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Market decline shows signs of easing

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Review

There are signs that the rate of decline in the current used car market was easing a little in August, with a slightly smaller fall in values.

However, it would be unwise to attribute it to anything more than the natural variations that occur from month to month in an unstable market.

There remains no reason to anticipate any fundamental change in fortunes for the medium term.

Most commentators remain confident that conditions across most markets will not see any significant improvement until 2010.

To give a flavour of conditions, analysis of CAP Black Book reveals that used prices fell between January and July more substantially than during entire years in recent times.

The cumulative movement between September 2006 and August 2007 was just -0.1%. But between September 2007 and August 2008, the movement was -18.3%.

Many cars are losing close to two-thirds of their value in their first year. CAP believes additional depreciation over the norm this year will be 7-8%, based on the benchmark of three years, 60,000 miles.

However, this may disguise the fact that there will be winners and losers in terms of car types.

It does not take an expert to predict that large, big-engined vehicles will lose more value than economical cars that can be sold on value for money.

One area of concern is the C sector (Focus/Astra type) which is very much the mainstay of retail dealers with family car customers.

The contracting retail market may well lead to more pain here than in the D sector (Mondeo/Vectra type).

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