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May 1, 2008updated 12 Apr 2017 4:43pm

Fleet lessors to be hit by predicted slump in residual values

Fleet lessors to be hit by predicted slump in residual values UK commercial vehicle (CV) lessors viewed with alarm forecasts in June that the value of used cars could fall by as much as 25 per cent during 2008. The predicted fall compares with a usual decline in values of around 8 per cent and caused much speculation as to how CV residual values will fare as ex-fleet vehicles re-enter the marketplace. The principal causes are the proposed increase in vehicle excise duty and the impact of the global rise in commodity prices including fuel.

By Brian Rogerson

UK commercial vehicle (CV) lessors viewed with alarm forecasts in June that the value of used cars could fall by as much as 25 per cent during 2008.

The predicted fall compares with a usual decline in values of around 8 per cent – and caused much speculation as to how CV residual values will fare as ex-fleet vehicles re-enter the marketplace.

The principal causes are the proposed increase in vehicle excise duty and the impact of the global rise in commodity prices including fuel.

John Watts, operational development manager at CAP, a residual value specialist, said the used CV market was becoming “extremely tough”. “Values,” he said, “are down between six and seven per cent from January 1 2008, most dealers have a lot of used stock, and turnaround is slow.”

He said the CV market – which is traditionally buoyed up by local traders – is being seriously affected by commodity inflation and is causing buyers to at best postpone their change of vehicle and, at worst, go out of business.

George Alexander, chief commercial vehicle editor at EurotaxGlass’s, added that the customary summer slump in CV sales will exacerbate the situation. “Over the last two or three years,” he said, “with demand reflecting the boom in the economy, values have stayed high. The long lead times from manufacturers have added to the tendency for values to remain high. This is all now coming to a halt.”

Duncan Ward, BCA’s UK business development manager, said that there is additional pressure in the nearly-new sector, where the average values of CVs fell by around £700 in April compared with the previous month, and in partexchange stock where values fell by over £80 month-on-month.

A survey recently carried out by fleet consultancy Colin Tourick & Associates Ltd found that 96 per cent of fleet operators in the UK believe the credit crunch is having a significant impact on the contract hire industry. 

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