Fleet News

Demand for used diesels remains buoyant

Diesel resale values are expected to remain stable during 2018, despite fears that consumers could be driven towards choosing petrol or electrified alternatives.

While diesel new car registrations fell by 17% in 2017, and were more than 20% lower year-on-year for the first two months of 2018, used diesel car sales have been more resilient, with no signs of falling demand for either Euro 6 or older Euro 5 models.

Diesel new car sales have been hurt by negative news stories around the Volkswagen diesel emissions scandal in 2015, and further reports of diesel cars producing higher than advertised NOx emissions in real-world driving.

London has introduced an additional charge for older diesel cars entering the congestion charging zone, and some local authorities have seen diesel as a target to increase revenue from parking charges based around the effect of emissions on local air quality.

Diesel company cars also face a higher tax burden from this month with the supplement over a petrol model with the same level of CO2 emissions increasing from three percentage points to four.

But market analysts have reported sharp contrast in the fortunes of diesel cars at auction compared with the new car market.

Derren Martin, head of current valuations at Cap HPI, told Fleet News: “Diesel cars seem to be performing in line with expectations, while petrol cars have been appreciating slightly, particularly small cars.

“For example, if someone had bought a used Škoda Citigo a year ago and driving 10,000 miles in it, it’s possible they could make money by selling it now. This isn’t what you would expect for something regarded as a depreciating asset.

“For now, it seems both petrol and diesel cars have stabilised in the used market and are performing in line with expectations. 

“For certain uses, such as high motorway mileage and people driving 15,000-20,000 miles a year, we think diesel still has a role, particularly in executive cars and upper-medium cars.”

His views were echoed by Jayson Whittington, chief editor for cars and leisure vehicles at Glass’s, who remarked that the current crop of diesel cars is cleaner than ever.

He said: “The new car market appears to be experiencing a shift away from diesel. Negative messages being conveyed by sections of the media, as well as a change in direction by the UK Government has had a big effect, and is driving people away from buying what are among the cleanest vehicles currently available.

“In the used market, too, there has been a change. Petrol models have increased in popularity, which has led to stronger demand from trade buyers in wholesale channels.

“As a result, auction hammer prices and conversion rates have strengthened. What is interesting, however, is that the price performance of diesel cars hasn’t been significantly impacted.”

He pointed to the fact that there is no tax penalty for choosing a used diesel car, and for those with CO2 emissions up to 100g/km and registered before April 2017, they are not liable for vehicle excise duty (VED).

“Add to that significantly better fuel economy and it is clear why diesel is still considered to be excellent value for money and continues to be a good used proposition for dealers, traders and consumers alike, which should protect against a crash in RVs,” said Whittington.

The decline in new diesel sales will also help to ensure residual values remain strong for some time to come as fewer ex-fleet models will be returning to the market in three years’ time. If demand remains strong, this supply shortage could strengthen used prices.

Martin agreed that diesel used car values should remain stable for the foreseeable future, noting that for forecasters, the current state of the market would have been impossible to predict three years ago – before the diesel emissions scandal broke.

He also pointed to changes in behaviour among car buyers and diesels that have shored up demand for used vehicles.

“As new car sales have declined,” said Martin, “and some of the current retail offers and deals don’t appear as attractive to consumers in the past, more dealers are taking an interest in used car sales, so this is why we have seen increased activity.”

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