The executive sector, while home to many premium brands, has in recent times been particularly hard hit by the downturn in the used car market.

This fact exposes the common misconception that high value brands such as BMW and Mercedes-Benz are isolated from residual pressures due to badge preference or desirability. In reality, higher residual values mean that these sectors are often more exposed when the market downturn does arrive.

During the past five years, the residual values of three-year-old executive vehicles have under performed the market as a whole, as the chart below shows. The sector includes both vehicles from volume manufacturers such as Vauxhall Omega as well as those from BMW and Mercedes-Benz.

Starting from an index value of 100 in January 1995, executive vehicle values rose by more than 10% on average during the next three years, although this was well below the increase recorded by the market as a whole. As the market fell, the executive sector continued to lag behind by an increasing margin until this year.

The increase registered this year reflects an important factor in executive vehicle values - due to the image-conscious nature of the premium brands, the inclusion of new models can lift sector values significantly.

A good example is the current BMW 5 Series, which initially achieved £4,000 more than the previous model as a three-year-old vehicle. However, due to the weak state of the market, its values have fallen by £2,000 since.

Used values for the Vauxhall Omega have followed a similar pattern (although from lower levels), initially reaching values in excess of the Carlton but subsequently falling back with the rest of the used car market. But the demise of the Ford Scorpio means that the volume brands have a significantly reduced presence in this sector.

However competition in this sector will continue with new entrants to the market, including next year's Jaguar X400. Cap Monitor forecasts that the decline in executive vehicle values will continue, although model-life cycles play an important role. New launches such as the C-class will always present the opportunity for an increase in values.

Nonetheless, despite this scope for improvement, Cap Monitor believes recent trends point to a change in market structure, where the residual values of executive vehicles will retain smaller premiums to those in the fleet sectors.