GROWING confidence in the used car market will spark a dramatic shift in used car prices next year, according to CAP Network. Although used car values are predicted to fall by between 4% and 6% this year, growing confidence in the market means that in 2002, prices will rise by 3%.

Mark Cowling, CAP Network editor, said further expert analysis suggested prices would now rise, but prices will still be below those achieved two years ago following a 'disastrous' 8% decline during 2000. Cowling told an Automotive Management conference that while there remained areas for concern in the market, the effective ending of a consumer 'boycott' had released pent-up demand for new and used cars.

He said: 'We expect new car registrations this year to reach 2.2 million, close to the second highest figure of 2.25 million recorded in 1998. This strong demand will inevitably lead to list price rises following substantial reductions we have seen over the past year. Such strong demand will also be mirrored in the used market, where we expect residual values to rise by 3% during 2002.'

The Alliance & Leicester Car Price Index went one step further, revealing that prices for three-year-old cars rose by 6.7% year-on-year last month, the highest rise since the index began. Prices of one-year-old cars went up 5.1%, while new car prices were down 6.4%.Tim Pile, business strategy director for Alliance and Leicester, said: 'At last, car buyers seem satisfied with the current car market and buyers are more confident.'

And at Lex Vehicle Leasing, a residual value assessment of its own fleet showed a 2% increase year-on-year, offsetting some large falls seen at the same time last year. The change should boost the opinions of fleet managers, who recently predicted a fall of up to 20% over the next year in the Business Car Expectations survey, from the Centre for Automotive Industries Management at Nottingham Business School, backed by HSBC Vehicle Finance (UK).