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.
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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%, or £150, over the final quarter of the year.
According to 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% 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,” said spokesman Alan Cole. “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.”
EurotaxGlass’s 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,” added 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.”
