Fleet News

The downside of the diesel boom

##CAPsml--left####Martin Ward--right##AS the New Year approaches, so does that day in April when the new company car tax system comes into effect. As we know this is leading many user-choosers to opt for a diesel to soften the effect of the new system on their pocket.

Much is being said about the likely effect on used car prices of so many more diesel cars entering the market. The great British public will decide their fate, but it is worth looking at the facts and seeing which way it could go.

Ford says that in 2002 about 48 per cent of its cars sold in the UK will be diesel, Volkswagen says it will be about 50 per cent or more if it can increase production and French manufacturers' diesel sales will probably be much higher than this.

Prestige car makers have also seen diesel demand growing over the past couple of years and this is set to continue.

In 1998, BMW sales were 3 per cent diesel. By 2000 this had risen to 12 per cent and in 2001 diesel could possibly have a 15 per cent share of its sales, rising even further next year with the very efficient and quiet new range of engines.

Mercedes-Benz has gone from 20 per cent in 1998 to 28 per cent so far this year. Audi sold more than 20,000 diesels in 1998, but about 30,000 this year. In January last year 13.54 per cent of new car registrations were diesel; this rose to 18.07 per cent in September this year. So the proof is there, if anyone was in doubt that diesel sales are rising and will continue to do so.

There are two main reasons for this. First, the diesel engine is getting much better and more sophisticated. Secondly, people have to choose them to save money, not necessarily because they want to. But what about used car buyers? Will their needs be the same as those choosing a company car?

Buyers of used cars make their selection for different reasons to those of new cars. Do they really need a diesel? After all, they tend to think that they are more costly to repair. And diesel is more expensive than petrol.

But more important to many used car owners is the ability to service the car. They generally know how to fix a petrol vehicle but with the modern diesel they cannot even see the engine, let alone fix it.

So will used car buyers continue to pay a premium for diesel over petrol? Demand currently outstrips supply, but in three years' time the reverse may happen.

If diesel at the pump was made cheaper than petrol, there is a good case that demand for diesel-engined vehicles will increase.

If the public accepts that modern sophisticated diesels are a better bet than petrol, demand will continue. But as long as the perception continues that diesels are smelly, noisy and tractor-like, that demand will weaken.

Manufacturers and the benefit-in-kind tax system have done a great job of convincing company car drivers of the benefits of diesel. But if a downward effect on residual values is to be averted they will have to convince about a quarter of used car buyers in three years' time - somehow.

Used winners and losers

THERE are currently some noticeable winners and losers in the used car market. Toyota's Land Cruiser Amazon 4.2 diesel is making strong money. Small automatics with loads of goodies are also sought after. Jaguar's XJ V8s easily find homes if they have the right spec and look good value for money.

BMW 3-series Coupes continue to be snapped up and you have to wonder whether the bubble will ever burst on this car.

On the other hand Renault's Megane seems to have gone off the boil, as has the Land Rover Freelander. Another 4x4 that is struggling is the Suzuki Vitara, but if we get a cold spell things may change. Rover's 600 is about in numbers, but if priced right they look extraordinarily good value.

At the heavy end of the market, Aston Martin DB7s have to be V12 as the 'straight six' is regarded as old and will only sell at the right price. Ferraris went through a blip in mid-September but business is back to normal with the exception of the 355 Spyder.

Because of the season demand is almost nil, but come springtime, the footballers and pop stars will be out in force as they won't want to wait up to five years for a new 360 Spyder, or whatever it will be called then!

  • FNN allows you to search for REAL prices reached by REAL vehicles sold at the country's leading car auctions. To start your search click here.

Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Login to comment


No comments have been made yet.

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee