Bluestone explains how automotive collections companies can help lenders mitigate short-term pain and create new pathways for customer retention.
The electric vehicle (EV) revolution promised a future of cleaner air and cutting-edge technology. For leasing and finance providers, it also promised a lucrative new revenue stream. But as the next wave of EVs reaches the end of their contract terms, reality is hitting hard, and the expected revenue stream many had expected has failed to materialise.
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Across the UK, leasing and car finance firms are facing unprecedented losses as used electric vehicle values nosedive, falling far short of the residual or guaranteed future values (GFVs) that were forecast just a few years ago.
The British Vehicle Rental and Leasing Association (BVRLA), says car finance companies are now losing hundreds of millions due to unanticipated EV depreciation, prompting one executive to describe the situation as “extreme.”
Only a few years ago, used EVs were enjoying strong values driven by low supply and rising demand. In 2021 and 2022, as the market rode a post-COVID supply crunch, residual value models showed bullish forecasts for popular EVs. Leasing firms priced their contracts accordingly.
But valuation experts like CAP hpi began ringing alarm bells. Their analysts flagged that EV values were unsustainably high and corrected their forecast models downward. Despite this, many vehicles already on the road were financed on legacy assumptions. These are the vehicles now being returned with values well below their original forecasts.
Simon Frost, Head of Business Development at Bluestone Credit Management, says the current state of play is creating unwelcome headaches for lenders.
He recounts a recent case: “A colleague returned a three-year-old Tesla Model 3 with a GFV of £25,000. It was only worth £18,000. They would have gladly bought it for £20,000 and financed it again, but that option was never on the table. The result? A £7,000 hit to the lender, plus the costs of transport and remarketing.”
Frost says that while car finance firms are “looking for government support in the future, today’s reality is that many are haemorrhaging money as cars financed over the last three years, on PCP and leasing agreements, often fail to meet their forecast end-of-contract value. Add in the cost of transportation and remarketing, and the losses per car escalate.”
A market out of balance
Oxford Economics: Assessing the impact of support for the used BEV market (September 2024)
BVRLA-OE-Used-BEV-market-forecast-Sept-2024Download
Demand, however, isn’t keeping pace.
“The used car market is nearly four times the size of the new car market,” says BVRLA Chief Executive Toby Poston. “If we don’t stabilise demand and values for used EVs, the entire transition to net zero could be jeopardised.”
In May 2025, analysis from Cox Automotive shed light on how aggressive discounting of new electric vehicles (EVs) has sent shockwaves through the used market.
According to the data, EVs up to 24 months old retained an average of 83% of their original cost new (OCN) when sold to the trade in 2022, a figure buoyed by post-pandemic supply shortages and strong demand. Fast-forward to April 2025, and the picture has dramatically changed: comparable vehicles now retain just 47% of their original value. By contrast, diesel vehicles of the same age were holding up far better, retaining around 70% of their OCN.
With the losses mounting, many in the industry are asking: what next? Motor Finance Online editor Alejandro Gonzalez (AG) spoke to the Head of Business Development at Bluestone Credit Management, Simon Frost (SF) about
SF: Recent months have seen a consistent trend in rising consumer demand for battery electric vehicles (BEVs), with the SMMT noting that BEVs recorded the highest growth in Q1, increasing by 58.5% to 65,850 units and a record 3.3% share of all transactions. They attributed this growth to increasing supply and affordable prices, creating “a new phase where electric becomes a realistic and attractive option for more buyers.”
SF: can’t speculate on lenders’ speed of response to adjust future values. However, regardless of this speed, what is clear is that historic high future values were already ‘baked in’ to lenders’ EV portfolios, and it is something we believe we can help them to manage.”
SF: While digitising processes and the use of AI can both help to streamline operations, there remain areas where personal intervention can help to customise the customer journey. We see this every day in helping people address historic debt issues. The end of contract guaranteed future value hurdle, where the hurdle is often too high for a consumer to move to purchase their EV, is a similar position. The one-to-one discretion to lower the height can help more customers clear the hurdle, delivering a win-win position.
SF: Lenders are making individual decisions on this question, and where the decision involves an OEM keen to sell new cars, a joint decision will be needed. By highlighting the opportunity for a tailored risk mitigation option, we have given lenders another choice.
SF: While never ruling out a repeat of such a situation, I think it is fair to reflect that the combination of a highly unusual post-COVID-19 car market boom with new car shortages creating unprecedented used car values and the emergence of EVs at increasing scale, helped by government support, was a unique situation. While the pain is being felt now as agreements mature, it is fair to say that lenders have adapted to the adjustment in future values.
SF: Today’s residual values can be mitigated to an extent, but lenders often lack the necessary processes and resources to implement what may be only a two or three year window of pain. It is an area where automotive collections experts, like Bluestone, with our outbound customer contact expertise, can pivot their model to help lenders proactively contact customers and tailor a new financing solution.
“Q&A with Bluestone: From overheating to undervalued, what’s next for the EV leasing market?” was originally created and published by Motor Finance Online, a GlobalData owned brand.
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