Trade value of the average three-year-old (’52-plate) used vehicle is now £6,625There 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.”
The full Glass’s Used Car Market Index full report is free – just email: marketing@eurotaxglass.co.uk quoting reference ‘Index 7’ in the subject line.
The detail – key extracts from the latest Glass’s Used Car Market Index
1) Trends in one-year-old used car values
During the last three months of 2005 the average one-year-old, 2004 ‘54-plate car lost 1.7 per cent of its value, equivalent to a fall of £250. One-year-old values at the end of December 2004 were some £425 behind the same point in 2004. During January 2006 values are expected to increase by slightly less than 1 per cent, as demand picks up after the holiday period.
2) Trends in three-year-old used car values
See main text, above.
3) Trends in three-year-old used car values, by market sector
The Used Car Market Index outlines residual values trends in major market sectors. For further detail of the residual value performance of individual models and other sectors, please contact Alan Cole at EurotaxGlass’s on 01932 823788.
Some of the sectors covered in the Index include the following:
· Superminis: Over the fourth quarter of 2005 the average three-year-old supermini (2002 ‘52-plate) reduced in value by 2.6 per cent, or £100. This was less of a fall than that seen during the third quarter of the year. For the first month of 2006 average values will pick up again, but by only £50. In residual value terms the Honda Jazz continues to perform best, retaining 56 per cent of its original list price after three years. Worst performing is the Suzuki Swift, at just 22 per cent.
· Lower-medium cars (mid-sized family hatchbacks): The value of the average 2002 ‘52-plated three-year old lower-medium car reduced by £150, or 3.7 per cent, during the fourth quarter of 2005. An increase in average values is expected in January, but only by 1.4 per cent (£50). Retained value, as a percentage of original new cost, varies from 49 per cent for the Volkswagen Beetle to 21 per cent for the Hyundai Accent.
· Upper-medium cars (volume-brand larger family saloons and hatchbacks): During the fourth quarter the average ‘52-plated three-year-old upper-medium segment used car fell in value by £125, or 2.7 per cent. Although traditionally a segment susceptible to higher rates of depreciation, this decline was at slower rate than was experienced during the third quarter of 2005, mainly due to a reduction in supply. In residual value terms the Honda Accord leads the pack, holding on to 48 per cent of its original cost new after three years. By contrast, the Fiat Marea retains only 12 per cent.
· Upper-medium executive cars: The value of the average three-year-old ‘52-plated upper-medium executive car continued to fall in line with the wider market throughout the final quarter, and by December was £175 or 1.8 per cent lower than it was in October. This reflects a lower rate of depreciation compared to that of the third quarter. Looking at trade values as a percentage of the original cost new, the top performer in this market sector is the Mercedes Benz C-Class retaining 51 per cent, while the worst performer is the Volvo S40, at 33 per cent.
· Sports Utility Vehicles (SUVs): During the last quarter of 2005 three-year-old 2002 ‘52-plated SUVs fell in average value by 3.8 per cent or £300 – more than the market average and similar to the reductions experienced in this segment during the third quarter. Despite the historic buoyancy of this market segment an increase in the supply of used examples and a wider choice of models is mainly to blame for this weakening. In residual value terms, the Toyota Rav4 tops the RV league table, holding on to 54 per cent of its original cost new as a three-year-old vehicle. Trailing its rivals in residual value terms is the Kia Sportage, at 29 per cent.
