Euro6 diesel company cars have a place on fleets with RV experts unmoved by media hysteria

There is nothing wrong with today’s Euro6 diesel engined cars, which are a “world away” from models of just five years ago and compared with 10 or 15 years ago they are “completely different”.

That’s the view of residual value experts as diesel, the favourite fuel of fleets since the introduction of carbon dioxide (CO2) emissions-based company car benefit-in-kind tax in 2002, has taken a media-led bashing over the last almost two years.

Diesel bashing started in the wake of the 2015 Volkswagen Group emission-cheating scandal dubbed ‘dieselgate’ and the hysteria has grown louder amid concerns over air quality and it being a ‘silent killer’ contributing to 40,000 premature deaths a year in the UK.

However, those denigrating diesel as a fuel conveniently choose to ignore the huge technological strides motor manufacturers have made in recent years. Indeed, the Society of Motor Manufacturers and Traders call today’s Euro6 emission compliant diesel engines “the cleanest in history – and light years away from their older counterparts”.

Manufacturer investment in new Euro6 emission diesel engine technology has been driven by fuel economy and government legislation and James Dower, senior editor of CAP HPI’s used car price guide Black Book, said: “It is still more beneficial to run a diesel car as a company car because of the lower CO2 and also lower benefit-in-kind tax rates.”

The organisation argues that a lot of media reporting “demonising diesel” has “not been very insightful, well-led or well-informed” in relation to the impact of CO2 and nitrogen oxide emissions and what is happening long term.

“Pollution is not the same across all diesel vehicles,” according to Andrew Mee, senior forecasting editor CAP HPI. “Euro6 vehicles are very clean, but older vehicles are more polluting.”

It’s a view shared by Rupert Pontin, director of valuations at rival Glass’s, who said: “There is a lot of negativity in the market at the moment.

“From a press point of view there are a number of people making connections that just aren’t there at the moment. Although there is a high level of speculation around what will happen to inner city congestion charging for diesels, there is little actual fact to date. Equally we wait to hear what will happen to diesel company car benefit-in-kind taxation in the Autumn Budget. Some clarity on these points – and whether there will be a scrappage scheme [for older diesel vehicles] – would be very settling and helpful for both the fleet and private market.”

The multi-billion investment in “clean” Euro6 diesel engine technology versus the emissions standards of older vehicles had, according to CAP HPI, created marketplace confusion based on “either incorrect assumptions or implications or information that is just wrong”, according to Dylan Setterfield, international forecast manager at automotive data and intelligence providers CAP HPI.

However, while Euro6 diesel emission vehicles have been in showrooms since 2014, the used car market is suffering because of potential legislation – Clean Air Zones (The Buzz: May 2017) and possible changes in diesel vehicle taxation as well as the impact on consumers of the fall-out from the September 2015 Volkswagen Group scandal surrounding the fitment of emission cheating devices to diesel models – and that was having an adverse impact on residual values in some market sectors. But that decline is not all due to second hand byer concerns over air quality.

New diesel models typically cost around £1,200-£1,400 more than their petrol-engined equivalents and that additional percentage of cost new premium is reflected in the used market translating into perhaps around £750.

Improvements in small car petrol-engine fuel economy and performance with the advent of three-cylinder engines coupled with the volume of small diesel cars in the market has resulted in an erosion of the diesel premium to perhaps £250-£300 and, in some cases, price parity.

As a result, some petrol models, especially in the city car and supermini segments, have moved towards parity with their diesel equivalents on a whole life cost basis.

Mr Mee said: “Slippage on diesel values has been happening for a number of years and looking to the future that is likely to continue as part of a long-term trend. It is likely that with all the bad press and publicity that the rate of deflation for small diesel vehicles will slightly increase.”

But with the vast majority of diesel company cars being in the lower medium sector and above, Mr Mee said: “It is likely that larger vehicles where diesel engines make sense [the publicity] may not have that effect.”

However, any potential decline is likely to hit older diesel vehicles as they will almost certainly be the models impacted by new legislation – as indicated by the entry criteria for London’s Ultra-Low Emission Zone and future Clean Air Zones – and therefore, according to Mr Mee: “Lose their value more quickly. But those older vehicles are worth less so there is less money to lose if they are impacted.”

Meanwhile, Mr Pontin has hinted at a potential ‘regionalisation’ of demand for defleeted diesel cars in the future.

He said: “It will be older diesel cars that will be more difficult to sell, although this will possibly become a regional issue bearing in mind the fact that it will be city drivers that will be penalised by Clean Air Zone charging. Older diesels that spend more time driven in the country will not be affected.”

Mr Setterfield concluded: “There is nothing wrong with today’s diesels. We need to concentrate on the most polluting vehicles and that is certainly not today’s modern diesel cars.”

Agreement came from Mr Pontin, who said: “The newest generation Euro6 diesels are much better for the environment than their predecessors and from a pollution perspective are only marginally worse than a petrol car.

“From a fleet perspective whilst there is a need for concern there is no need for panic yet. Residual value setters, Glass’s included, have yet to significantly downwardly adjust forecast values and at this stage see no reason to based on the facts.”

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