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AUCTIONS: High CO2 cars still valued

Date: 03 June 2008

According to Manheim research larger 4x4s over 225g/km are under pressure

Despite new taxes there remains a healthy market for cars emitting over 225g/km - they just require some effort

Recent changes in vehicle legislation and taxation have primarily focussed on CO2 in an attempt to encourage drivers into more environmentally friendly cars.

However, while the media has been describing it as a tax on 4x4s, in reality it affects many other more conventional vehicles such as estates, MPVs and so forth. As Robert Redman, senior pricing analyst at Masterlease, says: "Rather than just penalising those who choose to buy and run big, expensive vehicles, it is also affecting many who run typical family cars."

There are a number of issues affecting higher emission vehicles including whole-life and running costs. However, increased VED is perhaps the most significant.

"Working to the old adage that a little information is a dangerous thing, the average motorist is unlikely to have fully grasped the nuances of the new VED system and may just come to the conclusion that each and every 'large' car is subject to a higher tax regime," says BCA's UK operations director Simon Henstock.

"This could have a negative effect on values of all larger cars in the real world - whether they exceed the 225g/km limit or not, in a market sector where there has been pressure for some time."

It's not all bad news, though, as Henstock explains: "On the plus side, as used buyers will not be affected by any initial 'showroom' tax, these vehicles will potentially seem even better value in the used market. The first owner will carry more of the depreciation, as the up-front tax is effectively non-recoverable.

"While increased VED will mean higher running costs, these vehicles are already expensive to run and anyone wanting to buy one is likely to have factored those costs in. When VED was increased last year for the least fuel-efficient vehicles there was little or no impact on used values, beyond a short-term blip."

Who's buying?

"Don't overvalue these vehicles as they will become increasingly price sensitive," advises Henstock. "They may be good value, but at the top end of the range they still represent a considerable investment for the used buyer. However, at three years and 60,000 miles, a well maintained MPV/4x4 from one company owner, complete with a fully stamped service history and with a good spec is an appealing combination."

According to BCA many of the larger executive cars will go back into small company ownership, where the lower acquisition cost means the business owner can get good value for money. Similarly, self-employed professional people will see the benefit in buying an executive saloon once the first major hit of depreciation has taken place.

Outside of the business arena, financially secure older buyers like the quiet elegance of the bigger BMWs, Mercedes or Jaguars.

"As for the big 4x4s, Caravan Club members are big fans as are those working or living in rural areas," says Henstock. "And, of course, for the truly well-heeled a high-performance, luxury vehicle is a status symbol, and any additional costs or taxes due to high-emissions will have little effect."

What to consider

The fleet operator should be aware that price and running costs are key factors for most buyers.

"Buyers will look closely at service intervals and mileage, and if a car needs a major service very soon, this can be a real turn off," says Henstock. "It could well be worth getting the work done in advance and declaring this when the car is sold. Ask your remarketing partner to carry out an independent engineer's report on the car to boost buyer confidence. Similarly, make sure the car is offered with a long MOT, and if it hasn't got one, get one. A great spec is also expected, so the cabin should sport a leather interior, climate control and an array of gadgets, while the exterior should have a quality metallic paint finish, with alloys and maybe low-profile tyres. On bigger 4x4s, torque, or pulling power, come into play."

Henstock concludes by saying presentation should be first class on higher value models, particularly bigger executives. It is worth repairing dents and dings, too, because damage looks more expensive on higher value cars.

Sector analysis by Manheim

Manheim's research into the compact executive and executive segments over the first four months of 2008 shows a gradual increase in age and mileage and a corresponding fall in values. This is more pronounced at the back end of the period and applies to vehicles both above and below 225g/km. Manheim believes that is a reflection of the tougher market conditions affecting all used vehicles currently rather than to emissions specifically.

However, the research shows that larger 4x4s over 225g/km are under pressure while their smaller, more fuel-efficient counterparts in the sub-225g/km category are fairing much better. The result is that larger 4x4 values are down by an average of 6% in the period while sub-225g/km 4x4s are up 9%. This suggests staff appear to want to continue driving 4x4s but are turning to diesel derivatives or downsizing to smaller models.