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Oversupply undermines value of one-year-old cars

Values of one-year-old cars are continuing to fall at a faster rate than any other section of the used car market.

The typical one-year-old used car currently has an average trade value of £9,575, representing a fall of 14%, or £1,575, from the £11,150 figure seen in January 2000, according to EurotaxGlass’s.

Excess supply is one of the biggest causes of the increased rate of depreciation, with vehicles up to 12-months old now comprising around one in five of all used cars on dealer forecourts.

EurotaxGlass’s says oversupply can partly be attributed to the greater number of tactical registrations, where dealers are registering new vehicles as ‘demonstrator’ cars to help them meet incentive-based sales targets from manufacturers.

Falling demand in the new car market is also having an impact. EurotaxGlass’s says dealers have to peg their used car retail prices well below the discounted price of a brand new car in order to ensure they present good value for money.

"During the last two years the difference in average whole market value between a one-year-old and a three-year-old car has fallen by £400," said Alan Cole, editor for Glass’s market intelligence service. “There is a limit to how much more one-year-old values can drop before the effect on three-year-olds become more pronounced, causing their values to reduce further,” he said.

However, EurotaxGlass’s said there has been an improvement in used car trading so far this year. "There has been a fairly marked recovery in retail demand that has created a slightly greater lift in trade prices than we saw during the first quarter of last year,"said Cole. "This means that, for the time being, at least the market has arrested the slide in residual values," Cole added.

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