USED car values are relentlessly falling much faster than new car prices, increasing the wholelife costs of fleets and private drivers alike. The latest survey to confirm the residual value problems is the Alliance & Leicester Car Price Index.

It claims the fall in used car prices is accelerating, with the price of nearly-new and used cars falling much faster than the annual 4.9% fall in new car prices in July. According to the survey, nearly new car prices fell by 17% year-on-year and used values of three-year-old cars fell 18.8%.

The fall compared to a year-on-year fall of 18.7% reported last month as uncertainty in the used car market created record price. Doug McWilliams, of the Centre for Economic and Business Research, said: 'We have a lot further to go and I would expect new car prices to fall faster over the next year than in the past 12 months.'

His comments suggest that confidence in used car values will not be restored for a further year, backing claims by Professor Peter Cooke, head of the centre for automotive industries management at Nottingham Business School, that fleets could see up to two more years of residual value turmoil.

The UK currently has the lowest residual values in Europe when compared as a percentage of list price. Tim Pile, strategy director for Alliance & Leicester, claimed the price falls were 'good news' for buyers, but for drivers expecting to see healthy trade-in values for vehicles they already own, the future looks bleak.

Industry experts have disputed the Alliance & Leicester figures, claiming the falls are much too high, but admitting that residual values are falling to new lows.