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AUCTIONS: Eco-friendly cars enjoy 'credit crunch' surge

Date: 19 November 2008

Very high pump prices earlier this year and ongoing economic woes have really kick-started private buyers' interest in alternative-fuelled cars, writes Tony Rock

The effects of the economic downturn and higher fuel prices are continuing to boost interest in alternative fuels.

That's the message from BCA, whose Pulse price report on the auction market shows that values for alternative-fuelled cars continue to outperform the general used car market.

"It appears demand is continuing to rise because average values for hybrid/electric and LPG powered cars continue to be well ahead of expected guide prices, with the few examples BCA handle always attracting a flurry of bidding," says Simon Henstock, the company's UK operations director.

Values from the Pulse report for September show the small number of alternative-fuelled vehicles entered for sale by fleet operators are averaging up to 122% of guide prices. In comparison, average fleet values for petrol and diesel are currently around 92% of CAP Clean.

"Demand is actually increasing for hybrid electric/petrol cars such as the Honda Civic and Toyota Prius, and volumes sold at BCA have overtaken those of petrol/LPG cars - although numbers remain small," says Henstock. "The hybrid electric/petrol models are definitely the flavour of the moment, because there are no issues over fuel availability. However, consumers have already seen a variety of alternative fuels heralded as the answer to global warming and are wary of making the 'wrong' choice in terms of support and infrastructure - after all, just where do you go to get LPG these days?"

Mike Pilkington, Manheim's managing director, auctions and remarketing, expands further on that last point: "While LPG has been around for a while, the fuel station coverage is still a concern and until consumers are better served in this regard, it is unlikely the technology will take off in a major way. In terms of numbers, we see between 500-750 units for sale per annum."

As well as having concerns about support and infrastructure for alternative-fuelled vehicles, buyers also raise concerns about their reliability.

"Buyers are, understandably, cautious," says Pilkington. "The technology is still relatively new and therefore an unknown quantity further into the vehicle's life, and this has an effect on buyer confidence. As a result, when these vehicles appear on the sale list, the main requirements for purchase are younger, well-maintained and low-mileage examples."

There are steps sellers can take, though, to allay any fears, as Henstock explains: "Make sure the vehicle is serviced at the correct intervals and provide a complete service history. Consider providing an independent mechanical condition report too. And if the vehicle needs an MOT soon after the time of sale, get it done early as this will help promote buyer confidence.

"It can also be beneficial to take advantage of regional demand and sell vehicles in areas where congestion or emissions charging is in place."

Such locations might be where sellers can currently expect to achieve decent returns, but they shouldn't expect the good times to continue forever, as Gareth Hession, asset risk manager at Masterlease, concludes: "As the supply of hybrid vehicles into the second-hand market increases and Governments offer tax incentives to stimulate demand, we will see a drop in RVs."