Rates of used car depreciation continued to increase during the final three months of 2004, according to the latest quarterly used car market index from valuations specialist Glass's.

The average three-year-old vehicle (on a 51-plate with 36,000 miles) is now worth £6,910 according to the report, £200 less than for the same age of car at this point last year.

Glass's said the usual seasonal uplift in residual values during January will be less pronounced than during the same month in 2004, and that values for most ages and types of used car will continue to weaken at a modestly increased rate during much of the rest of the year.

Looking at residual values over the last quarter (October-December 2004), the index reported that the typical used car would have lost £233 in its trade value over the three month period, a fall of 3.2%. Glass's said that this reflects a modest weakening of values, which can be attributed to falls in consumer demand and increases in used car availability.

"Market demand for three-year old cars continues to be heavily influenced by the prevailing economic conditions," said a Glass's spokesman.

"With general inflation well under control it is quite likely that current interest rates have reached their peak. Once consumers become accustomed to this, buying confidence will return, although at a level lower than during 2004. The 2005 market will not, however, benefit from property equity release to the same extent, with house price inflation likely to remain at a more subdued level. The net result should be a continued softening of used car values across most sectors and ages."