FLEETS which back diesel as the key to cutting running costs and saving drivers benefit-in-kind tax could reap residual value windfalls totalling millions of pounds across the industry. Demand for used diesels is rocketing and outstripping the supply of clean and efficient modern diesel engines, such as common-rail and pumpe duse.

But despite a healthy used diesel market, fleets which make up the main supply of nearly new to four-year-old models are buying fewer diesels. Fleet diesel sales fell 1,587 to 173,911 last year in a total diesel market up 3%. Diesel residual values have mirrored the price fall of all used car values, but some of the latest models reaching the nearly new market are achieving premiums of thousands of pounds more than petrol equivalents, according to Glass's Guide. The current residual value boom is on nearly new diesel vehicles. But experts say that three and four-year-old models will reap similar dividends for the first time in more than a year, leaving fleets holding on to potential profits on their disposals.

And figures from British Car Auctions' Auction View system already show healthy premiums for some older diesel models over CAP 'clean' and Glass's Guide prices, although fleets have to 'cherry pick' the right car. Jonathan Brown, car editor for Glass's Guide, said: 'At three years/60,000 miles, the results will be slightly model dependent, so some models will be more of a safe haven for good residual values than others. But buyers will be paying over the odds, because there is not enough supply to meet the demand. Residual values will strengthen.'

In the nearly new sector, the Ford Focus is showing a £500 premium, despite the lack of the latest diesel engine technology, while a 2000 W Mercedes-Benz C220 CDI Classic diesel recently showed a £4,950 premium over the C 200 Classic petrol. Brown said: 'It is possible to look in any sector and find startling difference in favour of diesel. The only real exception is in small cars.' Mark Cowling, chief economist at CAP Motor Research, sounded a note of caution: 'It is easy to overcook the market. If prices are too high, used car buyers will realise they are not doing enough miles to make back the money in lower fuel costs.'