AM Online

Awareness of twice-yearly plate change will erode traditional August premiums

While it is too early to see exactly how things will pan out in terms of registration numbers, one thing is certain. There will be more V-plate cars registered in September than there were T-plates in August.

This matters in terms of future residuals because we need to have a clear picture of the effect today's new plate will have on the value of today's car over the coming years. Now, it is true that used car values are determined by the 'ordinary' used car buyer. And it is also true that a good number of them are unaware of the new system at the moment because the annual change is still etched on their minds.

However, as time goes on people will become aware of just how quickly the plate change comes around and the traditional premium will steadily be eroded.

We also have to bear in mind that by the time today's shiny new V-reg car is three years old we will have adopted a totally new system based on numbers, not letters. So, given all of this, what will be the value of a 'V' over a 'T' in 2002?

The answer lies in typical human behaviour. It is a virtually automatic response now to pay more for a car which is easily identifiable as newer, or indeed less for a slightly older vehicle, regardless of many other parameters. So, all things being equal, our belief is that in three years time the V-plate will be likely to carry a premium of between £150 and £250 on the typical bread and butter family car. This compares with a current premium of somewhere between £300 and £400 for a P-plate over the equivalent N-registered car in today's used market.

This is a good illustration of how everything often levels out, even when the rules of the game are changed. Doubling the frequency of a new letter roughly halves the premium it enjoys - at least for the foreseeable future. In this case the eroding of the latest letter premium therefore makes little difference in terms of the world of future residuals.

To close on one certainty similar to the one we began with; all other things being equal, in three years time the car purchased on September 1 will be the winner in the residual value stakes compared with one registered one day earlier.

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