According to EurotaxGlass's, the large, prestige-brand luxury cars are increasingly falling out of favour with new and used buyers in the UK, resulting in a sharp decline in registrations and high rates of depreciation.

This is in stark contrast to most other prestige car sectors that have seen unprecedented growth in registrations coupled with unrivalled stability in their residual values.

Sales of the four best-selling models in the luxury car class (BMW 7 Series, Mercedes S-Class, Audi A8 and Jaguar XJ) have declined by more than 25% over the past five years. During the same period the prestige car market as a whole has grown very strongly, up by more than 50%. The net result is that the luxury car share of the total premium-brand market has dwindled to just 2.5%.

Falling demand has hit residual values hard. In 2004 the average trade value of a one-year-old, 12,000-mile car from the sector was 67% of the original list price, but today that has fallen to just 57%. This compares unfavourably to 70% retained value for the typical large prestige saloon (BMW 5 Series, Audi A6, Mercedes E-Class, etc) and 73% for prestige SUVs (Mercedes M-Class, BMW X5, etc).

"A number of factors have contributed to the decline of the luxury car over recent years," said a EurotaxGlass's spokesman.

"There is much more choice in the market than ever before, and many traditional luxury car buyers [are] migrating to prestige-brand SUVs and niche coupe models. We're also seeing more affordable new luxury cars from the likes of Aston Martin.

"Fundamentally, there has been a sea-change in attitude towards the traditional big saloon. It is not considered as desirable as it once was, it has higher running costs than some of the more contemporary alternatives and, crucially, buyers are becoming more aware of the high levels of depreciation.

"Diminishing support for the beleaguered luxury car has even become apparent in the traditional heartland of the sector - the limousine business. Some of these companies have been transferring their money into the sector below," he added.

"Vehicles such as the Mercedes E-Class now offer the space they need but the initial outlay and running costs are less, and the residual values are higher."

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