Lex Autolease sees pre-tax profits plummet by over £400m on falling used EV values

Lex Autolease has reported a staggering drop in pre-tax profits of over £400 million, according to newly-filed accounts.

The company posted a pre-tax profit of £124.4 million for 2023, a sharp decline from the £544.2 million reported in 2022.

This dramatic decrease in profits occurred despite a rise in revenue from £2 billion to £2.2 billion over the same period, driven by improved new vehicle supply.

The profit decline has been attributed to lower profits from vehicle disposals "due to market conditions" and increased interest expenses on borrowings.

In 2023, nearly half (46%) of new vehicle orders were for electric vehicles (EVs), mirroring the 47% share reported in 2022.

However, fluctuations in residual values (RVs) of fleet vehicles, particularly significant price reductions in battery electric vehicles (BEVs), have been identified as a key factor impacting performance.

According to Cap HPI, used BEV values have dropped by more than 60% since September 2022, leading to increased rental costs and leasing losses for fleets.

Lex Autolease anticipates that more customers will opt for informal extensions on leased products due to rising rental prices.

The 77% year-on-year profit decline follows a 26% increase in 2022, when the leasing industry benefited from record returns due to the global semiconductor shortage, which drove up demand and values for used vehicles.

The British Vehicle Rental and Leasing Association (BVLRA) has warned that the UK’s vehicle leasing and rental industry faces an “existential threat” due to the collapse in used BEV values.

Lex Autolease joins a growing list of leasing companies whose profits have been hit by the performance of second-hand EVs.

In February, leasing giant Ayvens reported a 22.2% year-on-year drop in pre-tax profits, down from £1.42 billion to £1.1 billion, with a £341 million decline in used car sales due to falling RVs.

Similarly, Zenith's financial results for the year ending March 31, 2024, revealed a decrease in adjusted gross profit and average termination profit per vehicle, both impacted by weak used EV values.

These developments mark a stark contrast to the record-breaking pre-tax profits reported by the top 50 vehicle leasing companies where pre-tax profits exceeded £2 billion for the first time, fuelled by the semiconductor shortage and soaring used car prices.