Fleet News

Changes mean residuals forecasters are in for a difficult time

RESIDUAL value forecasters face a difficult time ahead as a host of new European issues come to bear on the new car market. Pressure for price harmonisation, the review of the Block Exemption and European Union environmental issues could all have a knock-on effect on used car prices and forecasters will have to assess the impact of these factors alongside traditional projection components such as vehicle supply, GDP and interest rates.

Dial, the leasing and fleet management specialist, is using econometric modelling to forecast residual values, balancing economic measures with issues such as demand for specific makes, models and even colour and specification. Group chief economist Ashley Sylvester has now thrown pan-European price harmonisation and the removal of the block exemption into this melting pot of ingredients that eventually determine a car's value at the end of its contract.

He predicts that the EC will not renew the block exemption in its current format, leading to two alternative scenarios. Either it will abolish the block exemption leaving cars to become generally traded goods, or it will apply a new general exemption and create a regulatory system that gives national competition authorities more power. Yet long before the review of the block exemption, consumer groups, competition authorities and the EC are bringing considerable pressure to bear in favour of pre-tax price harmonisation and, for the UK, such harmonisation would mean lower prices, raising questions over future residuals.

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