Fleet News

Premiums' popularity forecast to continue

PRESTIGE brands will still retain their magic touch in used car markets despite rocketing sales as they steal market share from volume rivals.

Over the past 10 years, prestige brands have increased their share of the new car market by 112% and the steady march is set to continue.

Among the latest entrants is BMW, with the 1-series, and before then cars including the Mercedes-Benz A-class, Audi A3, MINI and BMW Compact.

Saab is also expected to launch models into the smaller end of the fleet market.

Experts at Glass's Information Services say a number of factors should ensure continued premium-brand growth, to the detriment of the volume marques.

Just 10 years ago the prestige brands' share of the UK's new car market was a mere 8%, but by the end of 2003 this had grown to 17%.

Significantly, 77.8% of this 10-year growth actually took place during the last five years.

Aside from the perceived desirability of their cars, Glass's says additional factors are helping prestige marques grow their market share.

The weakness of economies in mainland Europe has made new prestige cars more affordable in the UK.

The continuing buoyancy of the UK economy is encouraging buyers to spend more, fuelling sales of desirable premium-priced vehicles. And fleet car buyers have become aware of the importance of vehicle wholelife costs, which is greatly influenced by depreciation.

Alan Cole, editorial consultant at Glass's Market Intelligence Service, said: 'Transaction prices, even for private buyers, have reduced considerably over the past 18 months, with the effect of increasing the number of prestige cars sold in the UK.'

While this activity has been detrimental to values of nearly-new cars, Glass's says values of three-year-old examples have been largely unaffected.

In the upper medium sector, average residual values for premium models (after three years, 36,000 miles), are about 46% while volume models' residuals average at some 34%.

So a prestige model can be more cost-effective than a comparable volume model.

The economics speak for themselves, leading to predictions that their share of the market will rocket past the current 17% of UK sales.

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