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Used car values ‘hit by rising depreciation’

The value of a three-year-old vehicle in the UK has dropped by approximately £125 (1.8%), according to the latest report from Glass’s Used Car Market Index.

Glass's says values for used cars of this age are approximately £175 lower than in April 2004, and that modest year-on-year rises in rates of depreciation are likely to be apparent through much of 2005.

As is normally the case following the March change in registration plate, residual values are expected to weaken more rapidly in April. Glass's suggests that used cars will lose a further 1.8% of their value, leaving the average three-year-old vehicle with a trade value of £6,925 by the end of April.

"Retail demand for three-year old cars during the first quarter was generally steady, although it continues to be heavily influenced by prevailing economic conditions," says Alan Cole, editorial consultant for Glass's Market Intelligence Service.

"With general inflation under control, no increase in interest rates likely before a General Election is held and a generally benign Budget, consumer buying confidence should be fairly sound, albeit weaker than it was last year. However, with house price inflation likely to remain at a relatively subdued level, sales of new and used cars in 2005 will not benefit from the levels of equity release experienced last year."

Glass's estimates that the holding of a General Election will have little impact on used car demand. "The immediate run-up is likely to cause no more than a temporary distraction to those who were intending to replace their car during the second quarter of the year," says Cole.

The full Glass's Used Car Market Index report is free – you can receive a copy by emailing quoting reference 'Index 5' in the subject line.

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