Buyers who have been looking to reduce vehicle ownership costs by demanding lower new car prices are taking a massive hit on used car residuals, wiping out any potential savings.

Mark Cowling, Cap Motor Research chief European economist, said the headline new car price reductions had "little substance", but the biggest cost to the driving public, used car prices, had "hit the rocks".

The recent recovery in residual values - January saw the smaller decline for almost two years - was a seasonal trend, he added.

Mr Cowling, a speaker at Used cars: the future, Automotive Management's spring conference, said: "It's a complex market, so dealers will have an opportunity to increase new and used prices, but in five years time, we will still be talking about lower prices, distribution costs and Block Exemption."

Used cars: the future will be held at the International Convention Centre, Birmingham on May 24, the day after the AM100 dinner.

It will be chaired by John Kiff, the International Car Distribution Programme used car expert. Other speakers include: John Brewer, CarPoint UK managing director and Paul Jarvis, Glass's Information Services managing director.