LONDON: A new Eurotax Residual Price Index released today (23/11/00) by highlights that residual prices of two-year-old vehicles are dropping in many European countries.

Values have fallen by an average of 2.5% over the past six months with the largest drops in the UK (-9.3%, linked to recent new car price cuts) and Belgium (-4.9%). France, Austria and Switzerland have, however, seen small rises in residuals.

The latest index also shows the continuing wide variation in residual prices across Europe. The average residual value as a percentage of a two-year-old car's new price ranges from 56% in the Netherlands through 66% in Germany to as high as 71% in markets such as Portugal, Poland and Czechoslovakia.

"This variation has great strategic importance for the automotive finance and leasing industry, where any harmonisation of residual values would have far-reaching consequences," the index authors note.

The reduction in residual values affects all market segments but the largest falls are in the executive and sports coupe segments.

"The continuing effects of the high levels of new car registrations right across Europe are bringing unprecedented numbers of used cars on to the market," said Roger Dal Santo, international sales and marketing director for Eurotax.

"The reduction in residual values is a clear sign that the demand for used cars is failing to keep pace with the demand for new cars which is resulting in higher used car stocks at dealers.

"In the UK, falling new car prices are having a dramatic effect on residuals [and] we see the overall downward trend continuing."