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March 27, 2003

UK: Residual values plunge to historic low

Residual values for three-year-old vehicles in the UK are at their lowest level in living memory and they remain on a downward trend, according to Glass's Information Services. Values fell 6% faster during 2002 than in 2001, and with the prospect of increased supplies of used cars and a sluggish UK economy, the rate of decline for values is likely to continue in the second half of the year.

By bcusack

Residual values for three-year-old vehicles in the UK are at their lowest level in living memory and they remain on a downward trend, according to Glass’s Information Services.

Values fell 6% faster during 2002 than in 2001, and with the prospect of increased supplies of used cars and a sluggish UK economy, the rate of decline for values is likely to continue in the second half of the year.

“The most dramatic falls in residual values during 2002 were for those sectors that have enjoyed the biggest growth in new sales during the last two years, namely compact MPVs (minivans) and premium-brand upper medium cars,” said Adrian Rushmore, managing editor at Glass’s Information Services.

“These two sectors each now command over 5.5% of the market and their growing popularity has generated increased supplies within the second-hand market, undermining previously firm residuals.”

By contrast, three-year-old full-size MPVs, off-road 4x4s and sports utility vehicles have only seen their values fall by an additional 1% in 2002 compared to 2001.

“Even though sales have increased significantly over the last two years, it was from a very low base and, importantly, supplies remain limited with each of these sectors still accounting for less than 3.5% of the total market,” added Rushmore.

Despite the slide in values, most dealers have been pleasantly surprised by the number of used vehicles that have found buyers since the start of the year.

“What currently favours the market is that used car prices are some 6% lower compared to last year and the cost of borrowing money is also marginally less. In particular, this has made it possible to attract lower income groups who until now commonly believed that a younger used car was beyond their reach,” Rushmore said.

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