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CAP refutes diesel 'meltdown' scare

A bright future exists for diesel cars in the UK – but old perceptions among secondhand car buyers continue to put the brakes on its full potential in the used market, says CAP.

These are among the findings of the automotive sector pricing and technical data experts in what it claims is the most comprehensive analysis ever conducted of the future prospects for diesel cars.

Published in association with AM-online’s sister brand Sewells Information & Research, 'Diesel Directions' looks at the experience and future expectations of dealers selling used diesels.

CAP conducted the research in response to industry demand for definitive information on the issue, following increasingly downbeat headlines forecasting 'residual value meltdown' for the growing proportion of diesel among Britain's 4.5 million company-owned cars.

CAP says: "The growth in diesel registrations since 2000/01 has left many automotive businesses exposed to the future prospects of diesel in the used car market.

"Because this growth was largely fuelled by tax incentives for company car drivers a question remains over whether there will be sufficient demand among private buyers to soak up increased supply for tomorrow's de-fleeted vehicles."

Researched among a geographically weighted sample of independent used car dealers, perceptions of diesel among private used car buyers was measured, along with the experience and trade perceptions.

The report establishes a clear picture of consumer demand, concentrating on perceptions of the relative values placed on diesel and petrol models and examines whether a sustainable value premium exists for diesel cars over petrol variants.

"Existing premiums have clearly been influenced by supply shortages but a question mark has remained over the medium and long-term impact on values of supply increase," says CAP.

Diesel Directions is the first investigation of the issue to focus on used car retailers, whose customers ultimately set secondhand values.

"Most importantly, the findings will reassure those who fear a dwindling market for used diesel cars. Clear insight is also offered into the restrainers on demand growth. Overall, Diesel Directions offers the only current and definitive view on the existing risks around exposure to the growing proportion of new diesel fleet registrations, bringing clarity to a debate which has frequently generated more heat than light."

In the conclusion to Diesel Directions, Mark Norman – who runs CAP's future residual values forecasting division - says: "The growth in diesel registrations has unarguably created future risk and this research confirms that there can be little doubt that the supply and demand equation will change. However, there is no evidence that the sometimes predicted 'meltdown' in diesel residual values will occur.

"There are areas of concern in the rest of the market. For example, diesel continues to suffer from some negative perceptions among a significant proportion of used car retail buyers. However misinformed and arbitrary such beliefs are, they remain a factor influencing choice and are unlikely to change overnight. This means the market for used diesels continues to present opportunities for growth, which could be influenced by carefully targeted marketing."

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