As a result, residual values are tumbling and industry experts say future Government fiscal and environmental legislation will further impact on both new and used car buying decisions prompting downsizing. Bill Carter, editor of Glass' AutoProVision, said: 'There are too many upper medium sector cars coming back from fleets and the retail customer cannot afford to run or insure them. The retail customer is downsizing, which is why the supermini and small car segments are doing well.'
CAP Monitor Future Residual Values editor Mark Norman, added: 'The path of future residual values is in the hands of the private motorist - it is they who will eventually buy the cars on fleets and it is they who will determine those cars' market value. A lot of retail buyers prefer smaller cars because the perception is they are cheaper to run. Cars such as the VW Golf are easier to sell at the back end because this type of car suits not just the Ford Fiesta buyer but also the Mondeo buyer.'
But fleets persist in buying lower and upper medium sector cars, accounting for about 60% and 75% of sales respectively. Operating the wrong type of vehicles could prove 'disastrous' for fleets, with Norman saying: 'A serious over-estimate could put a company out of business while a significant under-estimate is damaging by putting unnecessary reigns on financial planning.'