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Cap: shorter vehicles lives could harm residuals

Date: 11 June 2013   |   Author: Jack Carfrae

Cap is predicting that the shorter model lives of new vehicles may have a negative effect on residual values. The firm observed that modern vehicles have much shorter "shelf-lives" than has historically been the case, which has the capacity to blight used values in the long-run.

Cap's new car expert David Saville said: "A model that had an acceptable level of CO2 emissions three years back is now totally out of step with the latest requirements.

"Often, the changes to car design, which are aimed at reducing emissions, involve altering the shell of the car, to reduce weight or improve aerodynamics, as well as introducing more efficient engines. Again, the new look of the vehicle - as well as its improved technology - quickly makes its predecessor look out of date.

"On the face of it the new car consumer really benefits by always having a choice of bang up-to-date models to choose from. But this can also have a negative effect because most buyers have a car that they need to dispose of when they come back into the market.

"If their existing model isn't the latest offering from that manufacturer, what the industry calls 'lifecycle depreciation' kicks in and makes their car less attractive as a private sale or a trade-in."

He continued: "Cap analysis consistently shows that greater depreciation is a particular issue for manufacturers who have adopted model lifecycles below the standard three to four-year ownership pattern.

"In fact, Cap has seen that certain manufacturers, who have a history of dramatically changing their models over a relatively short period, have begun to take a step back and tone down visual changes so as not to damage the previous generation model's second hand values quickly."



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