Finance and leasing companies taking residual value losses on returned electric vehicles (EVs) may have a solution, according to Bluestone Credit Management.

Last year, the British Vehicle Rental and Leasing Association (BVRLA) issued a warning that EV residual values were falling faster than predicted, causing leasing and finance companies to take losses on returned vehicles.

Simon Frost, head of business development at Bluestone Credit Management, said: “Car finance firms are losing ‘hundreds of millions’ in EV depreciation, according to the BVRLA.

“While they 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.”

Frost said the issue is a short-term one, created by inaccurate valuations provided three years ago by experts such as CAP hpi, which many lenders built their finance agreements around.

Ensuing global events and changes in EV demand then caused values to fall much faster.

Frost added: “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.”

Frost suggested making refinancing available to customers at the end of their term, so that finance companies can recover some of their losses, and save on remarketing costs, while customers can continue to enjoy their existing vehicle.