Values Of Three-Year-Old Cars Improve, But The Outlook Remains Less Positive

  • Trade value of the average three-year-old (’52-plate) used vehicle is now £6,625

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 per cent, or £150, over the final quarter of the year.

According to EurotaxGlass’s, the publishers of the report, residual values are expected to follow a small seasonal uplift during January, with the typical three-year-old vehicle increasing in value by 0.4 per cent during the course of the month. However, 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 greater stability in values of three-year old cars was due to a better balance between supply and demand," comments Alan Cole, Editor at Glass’s Market Intelligence Service. "There was a modest revival in trade buying activity in the final quarter, and a further improvement in recent weeks as the trade prepare for the seasonal uplift in retail demand that normally takes place in the early spring. However, the longer-term outlook remains subdued, particularly for retail sales, and this has obvious ramifications for prices."

Prospects worse for nearly new cars

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.

"Furthermore, 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."

18 January 2006 Staff

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