Fleet News

Currency will have bigger impact on used car prices

THE introduction of the Euro on January 1 in 11 Eurozone countries has cast the spotlight on new car prices, but the single currency is likely to have a bigger and more immediate impact on used car prices. Second-hand vehicles escape the complications of local VAT and tax regimes, so the Euro price on the windscreen is the price the consumer pays.

This means that Northern European traders and private customers can travel to the cheaper markets of Portugal or Spain to buy a car for thousands of Euros less than in their domestic market, and without any fear of currency fluctuation. The large daily rental firms already see a large proportion of their southern European fleets exported at the end of their working life to northern markets, and this opportunistic practice is likely to increase.

Accountancy firm KPMG has already warned that: 'Used car prices will be hit and a residual value timebomb has been set ticking for the vehicle leasing industry in Europe. Used car prices will be depressed in response to significant reductions in new car prices' This view is reinforced by Barclays Bank's econometric modelling work, which sees a weakening of residual values in markets which have traditionally been more expensive, and a strengthening of residual values in cheaper countries.

Tim Rankin, business development director of Barclays-owned Dial, said: 'The trading barriers that tentatively exist through different currencies will disappear, and people will have fewer qualms about going across borders to buy a used car. If they see a car cheaper in Italy than Germany they will travel to buy it. Far more cars, both new and used will move across Europe, harmonising prices and driving them down in higher cost countries.'

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