For the first time in its history, CAP has begun a general reforecast process that will affect the residual values of all used vehicles.
Most severely hit will be the values of used vehicles powered by larger, thirstier engines, especially 4x4s.
CAP predicts residual values will continue to fall until at least summer 2009.
The news will be a particularly hard blow for smaller contract hire companies who are already finding it increasingly difficult to secure funding.
However, all lease car providers and fleets that own their vehicles outright will greet the news with dismay, as it confirms their worst fears that millions of pounds have - and continue to be - wiped off the value of their assets.
CAP’s decision comes on the back of the latest BCA sales results which show that last month average used car values fell to £4,743 - their lowest point in a year that has seen average values tumble by over £1,000.
Fleet and lease cars sold at auction fared even worse last month, falling by £133 against September’s results.
Residual values have been hit by a trio of knocks that have seen millions of pounds un-expectantly wiped off the value of used cars over the past few months.
The government’s decision to alter the road tax system has made consumers shy away from larger-engined used cars, while the lenders' unwillingness to provide used car buyers with credit has significantly reduced the number of customers in the market.
However, the biggest factor has been the shadow of a recession, which has seen the few buyers still out there opt either not to buy at all or to chose a smaller, cheaper used car.
Now CAP has said that with the near certainty of a recession, it has no choice but to re-forecast used vehicle values.
The latest issue of CAP Monitor already partially reflects the impact of the re-forecasting, with 4x4s and other 'heavy' vehicles suffering from a "significant downward revision of forecasts at the three-year/60,000 benchmark".
CAP's Mark Norman said: "All evidence currently suggests that the bulk of significant adjustments will be focused on larger-engine vehicles as market sentiment continues to favour smaller, more economical cars.
"Future residual value forecasts for the latter are therefore little changed, or stable at present.
"Other sectors, which will be significantly impacted are upper-medium and large executive."
The BVRLA – whose members will be hit hardest by the revising of residuals – said it broadly welcomed the move. Its director general John Lewis said: “We hope that CAP will undertake this sort of re-forecast on a more regular basis.
"It would be reassuring to think that they will reflect the eventual upturn in residual values as comprehensively.”
The re-forecasting process will continue until December, although CAP cannot rule out that the process will not continue beyond then.
EurotaxGlass's has said there are grounds for cautious optimism.
Its managing editor Adrian Rushmore said the used car market is likely to be the first to recover from current lows.
This is a view shared by some in the leasing industry.
“I would suggest that the market has already discounted most of this residual value downturn into current quoting.
"In many ways I think the toughest times are behind us,” said Andrew Cope, chief executive of Zenith Vehicle Contracts and member of the BVRLA leasing and fleet management committee.
“CAP Monitor is only a guide and like a lot of other leasing companies, we take information from many other areas, not least from our own performance on sale.”