Imbalance in used car market threatens EV take-up and increases costs

A glaring imbalance between the new and used electric car markets is leading to higher lease rentals as residual values remain volatile, challenging the ESG ambitions of businesses. That’s the view from Keith Allen, managing director at Licence Check, the country’s largest licence checking and risk compliance operation and the company behind the award-winning DAVIS platform.

It’s a situation which will only get worse in 2026 because of a lack of demand in the used EV market due to lingering doubts amongst second-hand buyers and which requires a reset from government on over-ambitious ZEV targets, says Allen.

Under the ZEV mandate, vehicle manufacturers must reach 28% of total sales for electric cars and 16% for vans in 2025, rising to 33% and 24% respectively for 2026 – figures which are putting undue pressure on the used vehicle market, says Allen. 

“Everyone talks about the new car market at around 2m transactions per annum but overlook the fact that there are over 7.6m used car transactions. And there is still this continuing uncertainty over exactly what it means to own a used electric car, about battery life, availability of charging networks and, from 2028, pay-by-mile road tax.

“As a consequence, there is an imbalance between electric supply and demand which is impacting heavily on the leasing industry. It’s driving down RVs and pushing up lease rentals to higher levels.

“However, at the same time, going electric is in line with most corporate ESG targets. But it is becoming increasingly unaffordable to get there for many companies because, at the same time as increasing rentals, they are being hit with rising labour costs due to the hike in National Insurance and the Minimum Living Wage.

“It is proving increasingly difficult to square this circle of oversupply, constrained demand and rising costs. We need a reset from government, an acknowledgement that 2030 is too ambitious for the banning of new petrol and diesel sales and that ZEV targets are unrealistic.

“Otherwise, I can see a situation in the future where we have Chinese car-only policy lists as they are providing EV’s at affordable prices in line with ICE pricing!” he said.

As well as ESG ambitions, duty of care will remain high on the corporate agenda for 2026, predicts Allen.

“Increasingly, companies are demanding that fleet management systems include the provision of a driver app to maintain regular checks on vehicle condition and identify any faults and damage as quickly and as early as possible.

“It is something we have been very conscious with our own DAVIS Fleet driver app and which the majority of our clients are now demanding to give them greater oversight of their vehicles.

“Our driver app integrates seamlessly with the DAVIS Fleet platform so that fleet managers can see dashboard views of all exceptions, including reported defects, and under and over mileages, so that they are be able to manage their fleets with greater control and efficiency.

“We expect this to remain a key feature of corporate life in 2026,” said Allen.