Audi and BMW will be looking to their laurels as Mercedes-Benz seeks to take its slice of the premium upper-medium diesel market with the new C-Class.

Last month the contract hire panel looked at the upper-medium sector – a market area which is seeing dwindling fleet sales.

This month we’re looking at the reason why this market is in decline – the march of the premium upper-medium models.

Audi and BMW are making hay in the fleet market thanks to their badges, high residuals and keen wholelife costs.

And now Mercedes-Benz is aiming to emulate the success of its rivals with an all-new C-Class.

The old model never made the impact that the A4 and 3 Series have, but now there is renewed focus from Mercedes-Benz with a car laden with technology, including the PreSafe accident mitigation system and Agility Control for a sportier drive.

Mercedes-Benz has also introduced three distinct versions – SE, Elegance and Sport.

In 2.2-litre C220 CDI SE diesel guise it will be going head-to-head with the recently introduced Audi A4 2.0 TDI with 170bhp and the BMW 320d (although this is the 163bhp model, not the very-recently announced upgraded 177bhp unit).

Lexus has its well-equipped IS220d – the marque’s first diesel, while Jaguar and Volvo have their ageing X-Type and S60.

  • THE JUDGES

    DEAN WOODWARD
    Contract services manager, DaimlerChrysler Fleet Management

    Hugely desirable cars make this sector extremely competitive. It represents the transition from volume manufacturers to the premium brands, the youngest being the new Mercedes-Benz C-Class.

    It offers a supple, cosseting ride, while there is a progressive model range with entry-level SE, Elegance and Sport.

    The Sport model is most identifiable due to its aggressive styling and the iconic three-pointed star in the grille. It also fares well on lease rates.

    Both the X-Type and S60 are in their twilight years and appear tired against the A4, C-Class, 3 Series and IS220d.

    CHRIS CROW
    Head of risk, Hitachi Capital

    UK drivers’ love affair with the three-pointed star, the propeller blades and four rings has grown unabated as they symbolise, for many, success.

    Audi has won much recognition for its diesel engines and build quality, which the A4 epitomises.

    BMW has traditionally defined this sector, although increasing popularity has eroded its appeal somewhat.

    Tarnished by poor build quality and staid image in the earlier part of the decade, the new Mercedes-Benz looks set to address both these issues.

    Despite a well-executed package, the Lexus misses the target, while the Volvo and Jaguar look dated.

    STEVE JONES
    Pricing manager, Lex

    In the two-horse race for the compact executive sector, get ready for a third runner to enter the field.

    Mercedes-Benz has identified the three facets that will bring it back to the limelight – image, dynamics and build quality.

    The Jaguar and Volvo are perfectly competent products, although late in their lifecycles now, and they’ve never been able to win lasting share; and although the IS220d has built on the success of its predecessor, none of the competition has made an impact on the 3 Series and A4.

    The previous C-Class was hampered by uncompetitive rentals but the new model appears to have all the attributes for success.

    ANDREW MEE
    Commercial operations manager, Lloyds TSB autolease

    In this image-conscious sector, the new C-Class will be launched with two different personas.

    SE and Elegance models appeal to traditional customers, whereas Sport models get a distinct three-louvre grille and sports suspension in a clear effort to steal sales from BMW.

    The 3 Series excels with sharp handling and build quality but the classy A4 is a tough competitor – both enjoy the lowest rentals in the sector. The Lexus has good residuals but the diesel is lacking.

    Despite higher discounts, weaker residuals mean that the competent S60 and ageing X-Type struggle to compete.

  • Average leasing rates

    A strong RV and very low SMR bills contribute to the BMW offering the lowest monthly lease. Close behind is the Audi, but the rest are well back – the Mercedes-Benz is the cheapest of the remaining four.

  • CO2 emissions

    The Jaguar’s CO2 emissions of 149g/km put it in the 19% benefit-in-kind tax band.

    The Audi and BMW are in the 20% band, with the Mercedes one higher. The Lexus is in the 23% band and the Volvo, 24%.

  • Fuel economy

    With claimed combined economy of 49.6mpg the 320d is just ahead of the X-Type on 49.1.

    The rest are mostly competitive although the Volvo struggles to 42.8mpg thanks to its larger 2.4-litre engine.

  • Residual values

    Limited supply and strong appeal in the used market thanks to high customer satisfaction levels put the Lexus out in front at 44%.

    The new C-Class runs it close while the Audi and BMW are not far behind.

  • Average discount

    Plenty of support from Volvo on the S60, compared with virtually nothing on offer with the new C-Class.

    Lexus is almost as frugal with its discount, while Audi and BMW are matched on 7% off.

  • Average maintenance

    BMW’s Service Inclusive offers all servicing (excl.tyres) over five years/60,000 miles for £635 and that helps.

    The Audi, Mercedes and Volvo are similarly priced, while the Jaguar and Lexus are the dearest.

    The verdict

    1. BMW 320d SE

    P11D price: £25,095
    2007 BIK bill (40%): £2,007
    2007 VED bill £140

    RENTAL RATES:
    DCFM: £393
    Hitachi Capital: £416
    Lex: £438
    Lloyds TSB autolease £424

    VERDICT:

    The 320d sets the standard. Strong RV, decent support and low SMR costs combine with a dynamic drive and iconic badge. Cheapest rentals.

    2. Mercedes-Benz C220 CDI SE

    P11D price: £24,892
    2007 BIK bill (40%): £2,090
    2007 VED bill: £140

    RENTAL RATES:
    DCFM: £461
    Hitachi Capital: £480
    Lex: £448
    Lloyds TSB autolease: £463

    VERDICT:

    Narrowly beaten by the 320d, the new C-Class is far more attractive than the old model. Good RV, although little support pushes up the rental.

    3. Audi A4 2.0 TDI 170 SE

    P11D price: £23,485
    2007 BIK bill (40%): £1,878
    2007 VED bill: £140

    RENTAL RATES:

    DCFM: £413
    Hitachi Capital: £439
    Lex: £433
    Lloyds TSB autolease: £406

    VERDICT:

    Decent support, strong RV and a competitive front-end price make the A4 a solid choice. Has the second lowest rentals of the group.

    4. Lexus IS220d SE

    P11D price: £25,567
    2007 BIK bill (40%): £2,352
    2007 VED bill £165

    RENTAL RATES:

    DCFM: £465
    Hitachi Capital: £484
    Lex: £467
    Lloyds TSB autolease £457

    VERDICT:

    Well equipped but a high price and low support give the Lexus third most expensive rental.

    Residual value is sector-leading though.

    5. Volvo S60 2.4D SE

    P11D price: £24,697
    2007 BIK bill (40%): £2,370
    2007 VED bill: £165

    RENTAL RATES:
    DCFM: £434
    Hitachi Capital: £503
    Lex: £478
    Lloyds TSB autolease: £466

    VERDICT:

    Plenty of discount available but this is off-set by a low RV to give the ageing S60 the second highest rental cost here. Fuel economy is not great either.

    6. Jaguar X-Type 2.0D SE

    P11D price: £25,352
    2007 BIK bill (40%): £1,926
    2007 VED bill: £115

    RENTAL RATES:
    DCFM: £459
    Hitachi Capital: £513
    Lex: £487
    Lloyds TSB autolease: £491

    VERDICT: Outclassed here with a poor RV and high SMR bill. Highest level of support can’t avoid the Jaguar having most expensive lease cost.