The leasing market is struggling

The House of Automobile has released its initial assessment, which paints a mixed picture. While new passenger car registrations by private customers jumped 5.7% compared to 2024 and 21.5% compared to 2023, representing 2,266 additional vehicles, operational leasing is in sharp decline. Historically a growth driver for the market, this segment has been particularly hard hit, with a 21.8% drop (1,989 fewer vehicles) in the first half of 2025.

Companies in sharp decline

‘This growth marks a turning point in purchasing habits, driven by increased household confidence and a less favourable tax environment for company fleets,’ says the House of Automobile, which represents the interests of players in the Luxembourg automotive market.

In addition, the HoA points out that companies have significantly reduced their vehicle purchases. In detail, the segment recorded a 4.7% decline compared to 2024 and a 20.6% decline compared to 2023, representing a net loss of 3,144 vehicles in two years.

Taxation deemed dissuasive and legal uncertainty

According to the House of Automobile, this decline is largely due to the entry into force in early 2025 of a new tax regime that is unfavourable to non-electric company cars. The increase in the tax rate on benefits in kind has had a dissuasive effect: rather than switching to electric models, many employees are simply giving up their company cars. ‘Even though it has been proven that converting the company car benefit into salary never allows you to afford the same vehicle privately, some people are making this choice on an emotional basis,’ says the House of Automobile (HoA).

Added to this taxation is ongoing uncertainty about the VAT applicable to company cars. The lack of clarification from the authorities on the taxable base creates legal uncertainty for both employers and employees, further discouraging the use of company fleets.

Further reading:
The market is “not bad”, but “not excellent” either