Industry experts reassure fleets over future of diesel vehicle values

Diesel is likely to remain a crucial part of the motor trade’s fuel mix for the foreseeable future and the motor industry should “remain calm” over future values, according to the Vehicle Remarketing Association (VRA).

The trade organisation, which represents companies that are involved in remarketing more than 1.5 million vehicles every year, said that there was “every reason to expect that the values of most diesels will stay relatively stable” despite the so-called ‘demonisation of diesel’ in the media (The Buzz: May 2017).

What’s more, used car diesel values were remaining stable despite mainstream media coverage blaming ‘oil burners’ for city and town centre pollution and residents’ health problems, according to Andy Cutler, forecast editor at automotive industry providers and vehicle valuation experts Glass’s.

He said: “There has been a lot of negative press recently about how bad the diesel engine is, and how London in particular is being seriously polluted by diesel fumes. There is a lot of misunderstanding with regards to the ‘dirty diesel’ theory; it relates mainly to anything manufactured prior to Euro5 and Euro6 engines.

“The latest vehicles are much cleaner than they have ever been, however, the UK motorist appears to be an easy target and yet again seems to be getting singled out as the root cause of the majority of the pollution, which is not believed to be the case.”

Meanwhile, Glenn Sturley, chairman of the VRA, said: “There is a lot of noise going on around diesel which is causing some people to speculate on an unexpected decline in demand but, we believe, the picture is much more complex and less worrying.

“The main point to bear in mind is that there is no such thing as a single ‘diesel’ car – instead there is a whole range of Euro4, Euro5 and Euro6 models, and the prospects for each of them are very different.

“At one extreme, Euro4 vehicles are much more likely to be affected by clean air legislation and their values could fall quickly but most of these cars are now quite old and probably in ‘banger’ territory.

“At the other, Euro6 vehicles meet the latest emissions regulations and, however you measure them, are highly unlikely to be hit by any new rules and regulations. These are newer vehicles and there is no concrete reason buyers won’t want them.”

So far, impacts on diesel values had been limited, but Mr Sturley said the VRA was monitoring the situation closely.

He explained: “Our members are reporting a slight fall in trade values for newer diesels against forecasts but this has not really fed through into the retail market. This shows how all the noise surrounding diesel is only having a limited material value.

“The fact is that car buying habits usually take years to gain momentum and also take years to fall away. There are many, many people who see themselves as diesel buyers, and they will not just change overnight.

“There may be some specific instances that have a localised effect, such as where different cities introduce clean air tariffs that affect diesels over the next couple of years, but these are only likely to hit the oldest models.”

Mr Sturley added that newer diesel cars were, in fact, following a largely predictable depreciation curve and that it was because petrol had performed better than expected in some market sectors that it could look as though diesel was falling away.

He said: “The latest generation of petrol engines are very strong in terms of emissions and driveability and, as a result, they are enjoying better than expected residual values, largely because they are around in quite small numbers.”

In the medium-long term, Mr Sturley said, the VRA expected to see a gradual readjustment in diesel values as part of a wider spread of fuels available on the used car market.

He concluded: “Our view is that we are moving to a situation where there will be a portfolio of fuels where electric vehicles, different kinds of hybrids, petrols and diesels will all be around in quite large numbers. Buyers will become more conversant with the advantages of each.

“However, reaching that point will take some time and, while the media is doing its best to present diesel as untouchable in many cases, newer diesel cars remain a sound new and used buy in emissions, cost and value terms. Their values should remain stable.”

Mr Cutler added: “The Mayor of London has indicated that he wants to kill off diesel vehicles in London and the UK press have jumped on the bandwagon.

“It has been suggested that as a result of the negative press coverage, some dealers and underwriters in the London area are extremely worried about taking anything diesel into their stock. If you live in central London and don’t travel outside the area very often, then why would you have a diesel vehicle anyway?

“The main benefit of owning and running one is the additional fuel economy that you are able to achieve over a similar sized petrol engine model, in particular when travelling on an extended journey using the motorway network, sitting at a steady 60-70 mph, as the diesel engine will be hardly working at this speed and using very little fuel.  Therefore should we be surprised that diesel is not so popular in and around the London area?

“If you look elsewhere in the UK, to more rural areas that aren’t in the vicinity of a major city then diesel is still as popular as ever.

“Using data from Glass’s Rada product which can analyse retail asking prices by region, we see that diesel cars advertised over the last 12 months, show on the whole to have remained stable. It is clear that whilst diesel cars remain in the spotlight and some individual segments are beginning to perform differently, the overall market remains consistent.”

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