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REMARKETING: Are increasing fuel prices impacting diesel desirability?
Date: 11 March 2011
As fuel costs rise and more and more petrol models decrease their emissions, Rachel Burgess finds out whether diesel cars still fare better at auction
Fuel costs have soared in recent months - yet remarketing patterns for diesel and petrol cars remain the same.
Punters, it seems, are not switching to petrol cars, even with the price of diesel heading towards 135p per litre.
Diesel models continue to enjoy a substantial price premium over petrol, despite the higher cost of diesel fuel and the fact that diesel cars are sold at a higher average mileage, according to latest price data from BCA. The company said the premium narrowed at the start of 2009 but widened again last year; in September 2010 it was as "wide as it has ever been" at £1400.
Tony Gannon, BCA communications director, said: "There can be little argument that the average price of a fleet and lease diesel car always outperforms that of a similar average petrol model."
Gannon added: "While diesel values are much higher, the BCA price trends always move in tandem and there are no instances of petrol values falling while diesel values are rising, for example. However, there are several instances where diesel values at BCA have climbed more sharply than petrol values."
Another area where fleet and lease petrol and diesel diverge quite sharply at remarketing time is in the mileage, says Gannon: "For petrol cars it is around 30,000 miles, for diesel cars, it is quite often double that figure."
In December last year, average mileage for fleet and lease volume models using petrol was 31,620 compared with 64,119 for the equivalent diesels. Indeed, Nigel Fletcher, operations director at leasing firm ALD Automotive, says: "If you're looking at a petrol car with 120,000 miles on it compared to a diesel with the same amount, obviously the latter will fetch a far better price."
Fletcher adds that ALD's clients show little interest in petrol, as people still get better fuel consumption from diesel. "Hopefully attitudes will change as petrol CO2 comes down."
About 40% of ALD's fleet is petrol, but Fletcher says this is abnormally high for a leasing company and is a result of it having a number of small courtesy cars that act as accident replacement vehicles. He says ALD has been encouraging its customers down the petrol route for some time: "When you look at disposal, you want your product to differentiate from others. We are trying to promote petrol to try and recover our position from having too many of the same cars, but I'm not sure whether that will be successful.
"It's about changing attitudes. We've got to re-educate people that, in some cases petrol cars can do what diesels are doing. Manufacturers also need to do more promotions and make more product available in the marketplace."
Several factors affect the relative price performance of the two fuel types in the used car market. "The price paid by motorists at the pumps is significant, and will affect desirability," says Gannon. "But motorists don't consider this in isolation - our research for the Used Car Market Report shows that they also value diesel's perceived relative economy in terms of mpg and lower servicing costs."
He added: "Research conducted for BCA reveals that when UK motorists were asked what type of fuel their next car would run on, 45% will buy a used or nearly new petrol car, while 31% opted for a used or nearly new diesel. With an annual UK market of around seven million used car sales, that is plenty of demand for diesel and suggests values will continue to remain strong."
According to Gannon, diesel power still broadly equates with larger cars, lifestyle and working vehicles, so larger saloons and estates, 4x4s and MPVs for example, where power and torque can be an issue. In the modern 4x4 market, petrol examples are few and far between, which does give those few petrol models a veneer of desirability that might surprise some people.
"Diesel penetration of the smaller saloon and hatchback sectors is relatively much lower, because the benefits in terms of cheaper motoring are much less clear cut and the latest generation of smaller petrol engines are frugal, powerful and CO2-efficient," he says.
"In the supermini and city car sectors it's very much petrol all the way, although there are odd exceptions - the Mini diesel, Fiat Panda, Citroen C1, C2 and C3, Toyota Yaris, for example - because there will always be a ready audience for diesel power. To put the numbers into context, BCA currently has 101 Minis for sale, nine of which are diesel."
In terms of acquiring diesels, Gannon, says "a good specification at the front end makes it a potentially easier sale as a used car three years later". However, he also says that with diesels being so prevalent in the fleet arena, there's little you can do to make these vehicles stand out, beyond preparing them to a high standard and carrying out any repairs that might be required. "Diesels tend to be sold at a higher mileage so cosmetic damage - stone chips, bumper scrapes, kerbed alloys - is more likely and is worth addressing," he concludes.
