Fleet News

Diesel glut will lower residuals

MARKET analysts are warning that residual values could be hit by this year's likely increase in the number of de-fleeted diesels – but say that fleets should not panic. And former residual value stars could begin to lose their shine in 2004 if the cars are poorly specified.

However, the adjustment to residual values will be a gradual process and should not prompt fleets into pre-empting the change by de-fleeting diesels early.

CAP Monitor predicts that while the 2003 used car market was stronger for the number of modern diesel cars, larger numbers of these cars are expected to arrive in the used market before the end of 2004 through fleet termination.

Mark Norman, managing editor of future data, said: 'It won't change all of a sudden, as there is still strong demand for diesel in the used car market.

'This will be the first year where people reacted to the change to a carbon dioxide emissions-based company car taxes, so the first diesels bought as a result of these changes will begin to filter through.

'However, we know that not everyone reacted at once, so it will be a gradual process.'

Auction houses agreed that there would be little impact from the influx of diesel cars in the medium term but warned of potential difficulties further down the line.

Martin Potter, fleet and leasing director of Manheim Europe, claimed the auction market in 2004 would remain steady, with continuing demand for diesel vehicles. He said: 'In 2004 the wholesale market will be stable, and the market for diesel cars will be stable with enough buyers around to soak up demand.

'I don't think diesel volume will be so high that it would affect residual values for at least a couple of years.'

Meanwhile, premium cars which have often been easy to sell at auction will come under pressure if they lack a higher level of specification.

CAP Monitor says cars like the BMW 3-series and Mercedes C-class could struggle, although it points out that cars with above average specification will still be desirable.

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