The UK automotive market could be heading towards a period of increased pressure on nearly-new vehicle values, as growing numbers of pre-registered cars, demonstrators, fleet returns and other young vehicles enter the used market.
For businesses that lease cars and vans, this is worth watching because residual values are an important part of the calculations behind vehicle leasing.
The issue isn’t simply about what a three-year-old vehicle is worth today. Leasing companies and funders have to estimate what a vehicle will be worth when it reaches the end of an agreement, often several years into the future.
With more nearly-new vehicles entering the market and manufacturers continuing to use discounts and incentives to support new-vehicle sales, the changing UK vehicle market is becoming increasingly important.
What Are Nearly-New Vehicles?
A nearly-new vehicle is generally one that has already been registered but has covered relatively little mileage.
This can include pre-registered vehicles, dealer demonstrators, fleet vehicles and vehicles returning from short-term or leasing agreements.
For buyers, nearly-new vehicles can offer an alternative to buying brand new. A vehicle may have covered very few miles and still have much of its original manufacturer’s warranty remaining, while being available for less than an equivalent brand-new model.
The challenge for the wider market comes when large numbers of these vehicles become available at the same time.
Cox Automotive’s Q2 2026 analysis found that pre-registration and demonstrator volumes were rising alongside fleet returns, leasing defleets and part-exchanges. The company said this was increasing supply through both retail and wholesale channels and putting pressure on nearly-new values.
Why Are Nearly-New Vehicle Volumes Increasing?
There isn’t a single reason behind the increase.
The new-vehicle market has become increasingly competitive, with manufacturers and newer market entrants using pricing, incentives and other tactics to attract customers.
Cox Automotive has highlighted increased competition from new market entrants as one factor contributing to rising registration volumes, while also pointing to the growing amount of young stock expected to enter the used market.
Some of those new vehicles subsequently enter the used market relatively quickly.
Pre-registrations and demonstrators can therefore add to the supply of younger used vehicles, while company fleets and leasing businesses also generate a continuing stream of vehicles when contracts end, and vehicles are defleeted as part of the fleet lifecycle.
The result is that the used market can receive newer vehicles from several different sources at the same time.
Why Does Supply Matter To Vehicle Values?
The basic principle is relatively straightforward.
If there are more vehicles available for sale, buyers have more choice.
When supply increases faster than demand, sellers may have to adjust prices to remain competitive.
That can be particularly relevant for nearly-new vehicles because they are competing not only with other used vehicles, but also with new vehicles that may be subject to manufacturer discounts or attractive finance offers.
If the price difference between a brand-new vehicle and one that is only a few months old becomes smaller, the nearly-new vehicle can come under additional pressure.
Cox Automotive says the combination of rising pre-registration, demonstrator, defleet and part-exchange volumes, alongside heavy discounting from new market entrants, is putting pressure on nearly-new values.
What Is A Residual Value?
A residual value is an estimate of what a vehicle will be worth at a specified point in the future.
For example, a leasing company might estimate the value of a vehicle after three years and 30,000 miles when calculating a leasing proposition.
The higher the expected future value, the less depreciation the funder expects the vehicle to suffer over the agreement.
This is one reason why the price of a lease isn’t simply based on the vehicle’s list price.
Factors including the vehicle’s expected depreciation, contract length, agreed mileage, funding costs and anticipated residual value can all influence the overall calculation.
Why Does This Matter To Businesses Leasing Vehicles?
For a business using Business Contract Hire, the residual value is particularly relevant because the leasing company generally takes responsibility for the vehicle’s future disposal value, subject to the terms of the agreement.
The business isn’t normally relying on being able to sell the vehicle for a particular amount at the end of the agreement.
However, the expected future value still matters because the leasing company has to account for what the vehicle could be worth when it returns.
If market expectations for residual values change significantly, this can influence the economics of future leasing propositions.
That doesn’t mean that a fall in used-vehicle values automatically results in an equivalent increase in every lease price. There are several factors behind changes in leasing costs, as explained in our guide to why van leasing costs more.
Leasing calculations are more complicated than that, and different vehicles can perform very differently in the used market.
Not Every Vehicle Is Affected In The Same Way
One of the important points businesses should take from the current market is that there isn’t necessarily a single residual-value trend applying to every vehicle.
Cox Automotive’s latest analysis shows considerable variation between individual models, particularly within the electric vehicle market.
Vehicle age, mileage, specification, brand, fuel type, demand and the amount of competing stock can all influence how a particular model performs.
That means a business choosing its next fleet vehicle shouldn’t necessarily assume that what is happening to one model will also happen to another.
The same principle applies to cars and vans.
Electric Vehicles Add Another Dimension
The electric vehicle market is particularly interesting because large numbers of EVs are now moving through the leasing and fleet system and entering the used market.
Cox Automotive reported that wholesale electric vehicles aged between two and four years were trading at around 32% of their original new cost, compared with 52% for petrol vehicles of the same age in Q2 2026.
However, Cox also stressed that the performance of individual EV models varies considerably, with some models seeing demand increase while others continue to decline in value. The used EV market is not moving uniformly, however, and recent UK data has also pointed to strengthening demand, with used EV values rising 7.5%.
This means businesses considering electric vehicle leasing need to consider more than simply the purchase price or advertised range of an EV.
The changing used market is another factor behind the importance of looking at the overall cost of running a vehicle.
What Could Happen To Used Vehicle Values?
Cox Automotive’s current outlook suggests that pressure could become more noticeable towards the end of 2026.
Its Q2 analysis says used values are forecast to become less favourable against seasonal norms from Q4 2026, with pressure expected to continue through much of 2027 as volumes continue to rise.
That doesn’t mean used-vehicle prices are expected to collapse.
The current used market remains relatively resilient, with demand for clean, retail-ready stock still strong. Cox Automotive says the market is close to a turning point, however, with substantial volumes expected to enter the market during the second half of 2026.
This distinction is important.
The market can remain active while individual vehicles, segments or age groups experience greater depreciation. Recent data has also shown signs of recovery in the commercial vehicle market, with used van values rising 5.3%.
What Does This Mean For Vehicle Leasing?
For businesses, the changing used market reinforces why vehicle choice matters when looking at leasing costs. The way residual values are treated can also differ depending on the finance method, so businesses considering alternatives such as Finance Lease need to understand how each arrangement works.
A vehicle with strong expected demand at the end of its contract may have a different depreciation profile from one entering an increasingly crowded part of the used market.
Leasing companies and funders continually assess these risks when determining their future-value assumptions.
It also helps explain why two vehicles with similar list prices can sometimes have noticeably different leasing costs.
The difference isn’t necessarily because one vehicle is inherently more expensive to finance. It can reflect differences in expected depreciation and what the funder believes the vehicle will be worth when the agreement ends.
For businesses reviewing several vehicles or managing a larger fleet, this is where fleet management solutions can become particularly useful, helping businesses consider vehicle choice and whole-life costs alongside their operational requirements.
Does This Mean Leasing Will Become More Expensive?
Not necessarily across the board.
Residual values are only one part of the leasing calculation, and other factors can move in the opposite direction.
Manufacturer discounts, funding costs, supply conditions and competition between manufacturers can all influence the final leasing proposition.
Consequently, businesses shouldn’t look at falling residual values in isolation.
The more useful question is how the expected depreciation of a particular vehicle compares with the wider cost of running and financing it.
Why Businesses Should Keep An Eye On The Market
For companies replacing cars or vans, the changing used market is another reason to consider the full cost of a vehicle rather than focusing solely on its purchase price.
The number of nearly-new vehicles entering the market is an important factor because these vehicles compete directly with other used stock and, in some cases, increasingly competitive new vehicles.
For businesses leasing vehicles, much of the residual-value risk is ultimately managed by the leasing company. However, changes in the used market can still feed through into the wider leasing environment.
With more fleet vehicles, leasing returns, demonstrators and pre-registered vehicles expected to enter the market, the relationship between new-vehicle pricing, used-vehicle supply and residual values is likely to remain an important issue for businesses considering their next cars and vans.
Call our expert team on 
