Fleet News

Conflict over 1998's residual predictions

FLEET managers will have to grapple with conflicting residual value predictions for 1998 after CAP Motor Research predicted the first fall in used car prices in real terms for four years this month. The company's Dataflow forecast believes the second-hand car market will fail to keep pace with inflation this month after 48 months of consecutive monthly increases, and there are indications that the heady days of windfall profits at disposal are coming to an end.

Mark Cowling, CAP chief economist, said: 'We are heading towards a plateau after four years of growth. Increased demand in the new year is likely to push prices up again but slower economic growth will see more stability in values overall in 1998.' He attributed the slowdown to lack of retail demand, with the used car market a victim of its own success as prices have perhaps become too expensive, against a background of fears over future interest rate rises.

But Glass's forecasting editor Adrian Rushmore challenged CAP's interpretation, citing a car's retained value expressed as a percentage of its new price as a better measure of the used car market. Using this criteria the gains in the used car market in recent times have been offset by the increase in new car prices. 'Looking ahead to 1998, the value of a three-year-old car will be as strong as this year. All the indications for the economy and the used car market are positive,' said Rushmore.

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