Residual values have stabilised in the ex-rental vehicle market, but the benefits derived have been offset to a degree by the difficulty in sourcing vehicles which has led to price rises and lower discounts. Insecurities over the nearly new market remain, fuelled by speculation in CAP and Glass's that demand remains weak because access to a new car has never been easier (Fleet News February 14).

John Leigh, managing director of EuroDollar, said: 'While the supply situation is under much better control, we are very concerned about residual values, because manufacturers are continuing to incentivise new car purchases, so the attraction of six to nine month old cars is less desirable.' Rising interest rates are a further cost for rental companies, and Doug Sawers, Europcar's operations and fleet director, said he expected hire rates to rise by between 5% and 10%, and in some cases even more, by the end of the year.

On the positive side, fleet demand for daily rental remains extremely buoyant, and with fleet operators aware of the pressures facing the rental industry rate increases were achieved in 1996.