According to the latest Glass's Used Car Market Index, rates of used car depreciation in the UK increased during the second quarter of 2005.

The report indicates that the trade value of the average three-year-old used car (2002 '02-plate with 36,000 miles) was £7,046 by the end of June, a fall in value of 4.1%, or £325, over the quarter.  EurotaxGlass's predicts values will fall by a further 2.2% to £6,893 by the end of July.

The report also suggests there has been a slight year-on-year increase in rates of depreciation. At the start of the second quarter, the value of the average three-year-old used car was £250 lower than at the same point 12 months earlier, and by the end of June the gap had widened to £275.

"In the post-election period there was a modest recovery in retail demand for three-year old cars, but this proved to be short lived," said EurotaxGlass's Alan Cole. "Sales of used cars continue to be heavily influenced by the prevailing economic conditions. With general inflation well under control and any future interest rate change more than likely to be in a downward direction, it could be expected that the used car market may show signs of stability. This has, however, not been the case and the situation will not be helped by the imminent onset of the holiday season, when demand inevitably slows."

During the second quarter of 2005, the average one-year-old car (2004 '04-plate) lost £425 of its trade value, equivalent to a 4% drop. This indicates a rate of depreciation steeper than that seen over the first quarter.

Given the current weakness in consumer confidence, EurotaxGlass's expects to see a further instability in values during the third quarter of 2005. Comparing the results with those of last year, the average one-year-old car had a value £700 lower this April and this differential increased marginally during the quarter.

During the second quarter, the average 2002 '02-plated three-year-old supermini fell in value by £225, or 5.9%. As expected at this time of year, lower levels of consumer demand and greater availability of used cars accelerated rates of depreciation on many models. In residual value terms, the Honda Jazz [Fit] performs best, holding on to 59% of its original list price. At the other end of the spectrum is the Suzuki Swift, which retains just 26% of its list price over the same period.

The value of the average 2002 '02-plated three-year-old lower-medium segment car fell £250, or 5.4%, during the second quarter of 2005. At the top of the residual value league is the VW Beetle, holding on to 54% of its original new cost after three years. The worst performing car in this sector after the same period is the Proton Wira, retaining 25% of its original list price as a trade value.

During the second quarter the average 2002 '02-plated three-year-old upper medium segment used car reduced in value by £350 (a fall of 6.4%). As expected this decline was at a steeper rate than was experienced during the first quarter of the year. In residual value terms, the Mazda 6 is top of the heap, holding on to 53% of it original list price. By contrast, the Daewoo Nubira retains just 16%.

The average three-year-old '02-plate compact executive sector car once again lost value at an increased rate during the second quarter of the year, equivalent to a drop of 3.8% or £400. Looking at trade values as a percentage of the original cost new, the top performer in this market sector is the BMW 3 Series (at 54%) while the worst performer is the Volvo S40 (at 36%).

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