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Diesel boom set to continue despite tax surcharge change

Diesel residual values are likely to be unaffected by new company car tax rules introduced next year that no longer exempt drivers from a tax surcharge.

From January 2006, company motorists with cars that meet Euro IV emissions standards will no longer be exempt from the 3% benefit-in-kind tax penalty.

But used car experts at Glass’s Market Intelligence Service believe that even when exemption clauses are changed, demand for diesel will still be strong, as will residual values.

Alan Cole, editorial consultant at Glass’s Market Intelligence Service, said: ‘There is unlikely to be any noticeable shift in demand away from diesel. Taking into account typical 36-month fleet replacement cycles, the bulk of those drivers due to replace their diesel company car in 2006 are likely to be well-used to paying the 3% surcharge because their existing car will not have been Euro IV compliant.

‘If diesel offered a preferable alternative to petrol at the time they chose their existing company car then this will still hold true after the January 2006 deadline, making them just as likely to opt for diesel again.’

Glass’s is predicting a small uplift in Euro IV diesel car registrations before the 2006 deadline but this is unlikely to affect residual values.

Cole added: ‘The additional volumes will not be sufficient to upset the current balance of supply and demand in the retail used car market.’

A number of experts have predicted that the huge increases in diesel sales – some key fleet cars are seeing 80-90% of sales have a diesel engine – will see values slip as they flood back onto the market in the next few years.

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