RV management becomes strategic priority for UK leasing market

Residual value management has become one of the most important strategic challenges facing the asset finance and leasing industry, according to a new white paper published by Teamwill and available to download from Finance Connect.

Residual Value Management: A Strategic Imperative for UK Leasing and Asset Finance, explores how the combination of electric vehicle (EV) adoption, market volatility and increasingly complex asset lifecycles is forcing finance providers to rethink how they assess, manage and mitigate residual value (RV) risk.

The European leasing market now generates more than €448 billion of new business annually, while used vehicle prices experienced swings of more than 50% between 2020 and 2023. At the same time, EV penetration is expected to exceed 20% of some leasing portfolios today and could double again by 2030.

Against this backdrop, the report suggests that traditional residual value forecasting approaches are no longer sufficient.

Rather than being treated as a back-office function, residual value management is increasingly becoming a critical driver of profitability, pricing, risk management and competitive advantage.

According to the white paper, the transition to electric vehicles has fundamentally altered the residual value landscape. Unlike internal combustion engine vehicles, EV values can be influenced by factors such as battery degradation, rapidly evolving technology, changing government incentives and shifting consumer sentiment.

Combined with wider economic uncertainty, inflationary pressures and supply chain disruptions, these factors have made future asset values significantly harder to predict.

The report warns that organisations relying on historical depreciation curves or limited forecasting methodologies risk exposing themselves to substantial losses.

To address these challenges, the paper argues that asset finance providers need to adopt more sophisticated data and analytics capabilities. It highlights the growing importance of VIN-level modelling, real-time market intelligence and artificial intelligence-driven forecasting tools capable of responding dynamically to changing market conditions.

The report also identifies five strategic priorities for organisations seeking to strengthen residual value performance.

These include developing advanced predictive modelling capabilities, building deeper EV expertise, improving end-of-contract processes, enhancing remarketing strategies and embedding residual value management more closely into wider business decision-making.

The white paper emphasises that successful organisations will increasingly view residual value management not simply as a risk function but as a strategic capability that influences product design, pricing, customer experience and long-term profitability.

Alongside analysis of the evolving market environment, the report outlines a practical framework for transformation, helping lenders assess their current maturity, identify capability gaps and develop a target operating model for residual value management.

The publication comes as many UK asset finance providers continue to expand their EV portfolios while navigating growing uncertainty around used vehicle values, technology developments and future regulatory requirements.

As residual value risk becomes an increasingly important determinant of financial performance, the report suggests that firms capable of combining data, technology and specialist expertise will be best positioned to succeed in the next phase of market evolution.