Residual Value of Electric Cars in Leasing
The residual value of electric cars in leasing plays a major part in how lease pricing is calculated. If an electric car is expected to hold its value well over time, it can often lead to a more competitive monthly lease rate.
In this guide, we explain what EV residual value means, why it matters in the UK car leasing market, and how it can affect the cost of an electric car lease for personal and business customers.
What Has Actually Happened to Electric Car Residual Values?
Residual value is the single biggest number behind a lease payment, and for electric cars it has had the most dramatic few years of any part of the market. If you are leasing an electric car, the short version is this: the collapse happened, it was worse than almost anyone forecast, it has now stopped, and on a lease you were insulated from the whole thing. The longer version is worth reading, because it explains what will happen to your next quote.
Every figure on this page carries the month it was published, because residual value data goes out of date within months. Be wary of any article on this subject that gives you a percentage without a date attached.
The fall
cap hpi recorded average used battery electric values falling more than 60 per cent between September 2022 and September 2024, with the year on year drop reaching 36 per cent in September 2023. This was a genuine market event, not a wobble.
The flattening
By April 2026 cap hpi had electric values at 11.2 per cent down year on year at the three year and 60,000 mile benchmark, and described them as relatively flat for the previous eleven months.
The turn
Auto Trader's Retail Price Index for September 2026, published on 12 October 2026, put used electric cars up 2.8 per cent year on year, a fifth consecutive month of like for like growth, while petrol fell 1 per cent and diesel 0.8 per cent.
Who Carries the Risk if Electric Values Fall Further?
On a lease, it is not you.
The BVRLA's October 2026 Leasing Outlook states it directly: customers on personal contract hire and salary sacrifice are shielded from residual value uncertainty by the fixed cost contract, and the risk sits with leasing companies, funders and residual value risk takers.
Here is the mechanism, because it is worth understanding properly rather than taking on trust. When a funder prices a lease, it forecasts what the car will be worth at the end of the agreement. Your monthly payment is built on the gap between the list price and that forecast, plus interest and costs. You hand the car back at the end. You never own it, you never sell it, and you are never exposed to what it actually fetches.
So when the market moved against electric cars, the funders took the loss, not the drivers. The BVRLA's October 2026 report is blunt about the scale of it: firms are still losing sizeable sums on every electric vehicle they defleet and expect to for another year or more, and most leasing companies have at least another year of disposal losses coming. If you leased an electric car in 2022 and handed it back in 2025, you were on the right side of the single worst residual value forecast in modern leasing, and your monthly payment never moved.
What a revised forecast does affect is new quotes. If a funder marks its electric residual values down, the next agreement it prices will cost more, because the gap it has to recover over the term is bigger. That is why rental increases through this period ran ahead of increases in new car prices, as the BVRLA noted in April 2026. It is also why the same quote from different funders can vary more than you would expect on an electric car: they are not all taking the same view of what it will be worth in three years, which is precisely where a broker working across several of them earns its keep.
Three Things About Electric Residual Values That Will Surprise You
1. Used electric cars are now going up in value while petrol and diesel fall
This is the complete reversal of the story everyone knows. Auto Trader's September 2026 data has electric up 2.8 per cent year on year against petrol down 1 per cent and diesel down 0.8 per cent. Three to five year old electric cars were up 8.9 per cent year on year in the first half of 2026. Part of it is electric demand outpacing supply, and part is record fuel costs hitting petrol and diesel values, with Cox Automotive noting UK fuel costs up 35.8 per cent. Used electric transactions were up 67 per cent in the second quarter of 2026 according to the SMMT, reaching 5.5 per cent of the used market against 3.3 per cent a year earlier.
2. Electric lease rentals have reached parity with petrol and diesel, despite the worse residuals
The BVRLA reported in October 2026 that battery electric rentals are now at parity with equivalent petrol and diesel cars. That looks impossible given everything above, and the explanation is that the Electric Car Grant and manufacturer discounts have cut the front end of the calculation by enough to offset the weaker back end. The same report notes funders are now holding some electric cars for up to seven years, which has forced changes to how they forecast residual values at all.
3. The gap between electric brands is far wider than the gap between electric and petrol
Cox Automotive's second quarter 2026 figures forecast Chinese new entrant brands retaining roughly 45 per cent of retail value at three years, against about 66 per cent for established brands. That is a spread of around 21 percentage points inside the electric market. The average penalty for being electric rather than petrol or diesel at the same age, on Cox's figures, is 15.8 per cent, improved from 17.9 per cent earlier in 2026. In other words, which electric car you choose matters more to its residual value than the fact that it is electric at all. On a lease that shows up directly in the monthly payment.
What Decides an Individual Electric Car's Residual Value?
Cox Automotive's analysis of August 2026 points to a consistent set of factors, and they are worth knowing because they tell you which cars will be cheapest to lease.
Battery health
Described as one of the most significant influences on resale value. State of health, charge cycle data and charging history all feed in, and small differences in measured health move values noticeably.
Battery warranty
Models with a strong battery warranty show the lowest depreciation. A long warranty reassures the next buyer, and that feeds back into what a funder thinks the car is worth.
Range and charging speed
Long range cars hold value better than the early short range ones, and rapid charging capability matters in its own right. A car that charges slowly dates faster than one that charges quickly.
Brand
The single widest factor, worth around 21 percentage points between new entrant brands and established ones on Cox's three year forecasts.
Software support
An up to date firmware and update history supports value, partly because buyers read it as a proxy for how the battery has been looked after.
Replacement cycles
cap hpi raised forecasts for facelifted cars in February 2026 and cut them for the pre facelift versions. Leasing just before a model changes is a different proposition from leasing just after.
Is There a Battery Health Certificate in the UK?
Not yet, and this is one of the clearer gaps in the UK market. There is no nationally recognised battery state of health standard, and in August 2026 Electrifying.com, New AutoMotive and BatteryIQ were publicly calling on Government to introduce one for every dealer sold used electric car.
The numbers behind that campaign are striking. A survey of more than 13,000 UK drivers found just 3 per cent felt confident buying a used electric car, while 38 per cent said an independently verified battery health certificate would increase their confidence. And testing of more than 8,000 electric cars found average battery state of health above 95 per cent. The batteries are, on the whole, fine. The problem is that buyers have no standard way to prove it, and that uncertainty is priced into residual values, which is priced into your monthly payment.
Certification schemes exist elsewhere in Europe, including one from Ayvens using diagnostics accredited by the European Car Remarketing Association, but the UK is not among its listed markets. If a UK standard does arrive, the logical consequence is better residual values on well kept cars and therefore better lease pricing, because the funder's uncertainty discount shrinks.
Where the Industry Genuinely Disagrees
We are going to be honest about this rather than pick the version that suits a leasing broker, because anyone telling you the electric residual value question is settled is overselling it.
The pessimistic case
The BVRLA, October 2026: electric prices continue to underperform massively the residual values originally forecast for them, member confidence in future margins is down 50 per cent, and there is precious little confidence among residual value committees about the future values of electric vans. Plug-in hybrid residuals are described as looking vulnerable.
The optimistic case
Auto Trader, on September 2026 data published 12 October 2026: a fifth consecutive month of like for like growth in used electric prices, up 2.8 per cent year on year while petrol and diesel both fell. Lessors themselves told the BVRLA that electric residuals stabilised over the summer and had, in their words, hit rock bottom.
The middle view
cap hpi, August 2026: electric cars will keep outperforming the wider market in the short term, but the advantage should narrow over the following three months, with weaker performance against seasonal norms building through 2027 before flattening in early 2028.
The honest summary is that nobody yet knows whether the 2026 recovery is a floor or a supply driven blip, and that for electric vans and plug-in hybrids there is currently no optimistic source at all. If you are leasing one of those, that is worth knowing: it does not affect your monthly payment once the contract is signed, but it does mean the quotes you are offered now carry more caution than they would on an electric car.
What This Means for Your Next Lease
Four practical conclusions.
You are not exposed to the forecast. On a personal lease or a salary sacrifice scheme the residual value risk sits with the funder. What you are exposed to is excess mileage and damage charges at the end, which are contractual and have nothing to do with the market.
Compare funders, not just cars. Because funders take genuinely different views of electric residual values, the spread between quotes on the same car can be wide. That is the single strongest argument for using a whole of market broker on an electric car rather than going to one lender.
The brand you pick matters more than the fuel. A 21 percentage point spread inside the electric market dwarfs the electric to petrol gap. If the monthly figure is what you care about, that is where to look first.
Electric and petrol rentals are now close. With battery electric rentals reported at parity with equivalent petrol and diesel cars, the old assumption that going electric carries a higher monthly figure is out of date. On a business lease, once company car tax is taken into account, electric usually wins comfortably, and those tax bands change each tax year so take the current figures from your accountant.
If you want this applied to a specific car rather than the market as a whole, tell us the model, the term and your annual mileage, and we will put the quotes from several funders next to each other so you can see how differently they are pricing the same residual value risk.
Frequently Asked Questions
It is the value a funder forecasts the car will be worth at the end of your agreement. Your monthly payment is built on the gap between the list price and that forecast, plus interest and costs, which is why two cars at the same price can lease for very different amounts. A car expected to hold its value well leases more cheaply than one expected to lose it.
No. On a personal lease or a salary sacrifice scheme you hand the car back at the end and you never own it, so you are not exposed to what it actually fetches. The BVRLA's October 2026 Leasing Outlook states this directly: customers on these contracts are shielded from residual value uncertainty by the fixed cost contract, and the risk sits with the leasing companies and funders. What you are exposed to is excess mileage and damage charges, which are contractual and unrelated to the market.
They fell further and faster than almost anyone forecast, then recovered. cap hpi recorded average used battery electric values falling more than 60 per cent between September 2022 and September 2024, with the year on year drop reaching 36 per cent in September 2023. By April 2026 the market had been broadly flat for eleven months, and by September 2026 Auto Trader's Retail Price Index had used electric cars up 2.8 per cent year on year, a fifth consecutive month of growth.
On average yes, but the gap is closing and the direction of travel has reversed. Cox Automotive's second quarter 2026 figures put the penalty for being electric at three years old at 15.8 per cent against an equivalent petrol or diesel car, improved from 17.9 per cent earlier in the same year. Meanwhile Auto Trader's September 2026 data has electric prices rising 2.8 per cent year on year while petrol fell 1 per cent and diesel fell 0.8 per cent.
No. A lease is a fixed cost contract and the payment is set when you sign. A funder revising its residual value forecasts downward affects new quotes, not agreements already in place, because the funder has to recover a bigger gap on the next car it prices. This is why rental increases through 2024 and 2025 ran ahead of increases in new car prices.
Battery health is described by Cox Automotive as one of the most significant influences, alongside the strength of the battery warranty, the car's range, how fast it charges, its software update history and where it sits in its model cycle. But the single widest factor is brand: Cox's 2026 figures forecast new entrant brands retaining around 45 per cent of retail value at three years against about 66 per cent for established brands. That 21 percentage point spread is wider than the gap between electric and petrol.
Not yet. There is no nationally recognised battery state of health standard, and in August 2026 Electrifying.com, New AutoMotive and BatteryIQ were publicly calling for one to be made mandatory on dealer sold used electric cars. Schemes exist elsewhere in Europe but the UK is not a listed market for them. Testing of more than 8,000 electric cars found average battery health above 95 per cent, so the batteries are largely fine; the problem is that buyers have no standard way to prove it.
The industry genuinely disagrees. cap hpi's view in April 2026 was that used values had already fallen far enough that a further new car discount was unlikely to affect them at a market level, and Auto Trader took a similar line. But in February 2026 cap hpi cut its used value forecasts on specific named models precisely because those models became eligible for the grant's higher tier. So the honest answer is that the effect appears at individual model level without showing up across the market as a whole.
Because funders take genuinely different views of what the car will be worth at the end. Residual value setting is a forecast, not a fact, and on electric cars the forecasts diverge more than they do on petrol and diesel because there is less history to work from. That spread is the strongest practical argument for comparing several funders rather than going to one lender.
Not any more, as a general rule. The BVRLA reported in October 2026 that battery electric rentals are at parity with equivalent petrol and diesel cars, because the Electric Car Grant and manufacturer discounts have reduced the front end of the calculation enough to offset the weaker residual value at the back. On a business lease, once company car tax is taken into account, electric usually wins comfortably.
It will not affect your payment once you have signed, but it is worth knowing that these are the weakest parts of the picture. The BVRLA's October 2026 report describes precious little confidence among residual value committees about the future values of electric vans, and says plug-in hybrid residuals look vulnerable. In practice that means the quotes you are offered now on those vehicles carry more caution built in than they would on an electric car.
Nobody knows, and anyone telling you otherwise is overselling it. cap hpi's August 2026 view was that electric cars would keep outperforming the wider market in the short term, with the advantage narrowing over the following three months and weaker performance building through 2027 before flattening in early 2028. The BVRLA remains considerably more cautious. The open question is whether the 2026 recovery is a genuine floor or a supply driven blip.