According to Glass's Information Services, consumer spending will increase this year, making the market for nearly-new and used cars stronger.
Adrian Rushmore, managing editor of Glass's Information Services, said: 'Undeterred by a cut in take-home pay and an increase in taxes in the second half of 2003, consumers appear resolute in their determination to extend their spending spree.
'This all bodes well for sales of new and used cars early this year, with plenty of momentum to drive sales forward. What underlies this message is the widely-held belief that household spending is expected to increase by a further 2% this year.'
Glass's claims that one of the key trends of recent years has been that consumers are buying younger used cars, meaning more buyers are considering ex-fleet models.
Rushmore said: 'Today, six to 10-year-old cars are being bypassed, thanks to the lower purchase prices available for new and younger used vehicles and the willingness of customers to service higher levels of personal debt. Given the expected further growth in consumer spending, this will continue to be a sluggish part of the used car market.'
However, it is not all good news for residuals in key fleet sectors. Increased supply should see compact MPVs, premium upper-medium cars and diesel residual values wobble.
Rushmore said: 'Year-on-year compact MPV sales grew by more than 60% and premium upper-medium cars such as the BMW 3-series and Audi A4, were up by nearly 30%.
'The additional used car supply that these numbers represent will place pressure on three-year residuals during 2004. This could well translate to values falling by at least 2% when the rest of the market is showing little or no change from 2003.'
Rushmore added: 'Used diesels will also fall victim to the same problem of increased supply, although there will also be a growing rift in prices between the old and new engine technologies.'