NEW legislation governing used vehicle sales looks set to cause chaos throughout the industry, CAP has warned.

National research manager Martin Ward claims the new rules that come into effect in February, meaning cars without a V5 document cannot be taxed, will cause major problems. Currently, many vehicles regularly change hands with the V5 missing or promised to follow, he said.

'Despite growing awareness of this change there are bound to be many trade professionals and private motorists caught short and it could cost them dear,' Ward said.

'A car that cannot be taxed may suddenly become technically worthless and, at best, command a significantly lower value in the used market due to the fact that it cannot be taken on to the road legally.

'And fleets especially must take steps to ensure they have the V5 for every vehicle or they will suffer serious financial penalties.'

Ward added that dealers and traders had the most to lose because while they waited for the Driver and Vehicle Licensing Agency to process new registration documents, depreciation may well wipe out any profit on a vehicle.

Meanwhile, Glass's Information Services claims the new rules could create a two-tier market for used commercial vehicles.

Its chief commercial vehicle editor, George Alexander, said: 'The hassle related to applying for replacement registration documents and the delays that are likely to arise from the system being overloaded, can surely only result in punitive reductions in value for vehicles lacking documentation at the time of sale.'