Last year, the most popular new car in the UK was from the lower medium sector – the Ford Focus (according to SMMT new car registrations statistics). This reflects the importance of the lower medium sector to both the new and used car markets.
Although the trend towards 'downsizing' has been noted recently, lower medium cars have historically been popular on the used market compared to their upper medium equivalents. As a result, the lower medium sector has enjoyed a relatively positive performance on the used car market since 1995, despite the collapse in values during the latter part of this period.
During the period 1995-2000, the lower medium sector outperformed the all-car index by more than 10%.
The margin between the lower medium and all-car indices has been particularly pronounced since 1997, when the residual values boom of the mid-1990s was coming to an end, but has also persisted during the subsequent residual values downturn.
Therefore, although the lower medium sector gained most from the increase in residuals during the mid-1990s, the sector has not lost out accordingly during the downturn since 1998. This reflects the fact that together with the supermini sector, lower medium vehicles reflect the requirements of buyers on the used car market for all-purpose, cost-effective transport. Residuals have not fallen as far as other sectors, as consumer demand has supported used values.
The lower medium sector has recently been through a large number of new model introductions from the major manufacturers. With newer vehicles such as the 1998 Ford Focus and Vauxhall Astra yet to appear in the index, we can expect this positive performance for the lower medium sector to continue during the next year.