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Record sales prompt warnings of residuals' slump

Record car sales this year of more than 2.4m vehicles have sparked fears that chronic oversupply in the market will force down residual values.

This week, Len Clayton, chief executive officer, global full service leasing at General Motors Acceptance Corporation, warned of an expected 5% fall in residual values for three-year-old cars next year.

He added that in 2003, used car values would fall by a further 3% and then again by 2% in 2004.

Mr Clayton said:"We see residual values dropping for the next three years. The market is oversupplied. What manufacturers do is their problem, but the market will not take it. It will only stabilise when sales are at about two million vehicles a year."

His comments came as the latest figures revealed a total of 2,332,303 units have been registered in the year to the end of November, beating the full-year sales record set in 1989 of 2,300,944 units.

Cap Network agreed the market was set to fall.

Mark Norman, senior editor of residual value forecasting tool Cap Monitor, said the situation was made worse when parallel and grey imports were considered.

He said: "Adding these figures would take total new car sales for the year to more than 2.5 million. The nearly-new market is most affected by falling prices. But there is a knock on effect through two-year-old and three-year-old cars."

Glass's Guide has predicted that fleets will need to adjust replacement cycles to protect RVs, changing from three-year to two.

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