Fleet News

Flexible contract management key to EV multi-cycle leasing, says Sofico

Bram Wallach

The development of multi-cycle leasing requires flexible software capable of managing subsequent leases of the same asset, says Sofico, as some OEMs look to offer used-vehicle leases on electric vehicles (EVs) as a strategy to keep control over the batteries, which may have longer shelf lives than the vehicle itself.

Sofico said Volkswagen plans to offer used vehicle leases on its ID family of EVs as a strategy to retain the battery and believes that secondary or tertiary leases would allow it to recycle the valuable battery packs into new uses, including home power centres and fast chargers.

VW believes that battery life could be about 1,000 charging cycles and around 350,000km or about 215,000 miles, said Sofico, meaning it could last longer than the car itself, and that its value survives as the value of the car depreciates.

The company said VW is seeing an indication that residuals for electric cars might be higher than for ICE models as the battery may still have 70-80% of its original energy storage capacity.

Lead product manager at Sofico, Bram Wallach, said: “This latest market development regarding multiple leasing cycles of EVs has been brought about by a number of factors.

“The first is the value of the battery within EVs and the amount of scarce earth materials it requires in its production.

“This makes for a steeper initial EV purchase price, already an incentive for leasing, as well as a higher residual value over time, thanks to the remaining value of the battery pack.

“The second is the current lead time for new cars, caused by the global semiconductor shortage, which has made new cars less plentiful and used cars more valuable and in greater demand.

“While this may be only a temporary phenomenon – although some experts suggest it may last well into next year - it makes absolute sense to try and optimise vehicle life cycles through multiple uses.

“The other impact has been that of the Covid pandemic which has made many businesses re-evaluate their mobility needs, often replacing car use with other multi-modal mobility provision. This has introduced the need for flexible and scalable management of several asset classes, again with a multitude of users.”

Leasing companies are also looking to retain control over vehicles for longer leasing cycles, said Sofico.

The ‘Move 2025’ strategic plan at ALD Automotive, comprises a business model in which vehicles are leased, in some cases, for their entire lifespan, involving multi-cycle leasing, used car sales and multi-channel distribution.

Sofico provides a configurable cloud-native Miles Enterprise Solution, that can manage financing and mobility solutions, including multi-user leases of varying durations for a specific asset.

Wallach said: “While descriptive analytics can be leveraged to accurately track and monitor profitability on every cost centre and for each individual cycle, thanks to Miles supporting separate cost centre accounting on vehicle and contract, we’re also anticipating the use of machine learning in predictive analytics for decision support in contract management to optimize the lifetime value across the portfolio.

“This could be done, for instance, by combining internal cost information with external market data to highlight for which of the vehicles on fleet a second cycle would make sense.”

> Interested in comparing electric vehicle data? Check out our EV tool.

> Interested in ensuring the efficient use of EVs. Check out our dedicated editorial sections: Insight & policy | EV news | Charging & infrastructure | Costs & incentives | Benefit-in-kind | EV case studies | EV road tests

> EVs by range

> EVs by their efficiency

> Rapid charging EVs

> EVs by price: lowest to highest

Click here for fleet funding best practice and procurement insight

Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Login to comment


No comments have been made yet.

Related content

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee