Fleet News

Glass's has the answers to five burning residual value questions

RESIDUAL value experts have given definitive answers to the five burning questions they believe every fleet decision-maker with responsibility for selling company cars at the end of their fleet lives is asking.

Staff at Glass's Guide have tackled the key issues in the used car market that they believe most affect fleet decision-makers, including the benefit of the twice-yearly registration plate change and the effect of high mileage on the value of vehicles.

They also tackle the key question of whether residual values are better or worse than this time last year and which cars are residual value winners and losers.

  • What is the benefit in value from having the most up-to-date registration plate?
    Up until 1999, when we had just a single plate change each August, a car with the newer plate was worth about 7% more than the same model with the old plate. With the arrival of the two plate changes in March and September this premium was reduced to about 3%, which meant the annual benefit of two plates amounted to 6%. The new '51 registration has only served to make this situation worse. We have discovered that the first cars to reach the trade on this new plate did not attract quite the same premiums as the same age cars one year earlier.

  • What effect does high mileage have on value?
    Despite manufacturers building better cars able to cover greater distances, prices have fallen steadily in relation to high mileages. As a rough rule of thumb, 3 years ago the penalty for cars covering more than the average Guide mileage was about 0.6% of the trade value for every additional 1,000 miles. Today this has risen to 0.9%. A 3-year-old car with a standard mileage of 35,000 and a trade value of £6,000 would have been adjusted downwards by £550 if the mileage had been 50,000. Today the same car would be reduced by £800. The fastest price fall comes after 75,000 miles for petrol and 85,000 for diesel. Once 100,000 miles have passed, the rate of fall slows, as prices have reached rock bottom by this stage.

  • Are residual values better or worse than this time last year?
    As at August, the fall in two and three year trade values was between 2% and 3%, but for one-year-old cars, the year-on-year movement was in excess of 5%. The trend of the past three months is that values of all ages have fallen back slightly at a greater rate than earlier in the year.

  • What are the slowest and fastest depreciating used cars and why?
    The fastest depreciating cars usually have several things in common. They are large saloons or hatches from volume manufacturers and they are either obsolete or at a very advanced stage in their lifecycle.
    Adopting three year old, 36,000 miles as the benchmark, the worst cars achieve trade prices of no more than 25% of their original cost new. They are: Rover 825 24-valve four-door, Renault Safrane 2.0 Exec five-door, Peugeot 605 SRTi four door auto, Nissan QX 2.0SE four door and the Citroen XM 2.0 VSX turbo auto five door. The slowest depreciating cars are, not surprisingly, blessed with high image, desirability and come from one of the premium brand manufacturers.
    At the benchmark, they achieve 61% of their original cost new and include the BMW Z3 1.8 two door, Audi TT 1.8 quattro coupe and Porsche Boxster 2.5 S two door Tiptronic.
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