Fleet News

Record sales spark residual value fears

RECORD car sales this year of more than 2.4 million vehicles have sparked fears that chronic oversupply in the market will force down residual values for fleets over the next three years.

Leading residual value experts are warning companies to prepare for lower returns on vehicle sales, as they expect the used car market to become saturated with vehicles following the new car sales boom.

This week, Len Clayton, chief executive officer, global full service leasing at General Motors Acceptance Corporation, the owner of top-four contract hire firm Interleasing, warned of an expected 5 per cent fall in residual values for three-year-old cars next year.

He added that in 2003, used car values would fall by a further 3 per cent and then again by 2 per cent in 2004. Clayton warned: 'We see residual values dropping for the next three years. The market is oversupplied. What manufacturers do is their problem, but the market will not take it. It will only stabilise when sales are at about two million vehicles a year.'

His comments came as latest car sales figures revealed a total of 2,332,303 cars were sold in the year to the end of November, beating the full-year sales record set in 1989 of 2,300,944 units. The Society of Motor Manufacturers and Traders estimates the final year total will be more than 2.4 million vehicles, with fleet sales also set to break through the 1 million barrier for the year.

Fleets have already been warned they will struggle to sell high-mileage vehicles as falling prices make newer models more attractive.

Mark Norman, senior editor of future residual value forecasting tool CAP Monitor, said the situation was made more serious when parallel and grey imports were taken into account.

He said: 'Adding these figures would take total new car sales for the year to more than 2.5 million. The nearly-new market is most affected by falling prices, but there is a knock-on effect through two-year-old model prices to three-year-old cars.'

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