Fleet News

CAP predicts economic downturn

BULLISH residual value predictions have been thrown into question by the latest edition of CAP Monitor, which predicts a steep downturn in the economy during the first two quarters of 2001. This downturn will have an impact on four-year contracts written this year, but there have been few signs over recent months of contract hire companies reigning in their used car price predictions.

'In 1999 the rate of growth is expected to reach 2.75%, 2.5% in 2000 but be sharply negative in the first two quarters of 2001,' according to CAP. This has prompted AT&T Automotive Services to predict a used vehicle price fall in the next millennium.

Colin Tourick, managing director of AT&T Automotive Services, said: 'We are taking this very seriously, because, should it happen, we have to be in a position to weather the storm. If the economy does start overheating and the government begins to reign it in, people are going to keep their money in their pockets rather than spend it, so prices for used cars will fall.'

With fleet sales running at record levels, the supply of ex-company cars risks exceeding demand in three and four years' time, exacerbating fears of declining residual values. 'Those leasing and contract hire companies that do not react to this threat now could find themselves in trouble later,' said Tourick.

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