Price pressures in the used car market caused by oversupply are threatening to force fleets into low-mileage, two-year replacement cycles to protect residual values.
Fleets which run cars beyond 75,000 miles are in danger of losing out to a severe fall in demand for high-mileage used cars. The crisis could even spread to affect traditional three-year/60,000-mile fleet cars, according to Glass's Information Services.
Fleets were already under caution that running vehicles up to 100,000 miles could render the vehicles virtually unsaleable, but the latest warning signals a new low for fleets trying to squeeze the best value out of their disposal vehicles.
To fend off the problem, caused by a glut in the used car market that has made low-price, low-mileage cars cheaper for used car buyers, Glass's has predicted that in the future one and two-year contracts will be the norm, as fleet managers re-structure their car replacement policies to match disposals to demand.
Glass's has seen demand for cars with more than 75,000 miles on the clock drop significantly, impacting fleets running three and four year higher-mileage contracts.
Bill Carter, editor of AutoProVision, Glass's future residual value forecasting system, said: 'A few months ago cars with more than 85,000 miles on the clock were struggling for buyers, but that has now reduced to 75,000 miles, and it is likely to drop to nearer 60,000 miles as it shows no sign of abating.
'Used demand seems biased towards new or nearly new cars. For those purchasing cars outright this could result in damaging residual losses, with fleets even being left with stocks of cars they simply can't shift.' He warned that contract hire firms might also have to put up rates to offset higher depreciation costs and increase excess mileage charges to encourage early return of vehicles. (November 30, 2001)