Continuing concerns over falling residual values and the rising costs of motoring have lead to 'downsizing' - a trend that has benefited the supermini sector in recent times.

As a result, superminis have been insulated from (although not immune to) downward pressure on used values. The chart below shows the residual values performance of three-year-old superminis relative to the all-car portfolio over the past five years.

Starting from an index value of 100 in January 1995, the supermini sector initially kept pace with rising residual values during 1995-96. However by 1997, the residuals boom had led to a shift towards larger sectors and consequently superminis underperformed that year.

It is immediately apparent that the overall supermini portfolio has not suffered a significant decline over the past two years. Compared to an overall market decline of more than 20%, the fall in supermini values is modest. The effects of downsizing have cushioned used values in this sector.

In particular, note that the average supermini value in 1999 was actually higher than the equivalent vehicle in 1998. Last month we observed how the off-road sector had fragmented into two distinct sub-sectors, and a similar trend has occurred in the supermini sector.

Effectively the growth in dimensions of the B-sector vehicles - traditional superminis such as Fiesta - which now offer much higher levels of comfort and equipment than their predecessors, have allowed manufacturers to introduce new A-sector vehicles, such as Ford's Ka.

In overall dimensions and equipment levels, these A-sector vehicles are closer to what the typical supermini would have represented several years ago, as the B-sector vehicles have 'grown up'.

However B-sector vehicles continue to dominate in volume terms, purely because they have moved with market demands and are able to meet the need to provide cost-effective urban transport while providing equipment levels not traditionally found in the sector.

Cap Monitor forecasts that the used market will continue to favour superminis, which have always been in relatively high demand. Even residuals for the current Fiesta, which is due for replacement are forecast to be higher in three years' time than in the current market.