Fleet News

Sales of older vehicles see boom in Germany.

“Germany's used car market is enjoying good times at the moment. Nearly-new sales are buoyant and ex-rental vehicles are well sought after, with this area of the market gaining momentum.

But Germany's bonus is on the older front, where there is strong demand for cars aged five to 10 years - although not particularly from Germans themselves. The customers are Bosnian, Croatian, Turkish and Polish. They export the cars and re-register them with relative ease back home.

Most popular are Mercedes-Benz, Volkswagen and BMW, and as prosperity grows in Eastern Europe this trend will continue because the cars represent the best they have ever been able to afford.

In Austria, one of the cornerstones of the used market has come under some pressure. More than 50% of all cars sold are diesel and until recently there was a €0.23 per litre gap between petrol and diesel in the latter's favour. But a recent rise on tax for diesel has reduced this to €0.13. The used diesel market has been affected by this move and although these cars have so far only dropped slightly in value, the high premiums previously being paid for diesels over petrol will continue to diminish.

With continuing publicity over differentials in new car pricing across Europe, the common assumption that residual values follow the same pattern as new prices is highlighted. For example, it is often assumed that where list prices are highest residual values are also correspondingly higher.

However there are several factors that make such cross-comparisons more difficult for used vehicles than new.

For used vehicles, condition is of critical importance. For accurate comparisons, common standards such as 'book values' must be applied carefully. Simply applying a trade value may not be sufficiently accurate for these purposes since, for example, the accepted 'Clean' in Italy may only equate to 'Average' in France. Specifications can also differ, even where vehicle badging is similar.

The introduction of the Euro in 1999 eliminated exchange rate risk within the Eurozone, and also makes residual value comparisons within the area easier. However, for comparisons to the UK, the floating Pound can cause huge fluctuations in estimated residual values abroad. With Sterling trading about 25% above its 'fair' valuation, there is a corresponding overvaluation of UK used vehicle values when making international comparisons.

When comparing residual values in the major European markets, there are a couple of major trends that are immediately apparent.

Firstly, UK residual values do appear to be higher than those abroad, despite the market downturn during the past two years. However, as noted above, much of this is due to the overvaluation of Sterling. If the UK currency falls as commentators widely expect, then much of this premium would disappear, and in many cases UK residual values would actually be lower than those in mainland Europe.

Secondly, German residual values are higher than those of the other continental mainland major markets - France and Italy.

There are also structural differences between these markets that reinforce these differentials. The French and Italian market places are similar in that they are both dominated by smaller vehicles in the city car and lower medium segments, produced by their respective domestic car makers.

By contrast, the German car parc has a much wider sectoral spread of used cars available. The popularity of larger cars such as the Audi A4 and Mercedes C- and E-class means that they are available in large numbers on the used market. This illustrates a key point when making residual value comparisons: that differentials are often due to differences in local tastes.

For example, Germany's tradition of the 'Jahreswagen' (where these vehicles are sold after just a year's usage) helps to provide a steady inflow of vehicles and a high volume of transactions in the used market." (April 2000)

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