Fleet News

Residuals rise as rental cut-back policy bites

VOLUME car residuals have risen significantly following manufacturers' recent attempts to cut daily rental business, according to Glass's Guide.

Latest figures detailing six- month-old residual values show, for the first time, that volume manufacturers are improving used prices, stabilising demand and supply, and injecting confidence into the nearly-new market. 'The practice of supplying the daily rental market direct at huge discounts has ceased,' said Arnie Fenn, chief editor of Glass's Guide. Comparing 1995 with 1996, the residual value of a six-month-old Astra 1.4LS 5-door as a percentage of original price has risen from 71.8% to 75.5%, the Mondeo 1.8LX 5-door from 70.9% to 73.7% and the Escort 1.4LX 5-door from 70.6% to 73.5%.

Analysts say there is room for improvement in residuals, particularly if discounting diminishes. Some manufacturers say most cuts in daily rental are yet to come. 'We remain committed to a 33% fall in daily rental sales this year,' said Vauxhall sales and marketing director Ian Coomber. 'But daily rental business has been front-ended this year, a greater proportion of cars were supplied in the first quarter. You will see sizeable cuts towards the end of the year.'

Peugeot, Ford and Rover made sizeable cuts during 1996. The changes have boosted the new market, as the gap between nearly new and new prices becomes smaller. The July market was the best since 1990, while the year-to-date figure is 5% ahead of last year.

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