Fleet News

Used value fear hits diesel fleets

SHOCK predictions that values of diesel fleet cars will dip below those of petrol variants within the next three years, wiping millions of pounds from the value of company fleets, have split opinion in the fleet industry.

New research claims mainstream diesel cars currently on run-out will suffer in three years compared with their petrol counterparts because the demand for new diesel cars will not be reflected in the used vehicle market.

But market analysts have disputed the claim, saying that while the traditional premium for used diesels over petrol will narrow, it is unlikely to dip below petrol.

Mark Chapman, European asset management director for GE Capital Fleet Services, which is behind the claim, said: 'The current high demand for diesels in the fleet market is caused almost entirely by the benefit-in-kind taxation regime.

'The used car buyer of 2007 will not be affected by that market distortion and will be faced with a dated car using last generation diesel technology.

'That buyer will probably not be willing to pay any kind of premium for a diesel engine and, in fact, the diesel could easily be seen as a generally less attractive proposition, with prices dropping a little below the petrol equivalent.'

Typical fleet cars including the Ford Focus, Vauxhall Astra Estate, Citroen Xsara, Citroen C5 and Skoda Octavia will be replaced by new models or have a new diesel engine range by next year.

Chapman added that diesel cars were only attractive to certain used car buyers and that, if fleet sales continued to rise, a general move towards parity with petrol would be inevitable.

'There are a number of factors at play – diesel engines remain an unknown quantity to the more conservative used car buyer who will usually opt for a petrol, a large number of buyers prefer petrol engines, and paying a premium for a diesel only really makes sense for drivers who cover high mileage.'

However Jeff Knight, editor of CAP New Car Monitor, disputed the controversial claim.

He said: 'In the end, most people will look at the differential between diesel and petrol and base it on fuel economy. They will see they can still get a reasonably-sized vehicle that achieves exceptional fuel economy.

'I can't see values diving below petrol equivalents, although the gap will narrow. Our own research among diesels shows a small but noticeable interest towards diesel from used car buyers, and factors including rising fuel prices will ensure there is still a gap.

'Run-out models when they arrive on the used market will still be quite acceptable cars to most people, with good specification levels and equipment and will do the job required of them.'

Last year Manheim Auctions dispelled fears of falling residual values for diesels, claiming the trade was already gearing up for an influx of defleeted diesels in 2004/05 (Fleet NewsNet, May 15 2002).

BCA quashed similar fears earlier this year, claiming that well-maintained and well-equipped diesels would always be desirable used cars (Fleet NewsNet February 12).

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