BVRLA discusses green leasing options

BVRLA chief executive Gerry Keaney tells us why total cost of ownership models still have a place in ECV leasing.

Total cost of ownership; it might make a good business case, but does it help cashflow or make credit lines more elastic?

Yes it does! Establishing a predictable and reliable TCO is a core part of planning your fleet acquisition and is standard procedure when working with a truck leasing company. This is one of the main benefits of leasing a truck. You pay a fixed monthly fee, which frees up existing credit lines that you may have with your bank so that they can be used to fund other assets or activities. 

How will operators finance these enormously expensive vehicles? Is there sufficient elasticity in the market, sufficient lending appetite?

Companies, lenders, investors and everyone in the supply chain are being encouraged to measure, report on and have a plan to reduce their emissions. Whether it is through international reporting standards, the UK Carbon Reduction Plans or other ESG-related initiatives, it will become increasingly difficult to fund non-sustainable vehicles and assets. In the near future, you are likely to see lenders offering preferential rates on green assets, alongside tax incentives and updates to capital allowances.

How can leasing companies make the product appealing over the next five years? Will new financing models emerge, or will there be ways to sweeten the sheer cost of these vehicles?

Leasing companies can support the transition by making it easier for operators to make the move. They can take the residual value risk on new technologies, obtain bulk discounts, and help by advising fleet operators on factors such as infrastructure. New fleet models will continue to evolve – particularly ones that provide more flexibility on contract length and mileage, or bundle additional services such as charge points.

Do the lease companies have confidence in the residual values of EVs? (RVs always being one of the key factors which determined the price of a lease). Do they have confidence in the lifespan of the batteries, or are we all secretly hoping for a technological miracle which doubles capacity and longevity at a stroke?

There is a certain degree of confidence, but any asset owner would be nervous when we are seeing such a rapid shift to a new type of vehicle that is relatively untried and untested over a longer period. Electric truck performance is improving all the time and battery costs continue to fall. As this happens, the number of viable (financially and operationally) use cases will continue to grow and bring more certainty.

Early nervousness about the long-term health of batteries has rapidly diminished thanks to improved battery management systems, and users have a greater understanding of how to get the best out of them. In the near future we should see the introduction of battery health check solutions that will give used electric truck buyers more assurance about what they are buying.  

At what point do we think used ICE vehicles will simply lose their value? Before or after 2040?

It is very hard to say when we will reach that tipping point, where used ICE vehicles will lose their value. It depends how the transition goes and what type of vehicle or use case is being considered. It is, however, clear that this is a linear journey that will ultimately see ICE vehicles replaced by zero-emission alternatives.

 

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