Fleet News

Residual values go into freefall

RESIDUAL value falls have reached record levels as cuts in new car prices and chronic oversupply have hammered down used car values almost 20% year-on-year, it was claimed this week. Thousands of pounds have been wiped from the values of key fleet models in the past year, amid growing confusion over the true state of the market.

According to Glass's Guide, a three-year-old/60,000 mile Renault Laguna 1.8 RT has slumped nearly 30% in value from £5,575 last year to £3,925 this month. Oversupply in the used car market is driving prices down, caused in part by traditional used car buyers moving into new vehicles as retail prices drop under pressure from the Competition Commission.

The industry is currently considering the draft order from the Department of Trade and Industry, in response to the commission's New Cars Inquiry, which could force further price cuts on the new car sector. But even without the order, the latest Alliance & Leicester Car Price Index shows new car prices fell 3.2% year-on-year, led by MPV prices down 10.4%, with executives, luxury and family car prices falling 4.2%, 3.4% and 5.8%.

However, used car values fell much more heavily, with three-year-old models down 19.2% in May compared to the same period last year. In April, the year-on-year fall was 15.3%, according to the latest Index. The steepest drops were suffered by small cars, down by 21.4%, followed by executive models at 20.7% and compact executives at 20.3%.

CAP Motor Research claims that although latest figures show an acceleration in residual value falls, they were more like 7.7% on average than 20%, while rival data supplier Glass's Guide claimed average falls of between 9% and 12%. In contrast to the Alliance & Leicester Index, CAP figures show an increase in some popular models, with a three-year-old/60,000-mile Ford Mondeo 1.8 LX with air conditioning rising in value from £4,175 to £4,375 in the past year.

Further analysis of key fleet models using the latest Glass's Guide showed that a three-year/60,000 mile Ford Mondeo 1.8 LX fell £650 year-on-year, and a Vauxhall Vectra 1.8 LS fell 7.3% from £5,150 to £4,775.

The worsening crisis will pile further pressure not only on outright purchase fleets but on the contract hire industry, with major players already shouldering mounting losses.

Lease Plan estimated residual value falls were more like 20% over two years. Head of marketing Jianni Geras said: 'Oversupply is a major issue, and the impact of European pricing issues is having an impact. As new car sales increase, supply in the used car market goes up as well. Supply and demand has a major role to play in this.'

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