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RV slide slows in 2006

The residual value of most used cars in the UK fell at a slower rate in 2006 compared to the previous year.

publishers of the Glass’s Guide to Used Car Values. The findings in a report from EurotaxGlass’s point to a year-on-year uplift in rates of depreciation in 2006 for cars between one and five years of age.

The trend, worth an extra three per cent of retained value for the typical three-year old car, reversed the downward pattern seen in 2004 and 2005, and affected most vehicle segments.

“A number of contributory factors influenced the improvement in values,” said Adrian Rushmore, managing editor at EurotaxGlass’s. “The mini consumer boom was at its height in 2003 and, given that the normal period of used car ownership is just over three years, a proportionally higher number of people considered a change last year although a significant number deferred their decisions on financial grounds.

“Furthermore, the declines in residual values that we have witnessed over the last 10 years have persuaded more owners that a used car now represents good value for money.”

Rushmore says the modest reduction in used car supply also played its part.

“New car registrations have been easing back since 2004. The decision of some major carmakers - notably Vauxhall - to reduce low-margin sales to vehicle rental businesses has also affected the availability of used car stock.”

Prospects for 2007

EurotaxGlass’s predicts that sales of new and used cars are unlikely to climb in 2007. “The more cautious approach that many consumers are now taking towards their spending looks set to continue, especially when it comes to higher costs items,” said Rushmore.

“Demand for new and used cars won’t be helped by fears over further increases in base rates. The relatively modest pace of house price inflation will also mean fewer people are willing to free up equity to finance a vehicle purchase.”

However, the registration statistics indicate that the reduced supply of used one- to four-year-old cars could ease back in line with the falls in demand. “For used car dealers, this all suggests a likely continuation in the patterns of unit sales, profitability, and residual values that we witnessed in 2006,” said Rushmore.

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