug-in hybrid and electric cars, BVRLA members claim almost half of salary-sacrifice deliveries are now going to 20% taxpayers, many of whom wouldn’t previously have been eligible for such schemes.

However, the organisation highlighted ultra-low benefit-in-kind (BIK) tax rates for EVs as the main catalyst for both company car and salary-sacrifice volumes. 

An EV driver would be taxed on 4% of the vehicle’s list price in 2026/27, compared with 25% for the most efficient petrol models, resulting in a monthly tax bill roughly six times lower.

BVRLA members’ business contract hire (BCH) fleet grew 10% to 983,388 cars during 2025, of which almost half (48%) were electric. Meanwhile, salary-sacrifice volumes more than doubled (up 125%) to 226,663 cars over the same period, with a 77% EV share of new deliveries during Q4 of 2025.

Leasing firm executives have now warned that those conditions have pushed EV registrations beyond the “organic” demand for EVs. 

With few incentives for retail customers, members’ private contract hire (PCH) fleets shrank by 4% to 236,804 cars. CO2 emissions for new deliveries averaged 90g/km – more than twice that of the EV-heavy new BCH fleet (44g/km). 

That imbalance is compounded by mixed messages from the government, including a new pay-per-mile tax (eVED) for EVs from April 2028, which has already affected order rates, while the Iran war is expected to raise borrowing costs and cause inflation, impacting business and consumer confidence with a risk of stalling the new car market, the BVRLA added.

Leasing firms are already facing “body blow” losses, often thousands of pounds per vehicle, when they remarket ex-fleet EVs at a lower price than the residual value that was forecast at the start of the contract.

That has caused monthly rental fees for EVs to rise faster than list prices, as a protective measure from further losses.

Customer behaviour is changing too, with average contract lengths increasing by 10% during 2025 and rising demand for used cars on salary-sacrifice and BCH fleets.

The BVRLA believes salary-sacrifice could absorb more ex-fleet volume if drivers were taxed based on the vehicle’s used value. BIK is fixed for a vehicle's entire life, based on its list price when new.

BVRLA chief executive Toby Poston said: “Persistent pressure on electric vehicle residual values, combined with wider economic uncertainty and global unrest, means margins are being squeezed like never before.

"Sustained progress will depend on greater market stability and clear, consistent policy signals from government.”