THE UK is suffering the highest depreciation in Europe, according to new research.

The EurotaxGlass's European Fleet Index shows that used cars in the UK retain a lower percentage of their new price, than the same cars on the continent at just 34% for three-year-old models.

And the trend shows no sign of stopping. While used car prices in Austria, Germany and Spain are showing increases, residual values in the UK continue to decline.

The research also shows that the premium commanded by diesel vehicles over their petrol counterparts is reducing throughout Europe.

Strong performances in the small car sector have bridged the gap between prices for petrol and diesel vehicles. This gap continues to narrow in the volume lower and upper medium segments.

But the petrol/diesel divide remains in the executive car segments. There is good news for premium brands. Strong used values for manufacturers like BMW, Audi and Mercedes-Benz indicate that volume brands are continuing to lose ground in Europe's second-hand markets.

The survey comes as used car experts in the UK reveal car prices for traditional fleet vehicles such as the Ford Mondeo and Vauxhall Vectra fell 2% year-on-year last month, although prices in many other sectors grew.

A CAP Network spokesman said: 'Even prices in the difficult executive sector rose by an average of 6.7%' CAP says 'downsizing' is fuelling the downward trend in used car prices for upper medium sector vehicles.

Fleet News revealed earlier this month that leasing companies controlling more than one million vehicles between them were predicting used car values in 2005 would fall to their lowest level for a decade.