AM Online

Subdued future for residual values

Residual values are set to decrease after the slow down in the last three months of last year.

There was a modest revival in the residual values of three-year-old cars during the last three months of 2005, with rates of depreciation slowing for the second successive quarter after an extended period of weakness.

The latest Glass’s Used Car Market Index indicates that the average three-year-old car (2002 ’52-plate with a typical 36,000 miles) was worth £6,625 by the end of 2005, reflecting a fall in value of 1.7%, or £150, over the final quarter of the year.

Although EurotaxGlass’s latest report suggests a slight uplift (0.4%) in January for residuals, but Alan Cole, editor at Glass’s Market Intelligence Service said the long-term outlook remains subdued, particularly for retail sales, and this has ‘obvious ramifications for prices’.

Prices for three-year-old cars currently remain some £325 behind the level seen at the start of 2005, and EurotaxGlass’s forecasts values to start easing back at a slightly faster rate during the coming months.

The EurotaxGlass’s analysis suggests rates of depreciation in 2006 are likely to remain higher for one-year-old cars than for their three-year-old counterparts.

“This is because the values for one-year old cars are constantly adjusting to pressures from the new car market, where inflationary price increases are virtually non-existent yet advancements in specification continue,” adds Cole.

“We continue to see an increase in the supply of three-month-old cars being offered for sale. For the one-year-old car to remain attractive, there needs to be a realistic price differential. In contrast, three-year old cars are not subject to these pressures.”

The full Glass’s Used Car Market Index report is free. Email: marketing@eurotaxglass.co.uk, quoting reference ‘Index 7’ in the subject line to receive a copy.

If you are not a registered user your comment will go to AM for approval before publishing. To avoid this requirement please register or login.

Login to comment

Comments

No comments have been made yet.