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Cap warns of depreciation hike

Date: 03 June 2011   |   Author:

Residual value expert Cap has warned fleet managers they could be about to face a steep rise in depreciation costs.

Speaking to BusinessCar after addressing the ACFO conference, Cap's Mark Norman, who heads the firm's new Automotive Intelligence Services division, said: "Fleets are concerned by rising fuel costs, but they should be looking at potentially far higher rises in depreciation costs. We're looking at between 10% and 20% more depreciation for cars bought now, being disposed of in three years' time.

"If your depreciation on a car was £10,000, it could rise to £12,000."

Norman said the increase was being caused by exchange rate changes which in turn forced list prices up. Cap's data showed that used car prices were not increasing at the same rate as new car prices, creating a larger differential in future.

The new car price rises would also have an effect on benefit-in-kind taxation because of higher P11D values, added Norman.

The rise in new car prices would have less of an effect on whole-life costs if discounts to fleets increased, however Norman said: "I've not heard of discounting getting larger. With such long lead times at the moment, manufacturers don't need to discount more."

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