Dealers have been urged to offload unpopular stock as quickly as possible, even if it means taking a loss, to minimise the impact of slumping residual values.

Cap Motor Research warns dealers to enforce disciplined stocking policies or risk taking a big hit on cars that fail to find a buyer quickly enough.

Mark Norman, senior Black Book editor, said: "There are many dealers without a stocking policy who prefer to hold out come what may for a retail sale. But with the market in such poor shape, the longer they wait the higher the danger of losing serious money, because used car values are falling so fast."

The latest Cap index reveals values plummeted in July 9% year-on-year, the largest monthly drop since values began falling two years ago. It blames "a combination of customer hesitancy and changes in second-hand car supply patterns" for the market fragility.

Mr Norman said: "With a regular stock turn you get fresh faces appearing regularly on the forecourt which offers the double benefit of maintaining the interest of passers by and making you look busy, even if you aren't."